A retailer choosing between a low-cost foreign manufacturer and a higher-cost domestic intermediary is not only choosing unit cost; it is also choosing the timing of cash flows. This note derives a closed-form condition for the profit-maximising sourcing corner under a stylised working-capital model with (i) supplier trade credit (days payable outstanding) and (ii) goods-in-transit inventory for the foreign route. Under a constant opportunity cost of capital, the objective is quadratic and strictly convex in the sourcing share, so the optimum is always a corner. Which corner is optimal is governed by a single threshold: an implied annual capital charge WACC* above which the domestic intermediary dominates and below which direct foreign sourcing dominates. The threshold depends only on observable operating parameters: COGS percentages, DPO terms (including prepayment as negative DPO), transit days, inventory days, and the corporate tax rate (for after-tax comparisons). A numerical illustration calibrated to plausible early-2025 consumer-goods parameters yields WACC ≈ 1.415 (141.5% per year), implying that under those terms the unit-cost advantage dominates purely on cash economics. We then present an alternative illustrative "early 2026" terms scenario featuring higher foreign COGS%, earlier payment, and longer transit, under which the implied threshold falls to WACC* ≈ 0.216 (21.6% per year). This magnitude change suggests that adverse shifts in trade credit and pipeline duration can plausibly induce partial "re-shoring" for working-capital-constrained firms. We close by stating falsifiable empirical predictions for trade shares, inventories, prices/margins, industrial production, and the GDP composition of any adjustment.
James Junghanns (Sat,) studied this question.