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
The Essential Guide to High Value, Low TCO WMS on the Fast Track
A warehouse could become your weakest link if you can’t execute with speed and accuracy. Your bottom line will be negatively impacted, so will your customer’s experience, and they are only one click away from buying from your competitors!
Download Today!
From the November 2017 Logistics Management Magazine Issue
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships into true, collaborative partnerships—and greatly strengthened its logistics and supply chain operations in the process.
34th Annual Quest for Quality Awards: 2017 Awards Dinner
Trucking Regulations: Washington U-Turns; States put hammer down
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Make Your Products Smarter in the Supply Chain with the IoT
This webinar explores how temperature-sensing smart labels and inexpensive NFC tags are being used to extend product safety and efficiency beyond the shipping dock while also building a communication bridge to your customers.
Register Today!
EDITORS' PICKS
2017 NASSTRAC Shipper of the Year: Mallinckrodt; Mastering and managing complexity
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships...
2017 Alliance Awards: Recognizing outstanding supply chain partnerships
In an era where effective supply chain collaboration is both highly valued and elusive, Logistics...

26th Annual Study of Logistics and Transportation Trends: Transportation at Digital Speed
While a majority of companies strongly agree that transportation is a strategically important...
34th Annual Quest for Quality Awards: Winners Revealed
Which carriers, third-party logistics providers, and North American ports have crossed the service...