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Exclusive White Paper: Sourcing Globally – Senior Managements Guide to “Thirteen Key Practices”

sourcing

Exclusive White Paper: Sourcing Globally – Senior Managements Guide to “Thirteen Key Practices”

Sourcing globally will continue to grow and expand into new markets as we enter the third decade of the new millennium.

Multinational companies down to smaller family-owned organizations are learning the critical importance of developing multiple and varied sources of raw materials, components, and finished products.

Traditional foreign sourcing options, such as China are being challenged aggressively for the first time in its 40-year tenure as the fastest and expansively growing foreign source of manufactured goods.

Tied into this are the 301 Tariffs under the Trump Administration, that our newly elected President Biden is likely to continue on with for at least the balance of 2021. Which have increased “landed costs” by as much as 25%.

Senior management is best guided by setting up policies, protocols, and SOP’s in how their management teams and staff operate in their global sourcing opportunities and initiatives.

The goal should always be to reduce the risk and cost of goods sourced globally.

In public companies, these guidelines would help meet Sarbanes- Oxley regulations and in private companies … “Best Practices”. The SOP’s create a standard with the following benefits:

-Documented and written commitment to follow government regulations

-Consistent approach to regulatory adherence

-Foundation and resource for all global supply chain personnel to follow

-Creates training module to make sure everyone knows how to operate in their companies following all necessary regulations.

Having said all of that …. The following Best Practices outlined in Thirteen Steps offer the international executive a blueprint for either new or matured global sourcing initiatives:

1. Learn how to navigate the opportunities offered through the numerous Free Trade Agreements that can be leveraged for economic advantage in the global sourcing arena

Utilizing FTA’s lower lands costs by reducing or eliminating duties and taxes.

2. Diversify sourcing into multiple countries so dependence on single sourcing is not relevant

This becomes a risk management concept in spreading the sourcing exposure over Variable options.

3. Learn the culture of the countries you source from. This will maximize your opportunity to negotiate better deals and build stronger relationships.

Keep in mind in overseas markets … “relationship” drives the success of the business deal and the long-term partnership with the vendor/supplier.

4. Utilize specialized professional attorneys who can guide you through the maze of foreign regulations, laws and policies that will influence sourcing options, agreements and contracts.

Legal expertise can be expensive, but it is a necessary expenditure that can help avoid pitfalls, mistakes, and serious financial consequences.

Laws vary greatly in foreign countries and companies that learn how to proactively avoid litigation and other legal issues will always minimize risk and maximize opportunity.

Purchase Orders (PO’s) also have different legal consequences in various countries, that need to be reconfigured to work better.

5. Develop sourcing reach into Mexico where maquiladora programs and near sourcing initiatives can prove to be a valuable option as a sourcing alternative.

Near sourcing can prove to significantly lower landed costs, reduce risk and enhance demand planning sand lead time reductions.

6. Utilize the service of specialized freight forwarders who can provide local support in the sourcing countries in arranging local freight needs, outbound logistics requirements, handle export specifics and the inbound process into the United States.

The freight forwarder or Customhouse broker can be a valuable partner in impacting risk and cost along with huge benefits in managing inbound supply chain needs.

7. Tread cautiously through all Intellectual Property Exposures (IPR) that can happen once you start to trade in foreign markets, share business models. Trade secrets and confidential manufacturing data.

Managing IPR issues needs to always be addressed proactively when forming relationships in global sourcing models. The headaches and costs in chasing and dealing with IPR breaches can be costly, aggravating and a waste of time and effort. And litigation in markets such as China typically create less them robust results … leaving both parties dissatisfied and filled with angst.

Managing IPR issues needs to always be addressed proactively when forming relationships in global sourcing models. The headaches and costs in chasing and dealing with IPR breaches can be costly, aggravating and a waste of time and effort. And litigation in markets such as China typically create less them robust results … leaving both parties dissatisfied and filled with angst.

