In any organization, data tends to exist in siloed pockets. When it is brought together it can provide valuable insights to help frame and manage the trade-offs involved in global operations. Enabled by integrated data, one can track the journey of inputs and finished goods from supplier to warehouse to distribution, from country of origin to destination, building a complete picture in one true source of data.
A bottoms-up, data-driven model centered on analysis of the Bill of Materials and built from historical transactions in the ERP allows the tracking of raw materials, components, sub-assemblies and finished goods to provide visibility of flows across the global network. Adding in data pertaining to indirect taxes, transfer pricing, customs codes and trade costs then captures the links and dependencies between Supply Chain and Tax & Trade at all levels of the operation. Finally, consideration of direct tax elements can be incorporated as an overlay as needed.
With a holistic and comprehensive data model, companies can create reporting and modelling capabilities, combining Supply Chain and global trade information to provide reports and visualisations of product flows; transportation hubs and modes; perform customs compliance checks; and carry out cost analyses from supplier comparisons all the way up to Total Landed Cost analysis.
A Bill of Materials- centered model will also allow for the overlay of specific regulatory, ESG, and externality costs – including carbon pricing, plastic taxes, tracking of conflict minerals and visibility into ethical sourcing – which are expected to evolve and become more impactful in coming years. Developing the capability to incorporate these (as is relevant to specific operations) will help companies to be ready as they become codified in regulation and standard practice.
Once a comprehensive data model is created, scenarios can be modelled to show potential global trade savings opportunities and Rules of Origin impacts of different sourcing options, and – critically – the holistic view allows for mitigation planning, such as potential opportunities and risks emerging from new Free Trade agreements or the consequences of projected changes to trade regimes.
This integrated view can illuminate the cost and compliance implications of decisions at every stage of the global supply process, from selection of specific raw materials to future supply chain network footprint design.
A total landed cost approach to the management of global product flows provides a holistic overview of a company’s operation – a thorough and transparent understanding of the network and its flows of inputs and goods.
The challenge for companies is to address siloed behaviours and processes and encourage true end-to-end thinking. With an integrated mindset and a data-driven approach, the many different functions involved in companies’ global supply flows can begin to understand their own processes as part of a synergetic whole, in which tax, operations and sustainability are interdependent, part of the same conversation.
Nothing less can drive cost efficiency and help manage the risks of doing business in complex global networks.