Tip 1: Take Control – Purchase Direct
Do you have full control of your supply chain? Are your purchasing your key inventory items through a third-party? There are significant, empowering cost-savings opportunities by purchasing from suppliers and manufacturers directly.
- Understand total landing costs per unit: Do you fully understand your landing cost per unit? How do freight costs, import duties, and other compliance certifications impact the actual landing costs of your product? This impacts your actual profit margin per unit sold. Understanding the full landing cost will put you in an empowered position to make smarter retail pricing decisions.
- Demand full product cost transparency: You should understand the detailed costs of all your products. Require your supplier to provide a detailed Bill of Materials breaking down all the costs for each of the products you purchase. You should have a clear understanding of the cost of materials and labor that goes into each item.
- Buying from overseas? There are options to save money by directly importing yourself. Are you a registered importer? If not, you can cut out the middle-man and empower your business to import directly.
Tip 2: Renegotiate Product Pricing – Simply Ask!
Easier said than done, but when is the last time you have asked your supplier for a discount? We have found one of the easiest ways to quickly reduce your product procurement is to…simply ask. Identify cost savings in established relationships, or when you first initiate a relationship with a supplier.
- Ask for a volume discount: Are you ordering more or increasing order quantity? There is always opportunity to renegotiate pricing based on volume.
- Benchmark pricing: We recommend buyers “arm themselves” with an understand of pricing offered by other suppliers. Do this by conducting a simple benchmarking exercise to identify pricing offered by other suppliers. Use your findings to empower conversations with your existing supplier, or consider the lower-cost alternatives you identified during the process.
Tip 3: Review Freight and Inventory Management Costs
How much are you paying for your product to be shipped to your warehouse? How are you managing your inventory? Do you fully understand all the costs to transport your goods and keep track of incoming inventory? We recommend reviewing the below:
- Get a new insurance plan: How much are you paying to insure your freight? Are you paying for insurance through your freight forwarder? An annual plan will save you significantly.
- Review storage fees and penalties and setup SOPs: Are the terms “demurrage” and “detention” showing up on your freight invoices? It’s time to have a call with your freight forwarder or provider to setup processes to avoid these significant fees at all costs.
- Link up your sourcing, ordering, and inventory tracking: Keeping track of your sourcing, ordering, and inventory in one system can help you make sure you are optimizing costs–and keeping everything in stock!
Tip 4: Explore New Suppliers and Manufacturers
Dependent on one supplier? Remember…there are always more fish in the sea. While your current supplier may be The One…it is worth your time to explore other suppliers and manufacturers to know what is out there. Or, at least, have a backup in case things go South (remember the disruptions during the Covid outbreak?)
- Review local options: Sometimes the cost savings opportunities are at home. Have you explored domestic suppliers and manufacturers? Sometimes there are great options that do not require international shipping. Looking for suppliers in the USA? Check out How to Find a USA-based Manufacturer and Supplier.
- Diversify geographically: Not finding what you need domestically? There are often cost savings opportunities by shifting your supply chain geographically. You won’t know until you check!
Tip 5: Importing? Review Customs Clearance and Compliance Costs
There are huge cost-savings opportunities if you are buying product from overseas:
- Review import duty payments and fees: Do you understand what you are paying in import duties? It’s possible you could be paying too much, or there are opportunities for cost savings by setting up direct payments to US Customs or exploring options for duty drawback. On the other hand, it’s possible you are missing duties (such as anti-dumping and countervailing duties). A thorough review will give you a clear understanding of the costs.
- Review product classification: How are your products classified? Have you conducted a thorough review of your classification to verify accuracy? Sometimes there may be cost savings opportunities.
- Review Incoterms: What’s an Incoterm? If you’re asking…it’s time to review what incoterm you have agreed upon with your supplier. Incoterms are the shipping terms that you use to divide liability and costs between you and a supplier. For example, if you are relying on your supplier to ship Delivered Duty Paid (DDP), are you certain they are covering duties and compliance requirements? Use tools like ddpcheck.com to help verify.
- Reduce customs clearance fees: What are you paying for customs clearance? If you currently place over 10 orders a year, there are significant cost savings opportunities by exploring other providers.
- Verify all compliance requirements: The biggest way to lose money importing product from overseas: Not fully understanding compliance requirements and getting product confiscated at the port. The costs can be significant—make sure you are clear on all the admissibility requirements for your product.
Ready to act on savings opportunities now?
Are you already purchasing product and ready to review your costs? Book a consultation today! We guarantee you will leave the consultation with actionable and long-term cost savings opportunities for your business.