8. Pay close attention to the choice of INCO Term (International Commercial Term of Purchase or Sale). The choice impacts risk and cost between the supplier and the buyer.

There are 11 INCO term options in the revised 2020 Edition: Ex Works, FAS, FCA. FOB, CIF, CIP, CPT, CFR, DAP, DPU and DDP.

Importers need to choose a term where they typically control the international freight inbound, the customers clearance process and delivery to the ultimate consigned.

This helps reduce both cost and risk and typically will offer better options and performance on the inbound logistics.

9. Make sure you:

-Understand all the regulatory issues with Customs and other regulatory agencies.

-Make sure you have a “point person” who takes ownership of regulatory concerns … typically referred to as the “trade compliance manager”.

-Develop SOP’s to integrate into the sourcing business model.

-Train all stakeholders in the global supply chain on all the aspects of regulatory controls and just how it is related to their specific responsibilities.

10. Always make sure you have supported your sourcing decision by working up “landed cost modeling” to affirm the purchasing decision utilizing specific metrics.

Landed cost modeling creates a metric to do comparison shopping and to evaluate options or choices by adding up all the direct, indirect and ancillary costs added to the origin purchase or acquisition cost.

Landed cost modeling creates a comprehensive formula to measure the method and process in making a sourcing decision on foreign shores.

11. Document these protocols in written SOP’s to evidence adherence to government regulations and best practices. This provides clear and concise senior management influence on managing with good intent, behavior, due diligence and reasonable care.

12. Create internal training programs for your management teams and your operating staff in all these guidelines and best practices. Solid training initiatives are an excellent and proven method to make sure everyone has comprehensive information flow, know what is expected and how best to execute.

13. Combine the utilization of Bonded Warehouses and Foreign Trade Zones, with various sourcing options, that can leverage risk and spend to your favor. This would include inventory, distribution, manufacturing and assembly operations in a secure FTZ, that could significantly lower landed costs to the USA based importer.

The role of Senior Management is to lead. Following these thoughts and turning them into effective actions within your business models is the best way to assure the opportunities to minimize risks and maximize profits within your global sourcing business models.

Senior management is best off by leading their teams into best practices and always exercising due diligence in their business behavior patterns. Any short-term costs and inconvenience will be outweighed by long-term benefits to any organization.

Benefits will include: reduction in risk and cost, business process improvement, more efficient operations, sustainability and significant growth potentials.

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Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

He can be reach at tomcook@bluetigerintl.com or 516-359-6232

port cities

20 INLAND PORT CITIES THAT ARE MAKING A DIFFERENCE IN THE SUPPLY CHAIN

From a logistics perspective, one of the biggest lessons learned (so far) in the COVID-19 pandemic is that long supply chains stretching across the globe can spell trouble. Shutdowns in one manufacturing center in Asia—or the United States, for that matter—can imperil companies down the chain. 

“The golden rule of the supply chain in a post-COVID-19 world is to avoid sourcing everything from one location or one company and to maintain alternative sources of supply,” said Brian Leonard and Mark Volkman, JLL’s managing director and executive vice president, respectively, in a July 2020 article in Heartland Real Estate Business magazine.

Morris Cohen, a professor of Manufacturing and Logistics at the Wharton School at the University of Pennsylvania, goes even further.

“The question of global sourcing will continue to be critical,” Cohen said in a March 31, 2020 Bloomberg News story. “I believe that there will be a shift toward more regional and local solutions, with less dependence on single sources in other countries, as companies determine that the costs and risks of offshoring are even more significant than what they perceived them to be in the past.”

Cities with inland ports are uniquely situated to localize manufacturing and make supply chains more agile and transparent. Here are 20 we looked at that can do supply chain wonders.  

