World Trade - September 2008 - (Page 21) Top Five Tips for Reducing Supply Chain Costs and Risks The Evolution of Supply Chain Management Ensuring that the right goods are delivered to the right place at the right price and time requires the development of cross-functional relationships. In other words, the importance of supply chain management to the optimization of working capital is indisputable, whether an organization is a multinational, an entrepreneurial growth company, or a subsidiary looking for efficiency. In fact, decisions being made about inventory are just as important as decisions regarding accounts payable and receivable strategies. Tip #1 – Understand the true costs of sourcing overseas. Calculate freight, duty, brokerage, and inventory carrying costs to support these lengthened supply chains. Also factor in items such as the cost of flying engineers overseas. Once you understand the true total landed cost and total impact to the business, that domestic buy may look a lot better. Sourcing from Ohio to your U.S. plant, distribution center or customer may, in the long run, be more cost effective than sourcing from China. Tip #2 – Informed decision-making. Provide the cost of freight for each service level, the reliability of each trade lane for each service level, and the true cost of carrying inventory to the decision makers/customers of your logistics network so that they can make informed decisions. Audit actual freight and inventory carrying costs against plan. Leverage information collected in audit to negotiate better freight rates with your carriers and optimize trade lanes. Tip #3 – Tariff engineering. Strategically source and manufacture products to take advantage of classification duty rates and eligibility for free trade programs such as NAFTA. Tip #4 – Implement an effective compliance program. Per the Bureau of Industry and Security (BIS), all U.S. exporters should have a formal documented compliance program with oversight by senior management that covers training, customer screening, recordkeeping, and audits. (Source BIS http://www.bis.doc.gov/complianceandenforcement/pec_program.pdf) Working capital management Tip #5 – Utilize external expertise. Realize your strengths, and seek external efficiency should be explicitly linked expertise for your weaknesses to help you manage the more complicated to supply chain management and aspects of your global supply chain. Focus on your core competencies and you approached holistically. By applying will win more often in the global marketplace. financial analysis to a company’s supply chain activity, managers can discover a more powerful way to drive their Partnering with the right global trade services company’s financial and operating performance. team helps companies optimize their working Furthermore, organizations with complex global capital, reduce risk and increase customer supply chains can optimize working capital, satisfaction. As a result, companies that drive cost savings, mitigate risk and improve effectively manage their physical and financial efficiencies while maintaining compliance with supply chains are positioned to achieve ever-changing government regulations. international trade success. Solutions for Global Businesses and Their Supply Chains Through a series of key acquisitions, JPMorgan has assimilated businesses that have already mastered core capabilities critical to the successful operation of international trade. In addition, a number of enhanced competencies have been integrated into its traditional trade finance business, including trade information management, transaction processing, invoice payment facilitation, document collection and compliance management. Bernie Hart, executive director for the Logistics Management product suite with Global Trade Services at JPMorgan Chase & Co., leads a business of 650-plus employees that delivers end-to-end global risk management and operational solutions that drive cost savings, increase efficiency and provide bestin-class compliance across physical and financial supply chains. For more information on global supply chain management, visit JPMorgan Global Trade Services at www.jpmorgan.com/trade. http://www.bis.doc.gov/complianceandenforcement/pec_program.pdf http://www.jpmorgan.com/trade
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