A recent article on the Procurement Leaders Network had a very shocking statistic: only 52% of businesses look at customs duties as a potential area for cost savings (according to a recent research survey by Deloitte). Considering that misclassifications alone cause most companies to overpay duties by 7% to 11%, this presents a substantial savings opportunity for any company that imports more than ten million dollars a year. Furthermore, better utilization of Free Trade Agreements can often significantly reduce, if not eliminate, duties on millions of dollars of merchandise. Many companies have doubled and tripled their free trade duty savings (and saved millions of dollars) just through FTA management. And then there’s Free Trade Zones that can save you even more! With a little Trade Visibility, you can save a lot of money. So why aren’t you?
Gene Tyndall, editor of CSCO Insights, recently penned a piece on how the recession offers chief supply chain officers opportunities as well as challenges which I believe is a must read because I do not think enough organizations are taking advantage of the opportunity provided to them to become the organizational superstars. Gene, who recommends that organizations pursue smart cost reductions, indicates that these smart cost reductions are likely to be found in your:
- Overall Supply Chain
As many companies have found, going global typically adds unexpected costs, increased time, and risk. However, innovation and intelligence focussed on the problem by an experienced organization can often reduce these costs, time, and risks.
- Supply Chain Network
Production and logistic locations add costs in the form of fixed capital, operations, taxes, leasing, and SG&A expenses to the business. Rationalizing the global network can reduce these costs.
- Total Delivered Cost
The total delivered cost, which includes freight, duties, taxes, and logistics, can often be reduced through better logistics, duty, and tax planning.
- Logistics Outsourcing
This industry has rapidly matured over the last decade, and a 3PL provider with an appropriately designed network might be able to save you money.
- Supply Chain Technologies
While traditionally thought of as long-term cost reductions, there are near-term savings potentials through today’s rapid implementations, improved visibility, powerful analytics, and greater alignment of technology to the business. Especially if you go pay-as-you-go SaaS. e-Sourcing will allow you to identify potentially lower-cost and higher-quality sources of supply, decision optimization will allow you to define the allocation with the lowest cost that meets all of your business requirements, contract management will allow you to monitor and ensure provisions and pricing are being met, e-Procurement will automatically do m-way matching and flag invoices that aren’t at contracted amounts or duplicate billings, etc.