St. Louis, MO

From a supply chain perspective, St. Louis is fairly close to ideal. The region, which stretches along 15 miles of the Mississippi River, includes four ports, six Class I railroad carriers, four interstate highways and two international cargo airports. It also offers more grain handling capacity than anywhere else on the Mississippi, which is why the region is known as the “Ag Coast of America,” according to Inbound Logistics. St. Louis is also very attractive to manufacturers, brought by in low tax rates and close proximity to a highly skilled workforce, much of which has been trained in Supply Chain Management at local colleges.

Cincinnati, OH

In their Heartland Real Estate Business magazine piece, Leonard and Volkman point to the fact that Cincinnati is “within a 10-hour truck drive of 54 percent of the U.S. population.” This is absolutely critical for companies trying to make their supply chain(s) as nimble as possible. Couple it with Cincinnati’s three intermodal terminals, quarter-million feet of industrial space, another 8 million square feet under construction and close proximity to Cincinnati/Northern Kentucky International Airport, and you have a desirable location from a supply chain perspective.

Pittsburgh, PA

Business leaders in Pittsburgh are taking the effects of the COVID-19 pandemic on the supply chain very serious. So much so that in July 2020, the Pittsburgh Post-Gazette reported that a coalition of companies, labor organizations and business associations called Pittsburgh Works Together—which formed as the pandemic lockdowns began—unveiled a new plan to shorten the region’s supply chain. Their proposals included that the region should “fully develop its energy sector, especially around natural gas; encourage trade school routes for high school graduates who don’t go to college; rebuild local infrastructure; and reduce Pennsylvania’s corporate tax burden,” according to the Post-Gazette

Kansas City, MO

Because four major interstate highways intersect in Kansas City, trucks leaving the region can reach virtually the entire continental U.S. within 48 hours. This is a major advantage for companies located there, and the city’s economic officials are doing what they can to make their supply chains more agile. “Technology is something we need to learn how to embrace and use to solve problems,” said Chris Gutierrez, president of KCSmartPort at its industry briefing in April 2020, according to the Kansas City Economic Development Corporation. “In Kansas City, we are proud to carry that innovative thinking into discussions around making our regional supply chain companies more successful in today’s global marketplace.”

Memphis, TN

One of just four cities in the U.S. that’s served by five Class I railroads, Memphis is uniquely suited for all supply chain needs. According to a September 2019 Supply Chain Dive post, the city is also served by Memphis International Airport (the largest air cargo airport in the Western Hemisphere), three major highways and a port that moved about 11 million short tons of goods in 2017. It’s no wonder that Udo Lange of FedEx Logistics told Supply Chain Dive that Memphis “is one of the great logistics hubs in the world.”

Chicago, IL

Chicago is a global supply chain powerhouse. “On the national scale, the region is a transportation node in a number of North American supply chains,” states the 2015 Chicago Metropolitan Agency for Planning (CMAP) report “Chicago Region Supply Chain Trends and Trading Partners.” “On a regional scale, transportation infrastructure supports the region’s manufacturing cluster, which benefits from strong connections to international markets.” All of which is made possible by Chicago’s connections to two major waterways, six Class I railroads, seven interstate highways and the nation’s fourth busiest cargo airport.

Houston, TX

As one of the top energy producers in the world, Houston is a part of many global supply chains. While steel imports at Port Houston are down considerably from this time last year, according to a June 2020 webinar on global supply chains hosted by the Greater Houston Partnership, the reason is due more to Section 232 tariffs and lower oil prices than the COVID-19 pandemic. Overall cargo remains steady, while aggregates and grains are up considerably, and the port itself is investing $2 billion in terminal and channel improvements, according to the Greater Houston Partnership. Houston is also served by three Class I railroads, three interstate highways and a major international airport.

Charlotte, NC

The Economic Development Partnership of North Carolina (EDPNC) says Charlotte “sits at the heart of the Southeast’s manufacturing and distribution sites.” The city connects to four interstate highways (two of which tie into the port). There are also two intermodal facilities in the city and Charlotte Douglas International Airport, the seventh busiest international airport in the world. According to a 2019 analysis of Charlotte’s logistics by the Charlotte Regional Business Alliance, the region sits within 12 hours of slightly more than half of the U.S. population. 

