What's The Problem?
LANDED COST TRACKING AND OPTIMISATION
Problem
Failing to track total landed costs accurately can be the difference between loss and profit
Complete supply chain visibility remains an aspiration for many, but being subject to unexpected charges is a common occurrence.
Many companies are either not tracking landed costs thoroughly, doing so entirely manually and often using spreadsheets with all the attendant challenges of data quality.
Some of the sources you rely on can be very complex too (see the current harmonized tariff schedules for the USA) - and depend on a detailed understanding of what the commodity is, free trade agreements, etc.
To give you an example from the US - the peel from a citrus fruit or melon is one category, with 3 subcategories for orange or citron, lime or 'other'. For all of these the unit of quantity is kilo. For orange or citron, the general duty is 'free', and for everything else it's 1.6¢ per kilo. There are special duties for imports for certain countries (typically where there are free (0¢ per kilo) trade agreements - for example, Singapore) and another duty (4.4¢ per kg) for countries that don't have normal trade relations with the US.
Penalties for getting it wrong can be significant - as HM Revenue and Customs in the UK makes clear, as just one example.
Solution
Categorise, track and optimise at a detail level
If you already have the expertise, then part of the solution is already available - although not necessarily in the most efficient, effective and error free fashion.
If you don't have the expertise, Henley Ridge can advise you where to find it. Don't attempt to go it alone - the combination of the complexity (those US tariffs we mentioned currently run to 4078 pages)
Once you have that expert advice, you can start to categorise costs - into duty, freight, port handling, insurance, etc.
Where there are rules for cost groups, these can often be automated. You can also setup costing parameters at various levels of detail.
Analysing the data - on an adhoc basis, through standard reports and customised business intelligence reports follow closely behind, and open the door to detailed root cause analysis and optimisation.
It's also important to remember that getting accurate total landed costs (TLC) doesn't include all factors that you should consider - other cost elements, revenue generation and risk.
Finally, don't forget that tariffs change on a regular basis (7 revisions to the US tariff in 2021 alone) and depend on where you're importing to and from.
Henley Ridge and our partners are here to help you every step of the way.
Success
Optimisation of Landed Cost Naturally Follows
Better categorisation and even more so, utilising automated costing rules, reduces the chance of human error.
Estimated cost savings from optimising landed costs go up to 25% - or even as much as 40% in higher cost economies.
