Editor's Note: The following is a guest post by Gary M. Barraco, director of global product marketing at Amber Road.
Uncertainty over trade tariffs is already putting the squeeze on US companies. The recent tit-for-tat moves by the U.S. and China sent ripples across the markets that turned into bigger waves across supply chains around the world.
But this and other trade mêlées are adding another level of risk to cross-border shippers that go deep. Companies have to be agile enough to react to these and other changes and adapt their supply chains to avert disaster.
Global supply chains are susceptible to shifts in the ever-changing trade rules. The cost of moving goods across borders can change literally overnight. Retailers first need to be proactive in their costing processes and predict cost spikes such as tariff shifts.
Conduct costing scenario simulations to prepare for the worst
The best strategy to avoid getting caught by surprise is to use technology to conduct “what-if” costing scenario simulations. This line-by-line cost calculation needs to be based on landed cost – the aggregated cost of sourcing and delivering the product to the end user.
A landed cost calculation does not only account for the purchase price and transportation costs, but also inventory carrying costs, tariffs, and a risk variance associated with stock-outs or line shutdowns, among others.
Armed with this level of detailed cost information, global sourcing professionals must weigh import controls, duties, freight costs, and many other factors into each purchase decision. The number of variables that go into calculating total landed cost and weighing the number of potential scenarios makes manual computation nearly impossible.
Both importers and exporters must have a clear understanding of estimated landed cost to correctly set prices, make accurate sourcing decisions, and assess transportation options. Most importantly, it is vital to calculate the total landed cost outcomes for multiple sourcing scenarios, while also adhering to the most current tariffs and duties.
Open communication channels with carriers, suppliers and 3PLs
That’s where you need more than just functional tools to do the calculation. Shippers need to have access to a database that houses all applicable duties, taxes, and fees associated with their international shipments. The database must also be constantly maintained to capture the most up-to-date rates, particularly when trade policies are changing so quickly in this environment.
This level of visibility, agility and data-sharing requires companies to implement a digital supply chain — moving from silo-based, inward-facing systems to an interconnected, single solution platform that can provide a broad and deep set of capabilities for the global supply chain.
The platform should also provide a digital model for sourcing, logistics, trade operations, and trade compliance — allowing for cross-functional collaboration, automation, and analytics.
In chess, having the ability to predict your opponent’s next move is a proven strategy for winning the game. As the global trade landscape continues to transform and face uncertainty and upheaval, having a trusted solution in your corner is the best way to stay one step ahead.
Gary M. Barraco is the director of global product marketing at Amber Road. As the platform evangelist, Gary develops and launches customer insights, go-to-market plans, product messaging and content, and field marketing tactics for the Global Trade Management software. Gary was VP, Industry Development for ecVision prior to its acquisition by Amber Road.