Improve Landed Cost Visibility

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

Transcript of Improve Landed Cost Visibility

  • 1. GT Nexus, Inc. How to Automatically Collect, Assemble, Track and Measure Global Supply Chain Cost Actuals as They Occur Improve Landed Cost Visibility A STRATEGIC IMPERATIVE FOR MANUFACTURERS

2. Global supply chains require goods to pass through many stages before they reach the point of delivery. While manu- facturers may have found unit costs sufcient in planning for protability in the past, todays environment requires much more data most of it from outside the manufacturers four walls. Whats 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 growing lead times, causing a large discrepancy in actual vs. estimates and plaguing manufacturers with hours of reactive, manual data collection. Companies need to ll in the blank space where landed costs can decrease a products margin with real-time analytics.Without this, they will struggle to understand the true price of the products they are sourcing. Impact of Poor Supply Chain Cost Analytics Without a way to calculate the costs that add up due to un- predictable demand and long lead times, manufacturers end up making decisions based on very little real-time informa- tion. Managing suppliers this way is difcult; 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, deconsol- idation, and agent fees that were not included in the margin calculation.When the product nally reaches its destination, those fees are noted however, theres 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. Difculty assigning cost to specic product Charges can come in on varying levels, from order to ship- ment 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 GT Nexus, Inc. 2 Companies cant see all the costs associated with a landed product, so they make decisions based on unit cost alone. The Challenge First Cost Freight Duties First Cost Freight Duties "Overhead" Drayage Consolidation Fees Typical Cost Recap Actual Costs Agent Fees Deconsolidation Fees Margin Loss Traditional approaches to determining landed cost often uncover surprise costs after the product is delivered too late to make corrective adjustments. 3. Plant Plant Network Connectivity Agility Customers Customer DC / Warehouse Plan Actual At-Risk Delay Dynamic ETA B A Sense more accurately Operate more efficiently Respond faster Make better decisions 3 The Solution Traditional software leaves a signicant information gap in the time a shipment leaves origin to the time its delivered.This missing data lowers the accuracy of any cost or prot projec- tions and makes it difcult 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, mea- sure them against targets, and audit nancial 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 trend- ing and measurement. 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 suppli- ers, and estimate landed costs based on high-quality data from their supply chain network.They will have the tools to: 1. Increase protability Lower COGS by accurately measuring total cost of a part Improve labor efciency 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 trans- portation 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 mar- gins, companies must transform themselves from silo-based, inward-facing corporate operators to interconnected, highly agile business network orchestrators. Its impossible to predict mar- gins on the SKU level without real-time data from supply chain partners. Cloud changes that, lling the information black hole with actual costs as they are incurred. From order to delivery, costs must be accurately captured and factored into expected product margins. Against targets/plans Financial liabilities Landed cost Actual vs. target cost Charges/invoices Financial performance $ $ $ $ $ $ $ Monitor Measure Audit On Order In Production In TransitAt Origin Delivered In Customs Inland Measure Actual Costs