Leveraging Trade Agreements to Achieve the Next Level of Savings from Global Sourcing

Manufacturers can spend 50% or more of revenue on purchasing parts. So, it is not surprising that sourcing from low cost countries to improve competitiveness has been such an important business strategy in the past ten years.

By · February 7, 2012

Manufacturers can spend 50% or more of revenue on purchasing parts. So, it is not surprising that sourcing from low cost countries to improve competitiveness has been such an important business strategy in the past ten years. According to AberdeenGroup 60 percent of manufacturers have turned to China as the cornerstone of their low-cost sourcing strategies and in the past few years this level of spend has almost doubled — from 21 percent to 39 percent. The ability to outsource product and skilled trade labor, at a fraction of the cost is integral in maintaining a competitive advantage in market pricing.

To achieve the next level of savings from a low-cost country sourcing strategy, leading companies are using trade agreements to reduce landed costs through duty reduction.

Free trade agreements are a pact or program between a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods and services traded between them. Free trade agreements are designed to promote trade between regions, increase labor and sourcing opportunities within those regions, and open up foreign markets to exporters. Free trade agreements (FTAs) pose an incredible opportunity for global companies to reduce landed cost of sourced product, and improve profit margins on exported product from anywhere between 3-7% on average.


Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

Amber Road · Free Trade · Global Trade · All Topics
Latest Whitepaper
Lead your organization through the driver shortage and over-the-road regulations.
Potential transportation disruptions are looming as increased over-the-road regulations are set to go into effect in 2017. Experts believe these regulations will further impact the already challenged driver pool as well as reduce driver productivity.
Download Today!
From the January 2017 Issue
Following LM tradition, we start off the New Year with our annual “Rate Outlook” cover story and subsequent Webcast
Moore on Pricing: The other TMS functional options
2017 Rate Outlook: Where are freight transportation rates headed?
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2017 Rate Outlook: Where are freight transportation rates headed?
Join our panel of top oil and transportation analysts for an exclusive look at where rates are headed and the issues driving those rate increases over the coming year.
Register Today!
EDITORS' PICKS
2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...

Making the TMS Decision: Ariens Finds Just the Right Fit
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL)...
Motor Carrier Regulations Update: Caught in a Trap
The fed is hitting truckers with a barrage of costly regulations in an era of scant profits....