Stockton, CA

A transportation hub since the mid 19th century, Stockton is located in California’s Central Valley. Though the city is best known for its 35-foot-deep inland port, it also boasts extensive rail connections. According to a December 2019 Business View Magazine article, nine of the city’s 13 industrial parks have rail access. In addition, all of its industrial parks are freeway close, and are within five to 15 minutes of both the port and Stockton Metropolitan Airport, which can accommodate all wide body aircraft currently in service.

Cleveland, OH

Port of Cleveland officials say their public and private harbors handle about 13 million tons of cargo every year. Cleveland processes a lot of heavy machinery, containers, iron ore, limestone and steel, among other cargoes, which isn’t surprising given that it’s the first major port of call on the Great Lakes for ships traveling the St. Lawrence Seaway. The Cleveland Bulk Terminal can handle 5,200 tons of iron ore per hour and is connected to one of the two Class I railroads that serve the port. Given that the port is just an eight-hour drive from half the U.S. population, it’s no wonder Cleveland is big on a lot of supply chains.

Duluth, MN

The Duluth Seaway Port Authority considers the Port of Duluth-Superior to be the “bulk cargo capital” of the Great Lakes, which isn’t surprising since it handles 35 million short tons of bulk cargo every year. “Maritime’s inherent efficiencies are critical to the success of supply chain managers worldwide,” states the port authority. “Shared by two cities and two states, the Port of Duluth-Superior has been the backbone of this region’s economy for well over a century.” Couple this with the city’s immediate access to I-35 and four Class I railroads, and it’s clear why this inland port city is so valuable from a supply chain perspective. 

Detroit, MI

Detroit is the busiest northern border crossing into Canada, according to that city’s Chamber of Commerce. It’s also the second largest customs port of entry into the U.S. in terms of the value of goods. The city is served by four Class I railroads, three intermodal terminals and the Port of Detroit, which handles 17 million tons of cargo every year. Much of that is raw materials, according to port officials: high grade steel, coal, iron ore, cement, aggregate and other building materials. In fact, the Port of Detroit is the third largest port in the U.S. in terms of handling steel. 

Louisville, KY

Louisville actually has two inland ports, both of which are vital supply chain components. There is, of course, the Port of Louisville on the Ohio River, which handles a variety of bulk cargos, including coal, grain and potash, and is served by three major eastern railroads. But there’s also the massive UPS Worldport, an air hub built in the early 2000s that today moves a staggering quantity of packages—many of them within a day. Three hundred flights carrying 2 million packages move in and out of the Worldport, which is as large as 90 football fields, every day. Eventually, Worldport officials say the center will be able to process as many as half a million packages per hour.

Vicksburg, MS

The only rail crossing of the Mississippi River in the state of Mississippi is at the Port of Vicksburg. The port currently handles 14 million tons of freight each year, but Vicksburg officials are looking at expanding it in the near future. In July 2020, the Vicksburg Warren Economic Development Partnership released a report outlining the supply chain growth advantages of such an expansion. “The top six market opportunities identified in the report include scrap iron imports from Mexico, containerized soybean exports, wood-chip exports in containers, resin exports, steel (mini) mill attraction and the imports of spruce logs,” the Vicksburg Post reported.

Green Bay, WI

Logistics and supply chain management jobs have been centering in Green Bay for many years now. Today, the region has the 18th highest concentration of transportation logistics jobs in the nation, according to an August 2019 Go Press Times article. The Port of Green Bay ties into enough major interstates to allow trucks to make overnight deliveries to anywhere within a 400-mile radius, according to the University of Wisconsin, Green Bay. “The Port of Green Bay is the westernmost port of Lake Michigan,” port officials say. “The Port of Green Bay offers the shortest, most direct route for shipments between the Midwest and the world.”

