Impact of TPP on Global Supply Chains

What is the TPP and How Does It Affect Me? 

The TPP—otherwise known as the Trans-Pacific Partnership—is a free-trade agreement that is held between the US and eleven other countries that all touch the Pacific Ocean (hence the name). This agreement is fairly new in its creation, having just been signed by officials in each country in February of 2016 and includes the following countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Vietnam, Singapore and the US (The US has since been removed from TPP via executive order). 

The TPP is the world’s largest trade partnership, even bigger than the North American Free Trade Agreement (NAFTA). The twelve countries involved in the TPP make up 40 percent of the world’s total gross domestic product (GDP) equivalent to $107.5 trillion, 26 percent of the global trade, and contain 793 million consumers. It’s no surprise that the TPP is going to have a huge impact on global supply chains. Understanding the impact of the US involvement can mean serious change for your global supply chain. Below are some of the pros and cons of the US’s position in the TPP and how the President’s decision will affect your operations. 

Effects of US Staying in the TPP 

Pros: 

There’s no doubt that the TPP helps to boost exports and economic growth in the now global economy. If the US is to stay involved within the TPP, the results could mean more jobs and wealth for both the US and the other eleven countries involved. US commercial exports are calculated to increase by approximately $123.5 billion, mainly in the machinery, auto, plastic and agriculture industries. The TPP would also remove the 18,000 export taxes placed on US goods to other countries, ultimately adding approximately $77 billion a year into the incomes of US workers. 

Cons: 

The potential faults in the TPP agreement means that the US opens its doors to tax-free imports from foreign nations. In many cases and industries (i.e. retail) this could mean production moving overseas to cut costs. This could mean seriously adverse effects for various job markets in the US. This would also entail the prevention of wage increases in blue collar jobs. Free trade agreements often contribute to income inequality meaning improvement in business bottom lines, but also the stalling of wages and salaries for workers. TPP encourages the procurement of cheaper goods from low-wage countries and therefore it becomes very possible to create job-loss. 

Bottom Line: 

Whether it’s a good decision or a poor one, the fate of the US in the TPP has yet to be seen. 

InsideTheBox is a US based industrial product development company offering logistics consulting services. As we are a company built by manufacturers serving manufacturers, naturally we are monitoring how the US’s involvement with the TPP will affect our industrial manufacturing industry and its workers.

4 Ways to Easily Cut Supply Chain Costs

If you’re looking to increase your business’ profits without having to increase sales, cutting supply chain costs is a great place to start. There are several ways to reduce costs such as cutting down on inventory, maximizing shipments capacity, and minimizing resource allocation and retrieval costs. By managing and reworking every step of your supply chain, you can end up recouping anywhere from 5% to 10% of all production costs. 

Not only will rethinking how you manage your supply chain save your business money, it can also make your operations run more smoothly and efficiently. An easy place to start your consideration is with the investment in supply chain management consulting. Although spending more on your supply chain seems like a crazy way to save money, this investment can pay significant dividends over the lifecycle of your products. Below you will find four simple and easy to implement ways to easily cut down supply chain costs. 

Consider Customer Demands 

When a supply chain is typically evaluated, most companies start with the supply. With a focus on customer service and demand, surpluses in inventory and critical to quality product features become extremely apparent. Generally, there is significant room within supply chain operations to reduce inventory and better measure quality inventory, ultimately cutting logistics, warehousing, and capital costs. A good start in measuring customer demand is to analyze purchase order patterns by season or by month. With inclinations to customer forecast, it is possible to adjust your supply base and inventory levels accordingly. 

Dual Source 

By using more than one supplier, you increase competition for orders and have a better chance of getting a good deal. This technique also helps to mitigate quality and delivery risks. Multiplier suppliers help your business avoid costly delays in receiving product, but can also help you mitigate the repercussions of holidays, port closures, and other unavoidable situations. Duel sourcing from entirely different geographic areas also allows you to reduce logistics costs. Suppliers who know they are competing for business typically will look to give discounts based on volume orders or reveal hidden margins that sole-sourced producers will not. 

Streamline Your Purchase Order Process 

A large portion of your supply chain cost comes from your ability and methodology in executing orders. Human error and a lack of communication creates opportunity for the order of incorrect part numbers, old drawing revisions, and even incorrect quantities. Not only is this a cash-flow issue, but also an inventory issue. By implementing a more stringent purchasing system and process, risk can be mitigated. Leveraging and investing in other purchase methodologies, such as blanket order systems, Kanban procedures, or processes for Just-In-Time (JIT) delivery, can end up saving money in capital and operating expenses. 

