Total Landed Cost, part 2

Aberdeen Group reported in their June 2006 report Global Supply Chain Benchmark Report

Global supply chain uncertainties ─ such as delayed or incomplete shipments leading to higher inventory buffers and freight expediting expenses ─ contribute to budget overruns and cash flow management challenges. In one Aberdeen study, fully 91% of companies reported that unexpected supply chain costs were eroding their anticipated low-cost country sourcing savings, with transportation budget overruns being the top culprit.

Supply Chain Network Simulation would have been one way to have foreseen the impact of variation in lead time and supply quantity on network performance and total landed cost.  Rather than assume a static spreadsheet cost roll up a Monte Carlo simulation would yield a more realistic picture of future network performance.  What-if scenario comparisons can often lead business leaders to consider alternate supply and distribution strategies.

Bytheway, near sourcing is on the rise; product lines once shipped to low cost country and now being relocated closer to the consumer markets.  The pendulum swings?  New lower total landed cost?