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  • A STRATEGIC IMPERATIVE FOR MANUFACTURERS

    Improve Landed Cost Visibility How to Automatically Collect, Assemble, Track and Measure Global Supply Chain Cost Actuals as They Occur

  • Global supply chains require goods to pass through

    many stages before they reach the point of delivery.

    While manufacturers may have found unit costs suffi-

    cient in planning for profitability in the past, today’s

    environment requires much more data — most of it

    from outside the manufacturer’s four walls.

    What’s often poorly projected

    as “overhead costs” can

    include fees that shipments

    incur in transit, at customs, and

    inland before delivery. These

    costs vary greatly on the back

    of demand changes and grow-

    ing lead times, causing a large

    discrepancy in actual vs. esti-

    mates and plaguing manufac-

    turers with hours of reactive,

    manual data collection.

    Companies need to fill in the

    blank space where landed

    costs can decrease a product’s

    margin with real-time analytics.

    Without this, they will struggle

    to understand the true price of

    the products they are sourcing.

    Traditional approaches to determining

    landed cost often uncover “surprise”

    costs after the product is delivered —

    too late to make corrective

    adjustments.

    Impact of Poor Supply Chain Cost Analytics

    Without a way to calculate the costs that add up due

    to unpredictable demand and long lead times, manu-

    facturers end up making decisions based on very little

    real-time information. Managing suppliers this way is

    difficult; if the true costs of sourcing a product do

    become clear, it is only long after the fact.

    In this scenario, manufacturers are forced to resort to:

    • Piecing together information on actual costs and

    lead times

    • Choosing suppliers based on unit cost alone

    • Guessing at product margins based on past data

    • Collecting and managing data manually

    • Attempting to make leap-of-faith target delivered

    unit costs

    The Root of the Problem

    There is a widening gap between projected landed

    costs and end-of-year actual recaps. This happens

    when shipments enter the information “black hole” —

    the month or two in which goods travel through an

    extended supply chain, often across borders, and no

    data is available on their activity. During this time, they

    may be picking up drayage, consolidation, deconsoli-

    dation, and agent fees that were not included in the

    margin calculation. When the product finally reaches

    its destination, those fees are noted — however,

    there’s no way of knowing how they break down at

    the unit level or if the next shipment will incur the

    same costs.

    1. Costs from many sources in different formats

    When a manufacturer has a list of supply chain

    partners and cost information in many different

    charges, currencies, and other data types it must

    deal with several issues:

    • Reconciling the different units, formats,

    and currencies

    • Tracking down late or incomplete information

    • Attempting to compare estimates with

    incongruent data

    2. Difficulty assigning cost to specific product

    Charges can come in on varying levels, from order

    to shipment to bill of lading. Often these costs are

    collected after the fact and never tracked back to

    the product line. As a result, manufacturers are

    forced to work with:

    • Limited information on the SKU level

    • Documented costs that are impossible to break

    down and allocate to individual products

    The Challenge

    Companies can’t see all the costs associated with a landed product, so they make decisions based on unit cost alone.

    First Cost

    Freight

    Duties

    First Cost

    Freight

    Duties

    "Overhead" Drayage

    Consolidation Fees

    Typical Cost Recap

    Actual Costs

    Agent Fees

    Deconsolidation Fees

    Margin Loss

  • Traditional software leaves a significant information

    gap in the time a shipment leaves origin to the time it’s

    delivered. This missing data lowers the accuracy of

    any cost or profit projections and makes it difficult to

    compare suppliers.

    Manufacturers can counter this effect by adopting a

    cloud-based platform that allows them to pull real-time

    data on their supply chain costs from their network of

    logistics partners. This allows them to monitor actual

    costs as they are incurred, measure them against targets,

    and audit financial performance.

    A cloud-based solution automates the capturing of

    supply chain costs and connects data to the SKU level.

    Managers can then use tactical day-to-day operational

    reports for orders and shipments in motion to make

    essential supply chain decisions. Landed cost data

    becomes a strategic analytical tool for trending

    and measurement.

    O n

    O rd

    e r

    At Origin In

    la n

    d D

    e live

    re d

    In P

    ro d

    u ct

    io n In Transit In Customs

    Monitor Against targets/plans Financial liabilities

    $

    $

    Measure Landed cost Actual vs. target cost

    Audit Charges/invoices Financial performance

    Actual Costs $

    $ $ $

    From order to delivery, costs must be accurately captured and

    factored into expected product margins.

    Measure landed cost data on a cloud-based platform.

    • Track actual costs and lead times as they occur

    • Automate allocation process to apply costs to the

    correct level (SKU, shipment, business line)

    • Use analysis engine to compare actual against

    target estimates

    How to use it to improve landed cost estimates:

    1. Understand the total cost components of a

    SKU/item

    2. Compare cost estimates to actual cost per item

    3. Make more informed sourcing decisions by taking

    actual product margin into account

    4. Make adjustments to course correct in real-time

    Value Propositions

    With good analytics, managers can decide to change

    production strategies, bring on new suppliers, and

    estimate landed costs based on high-quality data from

    their supply chain network. They will have the tools to:

    1. Increase profitability

    • Lower COGS by accurately measuring total cost

    of a part

    • Improve labor efficiency and lower admin costs by

    eliminating manual processes

    2. Improve sourcing activity and target costing

    • Accurately measure total cost and actual lead

    times against estimates to plan for the future

    • Collaborate with partners on reducing costs and

    lead times

    3. Capture end-to-end supply chain costs including

    transportation costs, handling fees, brokerage fees

    and document fees for better margin visibility

    • Automate landed cost determination (no more

    spreadsheets)

    • Save time and resources by reducing re-keying of

    cost data in AP/GL systems

    Supply Chain Cost Analytics and the

    Networked Company

    To understand true landed costs and how they impact

    margins, companies must transform themselves

    from silo-based, inward-facing corporate operators

    to interconnected, highly agile business network 

    orchestrators.

    Network Connectivity

    Agility

    B

    A

    Sense more accurately

    Operate more e�ciently

    Respond faster

    Make better decisions

    The Solution It’s impossible to predict margins on the

    SKU level without real-time data from

    supply chain partners. Cloud changes

    that, fi lling the information “black hole”

    with actual costs as they are incurred.

  • GT Nexus provides the cloud-based collaboration platform that leaders in nearly

    every sector rely on to automate hundreds of supply chain processes on a global

    scale, across entire trade communities.

    Copyright © 2017 GT Nexus, an Infor company. All rights reservedgtnexus.com