HITTING THE MARK with Landed Cost Management & Automation Best Practices

Transcription

1 HITTING THE MARK with Landed Cost Management & Automation Best Practices

2 Table of Contents Chapter 1 Chapter 2 Chapter 3 Chapter 4 Why Take Aim? Identify the Targets Bring Best Practices into Scope Pull the Trigger

3 Chapter 1 Why Take Aim?

4 $ Landed Cost is the total cost of a good as shipped from a seller to a buyer after all the additional costs incurred are factored in. It includes not only the seller s price to the buyer, but all the sourcing, transportation, financial, regulatory and internal costs required to produce and ship that good.

5 The value of understanding your landed costs is enormous. Did you know that when done correctly and with accurate information, landed cost calculations can impact purchasing, sourcing, and sales decisions?

6 Benefits of Landed Cost calculations and Management include: Make smarter decisions when it comes to sourcing Ensure accurate financial reporting and GL accounting assignment. Assess whether supply chain decisions (such as mode of transportation) are profitable at an item-level 4 5 Evaluate whether your pricing needs to be adjusted as supply chain costs fluctuate Improve budgeting through more accurate landed cost estimates that include all areas of costs and not just those that are known at the time

7 Chapter 2 Indentify the Target(s)

8 There are various cost types to be considered. With the data coming from all directions in the supply chain, many companies struggle with the ability to calculate true landed costs.

9 Product Manufacturing Costs Agent Fees Freight Charges The basic cost buckets that companies consider including in landed cost calculations are: Other Transportation Costs Bank Fees Taxes Duties Insurance Internal Costs

10 Other factors that should be considered when analyzing landed costs include: Business Costs Inventory Costs Supplier Relationship Management Compliance Costs

11 What is the ease of doing business in a distant country where local regulations may be more stringent than national or regional regulations? Business Costs For instance, what will it cost to have a manufacturing or distribution plant in a given country in terms of local fees, licenses, salaries, etc., and should any of those costs be amortized across the products over time? Are there any provincial taxes and fees that need to be accounted for due to the choice of business location?

12 What is the cost of shipping smaller, more frequent shipments that drive up freight costs versus holding inventory longer than is needed? Inventory Costs By identifying your cost of capital and other inventory holding costs, you can make the right decision.

13 Supplier Relationship Management Often overlooked but extremely important is the time spent cultivating the relationship with your suppliers. Do you need to pay someone (internal or external) to oversee transactions?

14 Each country has different regulations that must be adhered to when moving goods into that country s domain. For example, there is a cost to setting up the electronic filing of entry declarations. Compliance Costs What about fumigation and seals are those required? If so, there is a cost associated with those as well. What is the cost for compliance of your shipment? And don t forget to calculate the cost of non-compliance. Many don t think about it until it s too late, but what impact would non-compliance have on your costs? Penalties for incorrect duties or delays at a port can greatly affect the cost of product.

15 Chapter 3 Bring Best Practices into Scope

16 Now that you have decided to implement landed cost calculations as part of your overall supply chain management program, the next step is to make sure best practices are being followed. What are those best practices for landed costs?

17 Best Practices for Landed Costs Management Be sure to consider all different types of costs to calculate such as transportation, fees, commissions, duties/taxes, insurance and internal costs (e.g. cost of capital and warehousing expenses). If supply chain costs are managed by more than one team internally, establish regular and formal communication protocols to get updates on changes and communicate back landed cost results.

18 Best Practices for Landed Cost Automation Automate what you can but allow for exceptions that can be changed manually when needed Minimize manual data entry and save time with an automated Cost Rules engine Make sure the software can support any currencies that costs may be incurred in and covert to a base currency for viewing all total landed cost calculations Use a solution that provides up-to-date regulatory data to calculate duties and taxes

19 Chapter 4 Pull the Trigger on Landed Cost Calculations & Automation

20 If you are ready to implement an effective landed cost management program in your organization, let Integration Point help. Integration Point Landed Cost Management Solution calculates total landed costs at an item-specific level by leveraging a comprehensive and automated Cost Rules engine that includes up-to-date and accurate duties and taxes.

21 For More Information on Integration Point s Landed Cost Management Solution, Click Here Integration Point