Tulsa, OK

The Tulsa Port of Catoosa is one of the largest (and most inland) ports in the nation. It’s always ice-free and hosts more than 60 companies, according to the Oklahoma Chamber of Commerce. The port allows Oklahoma industries to take advantage of navigable waterways that connect Minneapolis, Chicago, Pittsburgh, Sioux City, Brownsville and the Florida coast. Tulsa is also served by two Class I railroads, three interstate highways and Tulsa International Airport, which is just 10 minutes from the port. Six air cargo carriers and the U.S. Postal Service all maintain operations at Tulsa International. 

Shreveport, LA

The Port of Caddo-Bossier, which is just four miles south of the Shreveport city limits, ties into two Class I railroads, two interstate highways and two U.S. highways. The port also provides access to the Red River, Mississippi River, Gulf Intercoastal Waterway and the Gulf of Mexico. The port authority considers it one of the fastest growing ports in the nation, and it currently handles liquid petroleum, aggregate, coiled steel, plate steel, fertilizer, over dimensional cargo, scrap steel, steel beams, coal, tire chips and frac sand. 

Philadelphia, PA

Because of its location in the heavily populated coastal Northeast, Philadelphia has nearly unmatched strategic value. In fact, because of the interstate highways and two Class I railroads that serve the Port of Philadelphia, shippers can move products to 70 percent of the nation’s population within 72 hours. In November 2016, when state officials announced a $300 Port Development Plan that would double container volume processing, Philadelphia Regional Port Authority Chairperson Jerry Sweeney said, “This new service validates what we have known for a long time. Philadelphia is a more efficient supply chain option for major beneficial cargo owners.”

Milwaukee, WI

Situated on Lake Michigan, 467-acre Port Milwaukee provides easy access to the St. Lawrence Seaway. According to Transportation & Logistics International, it’s also the only “Lake Michigan port beyond Chicago approved to serve the Mississippi River inland waterway system, which provides direct river barge access to the Illinois River that connects other U.S. ports on the Gulf of Mexico.” The port also connects to I-94/795, ties into two Class I railroads and processes around 2.5 million tons of cargo per year—much of grains, cement and limestone.

Toledo, OH

The supply chain advantages in Northwest Ohio almost defy belief. The region boasts a 130,000-strong workforce, according to Toledo’s Regional Growth Partnership. The city and its port are just a single day’s drive to 60 percent of the U.S. market. The three major interstates and four railways that service Toledo provide a huge advantage for shippers. And in terms of natural disasters, Toledo is a relatively low-risk area, and the whole region boasts an affordable cost of living. 

strategic sourcing

Strategic Sourcing and Supply Chain Management in a post-COVID World

While it might seem premature to discuss the post-COVID world as we are nearing what is hopefully the peak of the pandemic this winter, it is also clear that the crisis will pass as better treatment and vaccines become available and immunity spreads in the population.

Remaining however will be key macro trends that were sparked or drastically accelerated by the pandemic:

Forced adoption of e-commerce: E-commerce penetration into late adopter segments was drastically accelerated during COVID and the lockdowns that followed. Consumers who did not shop online were forced to do so and now prefer it. By some estimates, this steep change compressed five years of projected online shopping adoption into about three months.

Location irrelevance of knowledge labor: During the lockdowns, all non-essential service labor that could be performed remotely was done so, and it largely worked quite well. Fast network access speeds, low-cost video conferencing options, and sheer necessity finally made video conferencing common and socially acceptable; far easier, quicker, and cheaper via Zoom than actual physical meetings.

Real estate “Zoom Doom”:  I estimate that only 50% of the office space utilized prior to the pandemic will be re-occupied, as both employers and employees prefer remote work for many jobs. Employers save and employees can live wherever they want. While driving through rural parts of the US over the summer, I saw several housing developments with billboards advertising nothing but their high internet access speeds.

