GTM Best Practices

Our recent post on the compelling argument that Former President Vicente Fox made on near-sourcing from Mexico really begs the question: are you getting what you expected from China sourcing? It seems that a decision to source from China is as easy as recommending SAP for IT (or IBM for just about anything else). However, a recent study by the industry analyst Aberdeen Group reported that the total landed cost of goods – product cost and all related supply chain costs including transportation, duties, and taxes – varied from 2% to 10% for half of the 400 companies surveyed that import from China.

Now that the decision is made and operational, read on to discover ten strategies that can help your company tame those landed cost over-runs.

And even more troubling is that this discrepancy increased to more than 10% for 22% of respondents. So, it is not surprising that corporate supply chain teams are redoubling efforts to trim and tame the costs of importing goods.

The following ten tips will give you the insight you need to reduce total landed costs and help realize financial objectives of your global sourcing strategy.

1. Make Sourcing Decisions based on All Elements of Total Landed Cost.
Many companies focus their sourcing decisions on product cost savings but don’t spend enough time evaluating other critical cost components like a) accurately calculating associated duties, taxes and the impact of other regulatory controls ; b) factoring in total transportation costs; and , c) modeling the increased lead time and variability on inventory and customer service. Once done every couple of years, the dynamic nature of global trade today dictates the continuous monitoring of multiple sourcing scenarios to effectively manage risk.

2. Take Advantage of Preferential Trade Agreements
Understanding and leveraging trade agreements can be complicated but offer huge – double digit – reductions in duties associated with your import goods. Many companies are implementing systems that actively monitor changes in preferential trade agreements and automate the process of compliance to ensure that they capture the full duty savings without risk of fines.

3. Integrate Overseas Suppliers.
Quality starts at the source, and in your import supply chain, how you communicate and collaborate with overseas suppliers is a key first step to building a consistent and predictable process. Web-based supplier portals can automate your tactical purchasing efforts and allow suppliers to improve shipment quality metrics by eliminating the re-keying of data and automatically generating export documentation based on the original purchase order.

4. Actively Manage Supplier Performance.
Integrating your supply chain execution processes with suppliers provides the information that you need to actively manage supplier performance. With details on order and line-level fill rates you can fairly implement a charge-back program to promote order compliance.

5. Automate the Preparation of Import Documents.
Trade execution solutions are available that integrate and extend your existing enterprise systems to automate the preparation of all documentation associated with your shipment. The result is a highly accurate set of documents that improves the efficiency of your import logistics team and customs brokers.

6. Integrate the Clearance Process with Your Brokers.
Automating the import process allows you to electronically connect with your brokers. In this way you streamline Pre-Customs and Customs entries with CF 3461 and CF 7501 transactions and can maintain a complete audit trail for each shipment. Simplifying the process with your brokers not only reduces delays at the border, but offers an excellent opportunity to negotiate a reduction in transaction costs for each entry.

7. Tame Transportation Costs.
Higher than expected transportation costs tops the list of landed cost discrepancies. The challenge is to accurately calculate the total cost of shipment based on contracted rates and all applicable governing rules tariffs. Contract management solutions are available today that can accurate rate multi-leg shipments and identify cost-savings opportunities of different routing and service combinations. Companies that actively manage their transportation costs and optimize carrier selection decisions can expect cost savings of 5% or more.

8. Improve Fulfillment Decisions with Supply Chain Visibility.‘Place and pray’ strategies simply don’t work. State-of-the-art visibility solutions can eliminate the blackholes in your supply chain and provide detailed status information on your in-transit inventory. Beyond the customer service benefit of more predictable delivery you can further reduce costs by diverting inventory within your distribution network, or by totally by-passing distribution centers and delivering direct-to-store.

9. Recover Costs with Efficient Audits.
Automating your import processes offers a further opportunity to reduce costs by efficiently auditing and reconciling all brokerage transactions and freight invoices to ensure that you are paying the correct amount of freight, duty and tax on each shipment.

10. Implement a Six Sigma Program.
With the wealth of information created by a supply chain visibility solution you can implement a Six Sigma program for your supply chain to understand the underlying causes of unanticipated costs and time delays, then identify various opportunities to improve performance.

With these ten tips you can effectively trim and tame the costs of importing goods and improve the business case for global sourcing by closing the gap between forecasted and actual landed costs.