The series of recent Supply Excellence posts on costing have elicited significant debate, including comments from a former colleague and costing expert, Frank Cirimele. Frank has over twenty years of experience in the international supply chain domain and is a recognized expert on global trade and the practical application of effective Global Logistics Strategies. He has represented the U.S. on the United Nations International Trade Procedures Working Group, which addresses Trade Facilitation and global e-commerce issues. Frank was also selected as a private sector expert by the U.S. Department of Commerce, International Trade Administration to join the Free Trade Area of the Americas Committee on Electronic Commerce. I knew Frank from his role at a provider that attempted to unite total landed cost information and optimization capabilities for true global sourcing decisions. While possibly ahead of their time a few years ago, these costing concepts are at the fore of global sourcing decisions today. Below is the first of a series of contributions from Frank on the future of product costing and global sourcing:

The other day I asked a buyer for a large importer what the terms of sale were for a recent PO opened on an overseas supplier. She promptly sent me over the to the CFO saying that was outside of her domain. This was not a newbie but someone who has been in an international purchasing role for a few years now, though obviously not a very sophisticated buyer.

While five to ten years ago this type of answer would not have surprised me, receiving this response today from someone who works at a company where importing is a significant portion of their business was quite surprising. This may not have been what Jean-Baptiste Alphonse Carr, a nineteenth century French author and editor, was writing about when he penned “The More Things Change, The More They Stay the Same”; but it was defnitely deja vu to me when I heard the above referenced response.

I have spent more than a few years involved with international trade and have grown accustomed to hearing that people are struggling calculating, or even understanding, their landed cost for imported goods. And despite all the talk about ‘global sourcing’ I am still pleasantly surprised when the subject comes up on identifying the global TCO (Total Cost of Ownership) for either goods sourced overseas or equipment moves done on an inter-company basis. All that said, I am not sure that with all the talk about companies competing with their supply chains, why Global Profit Optimization (GPO) is not a bigger topic of conversation for firms looking to design, implement, and optimize a tax efficient supply chain.

Maybe it has something to do with ‘low-hanging fruit’, or some other innocuous buzzword, but I would have to think that these areas are critical investment projects for any multinational firm. Whether it is competitor driven, or SarBox motivated, the need to accurately identify all the direct and indirect costs of moving production or sourcing offshore is a vital corporate capability. Offshore sourcing and production is not going away, nor will it stand still, so the ability to constantly calculate costs, via multiple ‘what-if’ scenarios, is now a required corporate competency.

The global firms who invest in developing this capability will be a step (or two) ahead of the competiton even when the source of of their product is the same.

Check back here for more of Frank’s advice on costing. Or contact Frank directly with your questions at: frankcirimele@earthlink.net