Rethink your Operations 

When operations are stressed, employees and products are prone to more quality and delivery issues, ultimately drastically increasing your costs. One way to take the stress off operations and off your employees is to consider outsourcing. More and more companies today are outsourcing production services and operations such as warehousing and transport. Although you will certainly pay a fee for these services, warehousing and logistics companies typically offer greater capacity, skill, and effieincy with regard to the specified operations. This also is an option that prevents the need to invest in new technology and equipment. 

Bottom Line 

The supply chain is one of the first places you should consider when reviewing your operational costs. Your business stands to see substantial upside by thorough analysis and review of supply chain operations. Supply chain management consulting is a rapidly growing service industry that can provide significant value to any industrial operation.

Benchmarking in Supply Chain Operations

Logistics consulting services are one of the best ways to improve your warehouse operations and supply chain efficiency. Typical services include throughput management, warehouse operations, international logistics & transportation, and the development of new procurement systems. One key tool in the effective implementation of these services is benchmarking. Benchmarking allows logistics consultants to compare a business’ operations to some of the top performers in the industry in an effort to glean insights and information about how to operate more efficiently. 

Benchmarking allows an analyst to find out whether operations are “on-track” to meet future expectations. Additionally, benchmarking is a tool that can be used to constantly measure progress against clearly outlined target performance metrics. This type of system also lays the framework for the implementation of other improvement studies such as gap, SWOT, and stakeholder analyses. Overall, benchmarking is a fantastic tool to help companies define future business improvements. 

How to implement benchmarking in supply chain management operations? 

1. Analyze your own business and identify specific operations or processes that you are looking to improve. By targeting specific trains of your operations, you can focus your benchmarking studies and therefore your process improvement tasks. If there is one particularly troublesome process, it is possible to do an entire benchmarking study within that process. It is advisable to hire logistics consulting services for this type of work. Using a consultant from the start of a change management program is more effective than implementing mid-way through.
2. Recognize the key performance indicators (KPIs) for selected processes. Examples of KPIs include: cost, time, efficiency, and quality.
3. Document existing operations. Without having a baseline of your operations and your key performance metrics, it is impossible to measure improvement.
4. Identify competitors or your target for improvement. Targets can vary based on the type of improvement that your business is considering. In some cases, benchmarks can be used for reference and future state operations will approach your target. In other cases, your future state may match the target or even surpass, or breakthrough, the benchmark. 

Specifically, with regard to supply chain operations, the top 10% of companies typically spend 5% less on logistics and supply chain operations than their competitors. While 5% may not sound like much, when you are spending millions of dollars on logistics costs, it adds up. Experienced consultants who have witnessed these types of best practices and operations can be major keys to your business’ success.

Benefits of Logistics Consulting Services for Your Business

Supply chain consultants and logistics consultants can provide a range of logistics and transportation solutions to help your business sustain growth. These consultants’ expertise consists of everything from purchasing systems to international shipping and warehousing solutions. Despite typically vast experience in different types of industries their functional skill-set is universal and can help develop sustainable logistics models that can account for the ever-changing business environment. 

Recommendations and solutions provided via logistics consulting services can be useful for a wide range of different business models, industries, and product types. Logistics consultants are experienced in all aspects of the supply chain including services such as: 

• Inventory Planning 
• Supplier Management
• Strategic Sourcing
• Supply Network Design
• Warehousing & Transport Operations

Provision of inventory means offering training to the staff to achieve the best service and inventory results across a company to get maximum profits and client satisfaction. Transportation operations are very important when coordinating a transport bid for a number of different production sites owned by one organization. 

Logistics consulting services also offer services with regard to inventory management, including Kanban management and Just-In-Time (JIT) delivery, benchmarking, logistics modeling and routing, and warehouse design. For example, new types of warehouse design services are developing across industry in order to improve the efficiency of storage systems and eliminate the need for massive inventory levels. These types of enhancements on traditional warehousing can help automate ordering systems, ultimately saving time, space, and improving cash flow. 

Experienced logistics consultants can also help companies to build better relations with their consumers and their suppliers. With improved logistics performance and business efficiency, product delivery is hassle free. Delivery is more reliable and sustainable over the course of business relationships. Additionally, it helps organizations gain competitive advantage through reduced transportation costs, better buying power, and reliable customer service. 

The investment in a strong consultant ultimately helps a business save money through cost reductions in operations and capital costs. With reductions in inventory, comes an increase in risk. A strong consultant will also look to mitigate and transfer risk out of your operations in accordance with improved business efficiency. Ultimately, logistics consulting services can offer a variety of solutions to enhance business efficiencies and reduce costs. Although many recommendations can be standardized across multiple industries, there are also benefits to using niche services for your business market.