While obviously net positive for the economy, this transition will be quite jarring, as the $3.7 trillion of commercial mortgages will lose significant and possibly permanent value, severely damaging banks’ balance sheets. This may trigger a financial crisis similar to 2008, but if the Federal Reserve Bank and the Federal Government apply the lessons learned in 2008 proactively, the worst might be avoided.

Focus on supply chain diversity: Prior to the pandemic, many companies paid lip service to true supply chain diversity and instead focused on lowest-cost sourcing, depending heavily on China. President Trump’s China tariffs were the first test and many companies responded by diversifying to other Asian countries as best they could. When the pandemic hit, China initially shut down and prioritized their domestic needs, but came back surprisingly quickly. Companies are now scrambling to enhance diversity and increase non-China and US domestic sources.

Smart companies should use this crisis as an opportunity – To strategically re-source core supply chains for both better long-term pricing and more diversity and robustness.

2021 is the time to do this. Suppliers are highly motivated and seek long-term partnerships. A proper strategic sourcing approach is grounded in microeconomic principles and designed to reduce costs for both parties in the long-term.

Here are the key steps:

Envision target supply chain: A desired end state vision is a useful planning device, but companies should remain flexible and include suppliers they may not have used in the past and consider them for development. It’s important not to restrict the solution before all the facts and data have been gathered and terms have been fully negotiated. Restricting the degree of freedom by presupposing an answer can be very costly and highly counter-productive.

Design the correct pricing model: The method of pricing is the most powerful lever in strategic sourcing. The way one asks for a price determines how suppliers respond, how much of the spend is covered, what we learn about the supplier economics, it enables long-term relationships and most importantly, aligns incentives to reduce cost and innovate long-term pricing contracts. Unlike cost-plus approaches, pricing models are industry-based, competitive, and centered around buyers’ requirements.

Perform disaggregated analysis on bidding data: A bidding process or request for proposal is the main source of data and can be quite complex. Strategic sourcing analysis is usually about uncovering many small improvements that add up to meaningful savings, blocking and tackling, tedious iteration, and outworking the suppliers, rather than big, brilliant insights. The availability of big data methods enables sophisticated analysis.

Negotiate for optimal supplier configuration: Negotiation is the iterative process of leveraging the fact that the buyer is now in possession of more information than the suppliers. Based on the highly disaggregated analysis, one can find each supplier’s ‘sweet spots’ and configure a preferred supplier base, where each purchase is routed to the most competitive source. It is critical that all bidders remain convinced that they can gain a lot or lose a lot of business and that there is no preference for anyone outside cold, hard economics and math.

Implement for ongoing competition: Even the most sophisticated and thoughtful pricing arrangements cannot account for unknowable innovation, temporary excess capacities, new entrants, etc.  Therefore, it is critical to maintain ongoing competition while balancing the commitment to the preferred supplier base. This can be accomplished by allowing purchase level competition subject to an agreed-upon pricing umbrella with minimum / maximum market shares within the preferred supplier set.

Strategic buyers should not go back to business as usual, but instead create a competitively differentiating supply chain for the long-term. The COVID supply chain experience provides the organizational urgency to act and the likely ongoing weakness in the world economy provides the motivation to suppliers to cooperate.

Most strategic sourcing initiatives take about six to nine months and return three to five times their investment within the first year of implementation, but require a high level of expertise and analytical sophistication. If such resources are not available internally, senior management should build or bring in the talent and capabilities required before this opportunity passes.

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Hans Dau is the CEO of the Mitchell Madison Group (https://www.mmgmc.com/), hosting deep experience consulting across many industries, including banking, insurance, manufacturing, technology, entertainment, and retail, with a focus on short-term earnings improvement through strategic sourcing, pricing optimization and marketing analytics. The views expressed are his own.

sourcing

Global Sourcing Opportunities: Reduce Your Risks.

