What are the key considerations when evaluating the total cost of ownership for overseas suppliers?

TCO Was defined by these major steps End to end service Service On time Risk factors Opportunities TAT It will be defined by using these parameters

Assessing the total cost of ownership (TCO) for overseas suppliers involves more than the initial price. It includes product cost, shipping, customs duties, quality control, and inventory expenses. Additionally, factor in communication, travel, currency fluctuations, supply chain risks, compliance costs, vendor management, returns, and ethical considerations. Evaluating these aspects comprehensively provides a holistic view for informed decision-making, totaling the expenses associated with engaging overseas suppliers.

Popular hedging instruments for currency exchange rate risk: 1. **Forward Contracts:** Lock in future exchange rates. 2. **Options:** Provide flexibility to exchange currencies at a set rate. 3. **Futures Contracts:** Standardized contracts for hedging. 4. **Currency Swaps:** Exchange one currency for another with a reversal agreement. 5. **Money Market Hedging:** Use foreign currency accounts and short-term investments. 6. **Natural Hedging:** Adjust transactions to offset currency risk naturally.

Prior to loading cargo, make sure to ask the shipping lines/forwarders/etc. to quote the rates applicable so that you can plan ahead the date and time of shipments.

What changed after Brexit from a logistics point of view? Customs clearance is now required for all goods moving between the UK and EU and every consignment needs to have two customs declarations: one for exporting from the EU and one for importing into the UK. For example, if you buy a sofa from the EU, the seller has to fill in an export declaration in their country and you have to fill in an import declaration in the UK.

1. **Transportation Management Systems (TMS):** Oracle, SAP TMS, TMC for transportation planning. 2. Route Optimization Software: Route4Me, OptimoRoute for efficient delivery routes. 3. **Warehouse Management Systems (WMS): Manhattan Associates, HighJump WMS for warehouse efficiency. 4. Incoterms Selection: Choose appropriate terms to allocate costs. 5. **Consolidation Services: Combine smaller shipments for cost-effectiveness. 6. Volume Discounts: Negotiate discounts with transport providers. 7. Customs and Compliance Software: Integration Point, Amber Road for customs clearance. 8. Supply Chain Visibility Software: Control Tower platforms, Shippeo for real-time supply chain monitoring & optimization.

Transport & Logistics is one of the main and most important of all, as the containers have to be deployed @ the right time or else the supplier loses out in the commodity market like raw materials to the cement factory.

Quality is always an important factor while selecting your suppliers. Now some people ask for the prices first then check the quality and specifications. For me it works the other way around. Now you have to make sure that the bulk shipment should be at par with the samples you checked or received. Try to make it all written in your PI that will cover the major points and duly signed and stamped by both the parties. It should be more like a conducive partnership rather than feeling of mistrust or be sceptical, by both the sides. Other things like warranties and foc (free of cost) spare parts should be talked before hand.

The popular worldwide due diligence method for managing quality and compliance issues with overseas suppliers is: **Supplier Audits and Assessments:** Conduct comprehensive supplier audits and assessments to evaluate a supplier's credentials, certifications, references, and overall compliance with quality and performance standards. This involves on-site inspections, quality control checks, and verification of their track record in meeting contractual obligations. By thoroughly assessing your overseas suppliers, you can mitigate the risk of quality and compliance issues that may impact your total cost of ownership (TCO) and overall business performance.

Does that mean that goods brought in from the EU are not subject to customs duty? It depends on where the goods are manufactured. This is also called the origin of the goods. If the goods are made in the EU, they are considered to have EU origin and are duty-free. On the other hand, if the goods are made in a non-EU country, such as China, they are of non-EU origin and in some cases subject to customs duty. The origin of the goods does not change even if they are moved or stored in different locations. For example, if you buy a product that is made in

When assessing the total cost of ownership (TCO) for overseas suppliers, consider more than the purchase price. Factor in shipping costs, quality, lead times, inventory expenses, supplier performance, exchange rates, compliance, political stability, and ethical considerations. Analyze the full lifecycle costs, including maintenance and disposal. Assess risks, environmental impact, and the overall value of the supplier relationship to make informed and comprehensive sourcing decisions.

One of the most important part of TCO , is supply chain issues. Now you can’t be sure about the quality and price of the products, if you don’t have the steady flow of raw materials for that particular products. Nowadays the prices of raw materials have seen drastic changes , especially after Covid, that can lead the whole production plans go haywire. A secure and undeviating supply of raw materials is the need of the hour.

Is the EU treated like any other (third) country when dealing with the UK? When you look at the customs clearance side of things – yes, it is. However, the UK and EU have a trade deal (known as TCA) that makes things easier for importers and exporters. It allows goods that originate in the UK or EU to be traded without any customs duty, as long as they meet certain rules of origin. This means you can save money and avoid extra paperwork when importing goods from the EU or export goods to the EU.

TCO's level of risk should also be taken into account. A risk management plan must include contingency plans to guard against supply chain disruptions. The entire cost of ownership, including mitigation expenses. Larger inventories or various sources may be required in long-distance supply chains to protect against potential interruptions like changes in transportation costs, currency exchange rates, logistical difficulties, or other hazards. Long-distance supply chains also frequently present vulnerabilities. It is essential to comprehend the total cost of ownership and how it affects the strategic sourcing process to manage an effective, optimized supply chain.

In most cases your best bet would be to consider all costs. Include an additional mark up to ensure costs are covered with no nasty surprises.