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

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 sufficient 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
growing lead times, causing a large
discrepancy in actual vs. estimates
and plaguing manufacturers 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.
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 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, deconsol-
idation, 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 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 can’t 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 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 projec-
tions 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, mea-
sure 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 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 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 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.
It’s impossible to predict mar-
gins on the SKU level without
real-time data from supply chain
partners. Cloud changes that,
filling 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