Friday, February 18, 2011

Give Your Supply Chain a Little TLC

Analysis of Total Landed Costs gives C-level executives the tools to decide among logistics options.

To fully understand your supply chain, and properly value your goods that flow through it, you may need to apply some TLC.

No, not that TLC – we’re talking about Total Landed Cost, which factors in all the costs associated with getting a product to its final destination, be it a retail shelf or a B2B customer. If you source in China, for instance, in addition to manufacturing or acquisition costs, you need to consider transportation costs, consolidation, taxes, duties, customs, receiving, storage, and inventory carrying costs, at every stop along the way. What is the trade-off between shipping ocean vs. air? Have you evaluated the impact of carrying costs?

You also need to consider the risk associated with any given channel, whether it be natural disaster, price volatility, or even social unrest – during the Cairo street protests this month, operations in the Suez Canal briefly shut down. Performing the Total Landed Cost analysis gives you a more accurate assessment of the cost, and profitability, of any given item, category, or business division.

Today, sophisticated new technologies provide enhanced analytics and supply chain visibility, allowing risk, disruptions, fuel price swings and other variables to be factored into the landed cost equation, often in real time. Is it better to manufacture in China, in Mexico, or both? Are you better served by one national, or several regional DCs?

The lowest cost option is not always the best option. Understanding your Total Landed Cost can give you a key competitive advantage. Does your supply chain need a little TLC?

Kirk Shearer
TOTALogistix, Inc.
800-989-0054 x103

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