The American business sector is growing and expanding foreign sourcing at unprecedented rates. This growth is due to a number of factors. One contributing impact is the need to source competitively priced raw materials, components, and finished products from foreign markets.

While there is always a value in “Buying American” the reality is that we participate in a global economy and buying and selling in a multitude of markets offers all companies value in growth, profits and sustainability.

This holds true for all business verticals in a robust fashion. More and more USA based retailers, manufacturers, and distributors are finding alternative sourcing opportunities in other countries.

Consumer products, chemicals, electronics (both components and finished products), industrial goods are examples where we witness increased foreign sourcing.

China leads the world as a source for most manufactured products. . “Hats-off” to them for creating a huge capacity, with a robust bandwidth to be both comprehensive and competitively priced, making all other markets subordinate in comparison.

The United States has lost a lot of ground to foreign competition but has still maintained a strong manufacturing profile in numerous verticals. And in recent years has begun to grow again.

Most management personnel in expanding companies … are pressured into short term profitability goals, source internationally, which can lower production and purchasing costs, so margins can be maximized.

These strategies create a dependence on foreign sourcing and a continued need to develop numerous options in purchasing both materials and finished products from low-cost countries.

Cost reduction is the main reason for foreign sourcing that comes with certain risks and challenges, that we need to navigate successfully.

Some of the examples of the challenges and risks in global sourcing:

-Making sure “landed costs” are figured into the cost of goods purchased

-Handling the complications of shipping internationally

-Dealing with U.S. Customs (CBP)

-Managing Trade Compliance

-Packing, marking, and labeling concerns

-Other government agencies, such as but not limited to: USDA, FDA, ATF, DOE, etc.

The critical step is to evaluate and understand your risks and manage solutions to mitigate the challenges of global sourcing and the import process.

In that regard we have eight recommendations:

1. Proceed with new suppliers cautiously.

Do not rush into sourcing relationships. Initially obtain a flow of samples. Check, recheck and check again. Initially buy limited quantities till you have had a number of successful import transactions.

2. Raise the Bar of Quality Control (QC)

Many Industrial Companies we have interfaced with over the last 20 years have had QC issues with foreign suppliers. We strongly suggest you acting diligently and with high reasonable care in assuring that all quality standards are being met.

3. Control the Term of Purchase

INCO Terms control international sales and purchasing. Chose terms that leverage your purchase, such as Ex Works, FOB, FCA and stay away from the DDP Term.

4. Align with Qualified Service Providers

Freight Forwarders and Customhouse Brokers become a reliable partner in your import supply chain. We maintain strong relationships with several service providers that understand the Pet Products Vertical and can refer you to several options.

5. Create Robust “Landed Cost Models”

Landed Cost Models outline all the costs in an import transaction that impact the overall expense in choosing a specific foreign supplier. Freight, duties, taxes, clearance charges, consolidation, etc are just a few of the many expenses associated with imports.

It is critical to make sure you are identifying and covering all of your expenses in the import transaction.

6. Continually do comparison purchasing and diversify your sourcing options

Foreign sourcing is a “work-in-process”. It is a best practice to always seek options, explore alternative suppliers in various countries to make sure you are truly obtaining the most competitive price and highest level of QC and product performance.

7. Utilize and leverage your Logistics Options

Bonded warehousing, foreign trade zones, tariff engineering are practices available to help lower landed costs of goods purchased and are legitimate options to reduce inbound logistics costs.

8. Pay attention to detail

Issues such as Harmonized Tariff Codes, Valuation, Transfer pricing, and Record-Keeping are all issues you have to manage successfully to keep your inbound supply chain running and managing successfully.

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Thomas Cook is a recognized leader in global supply chain and author of 20 books on global trade and business management. He can be reached at tomcook@bluetigerintl.com or 516-359-6232.