Revolutionising retail risk management
Written by Ty Bordner, VP Product Management and Solutions Consulting at Amber Road
Global multi-sourcing (the practice of obtaining identical merchandise and components from more than one international supplier) has risen in profile recently, following a renewed focus on risk management in the supply chain. Whether you are considering or already undertaking a global multi-sourcing strategy, it is important to weigh the qualitative and quantitative factors against what your company can reasonably support.
Many supply chain professionals are adopting multi-sourcing as a part of a retail supply chain resiliency strategy or to optimise sourcing decisions. By multi-sourcing, organisations can insulate themselves from risk factors such as storms, port closures and labour disputes.
While multi-sourcing is straightforward in theory; organisations accustomed to working with only one vendor per item may have to make some adjustments. Here are some questions to help determine whether multi-sourcing is the right choice for your company.
Consider your level of risk tolerance
Similar to an investment strategy, a multi-sourcing strategy should take into account the level of risk the organisation is willing to accept, based on the likelihood of supply chain disruption for a particular item. An analysis of how difficult or easy the item is to obtain versus how important it is to the overall supply chain is a good first step to determining whether to find multiple sources for the item.
Can you afford the risk?
What would the effect be on your business of not being able to obtain the product? This is closely related to the concept of risk, but adds a quantitative aspect to the analysis. If a particular item is not available, what is the effect on revenue? Would you lose customers? Would employees be laid off? Would you close factories or plants? Or, as with Superstorm Sandy, would you miss a key window to bring seasonal items to your retail shelves? With the results of your quantitative analysis, you can determine its worth to the organisation to have the item available from additional sources.
Sourcing a comparable cost
Do other suppliers offer the same product at a comparable cost? Can they provide it if your primary supplier can’t? If you determine that alternative suppliers are necessary, then set about finding them. As with qualifying any supplier, ensure they can meet your deadlines at an acceptable total landed cost, not just product cost. These other charges to be considered include freight, insurance, duties and taxes; preferential trade programs; and countervailing or anti-dumping duties. Perhaps it is worth it to pay a premium to the alternative supplier to guarantee availability. Just make sure the alternative supplier won’t also be affected by the same factors that could disrupt your primary supplier. Choose suppliers from a different region, and use a different port of entry.
Can you manage multiple suppliers?
Can your organisation manage relationships with multiple suppliers? Whether you opt for multiple suppliers for backup purposes or as part of your overall sourcing strategy, determine whether your organisation is prepared to manage multiple vendors for the same item. It’s typically not enough to have a supplier simply waiting in the wings in case of disaster, since if there’s no relationship they may not want to come to your rescue. Be prepared to nurture the relationship with all your suppliers so you won’t go begging in times of real need. Organisations also must administratively manage their suppliers, effectively storing information in a manner that enables streamlined and easy sourcing decisions.
Finding the right system
Using an international supplier management system as part of a global trade management (GTM) system enables companies to inherently and intuitively approach the complexities of multiple sourcing at the product level. Companies should look for a solution that allows them to store information about multiple sources and account for all the permutations in a single product record in a single repository. The system should also be able to perform import cost calculations and check regulatory compliance for all relevant country of import/country of export combinations.
Consider whether your existing or future system does the following:
- Landed cost — Products sourced from different suppliers have unique landed costs, since they will be coming from different countries. Freight, insurance, duties and taxes all play a role in determining landed cost. There may also be preferential trade programs, countervailing or anti-dumping duties in place between some of these countries to take into account.
- Compliance — each country has different import regulations. Examples include rules around chemical composition, components, labelling requirements and subtleties in product classification. Agencies other than Customs may be involved, and each government has its own set of import filing forms.
- Logistics — getting your merchandise from source to destination is no small task, especially if regular trade routes are disrupted. Each shipment must be rated and booked, and multiple land and sea carriers will need to be managed and tracked.
Your supply chain can build or destroy your brand. By evaluating your needs and potential changes that you may need to undergo to accommodate multi-sourcing, your organisation can determine if this strategy is the right solution to keep your supply chain in top shape.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”