Evolving the supply chain
Published by Marie Morden on November 22, 2016
KPMG's Canadian Manufacturing Outlook 2016 surveyed more than 220 executives from across the country, gaining insights about their companies and the future of Canadian manufacturing. We then compared these ambitions to Canadian peers and global counterparts.
Among the important outcomes from this research, more than ever, the race for new markets and innovation stand out as strategic pillars for Canadian manufacturers who leverage their supply chain capabilities as key differentiators, and are smart with their trade and customs approach.
A call for trade and customs support
The ability to manage the customs process as well as other links in the supply chain is critical to survival in a global market place. A company that manages this process efficiently and effectively can focus on what it does best, while concentrating on strategies to improve their financial performance, reducing logistics costs, improving customer service levels, and having more flexibility to meet changing customer needs.
There is a paradigm shift in customs administration from a transaction-based process to a post-audit environment when dealing with customs.
For Canadian companies, international sourcing, sales, and expansion are crucial to future growth, and business leaders are increasingly seeing trade management as a competitive area that merits additional resources. With as many as 400 agreements in force across the world*, the free trade agreement (FTA) landscape certainly has the potential to yield significant reductions in duties and import-related costs.
It's up to executives to allocate the necessary resources to identify cost-saving opportunities, while ensuring their operations remain compliant in a time of increased scrutiny by customs authorities. To that end, not only do organizations have to understand and model their full cost at port of entry for any particular goods (including tariff classification for imported goods), but they also have to ensure compliance in the following five areas: (1) local import laws, (2) local export laws, (3) export laws as they apply globally, (4) trade security programs, and (5) policies and procedures with respect to customs regulations. A heavy load for all organizations that can be turned into a strategic advantage when properly utilized.
Supply chain as a key differentiator
The nature of competition is evolving and becoming even more global. No longer will companies simply compete against other companies, but total supply chains will compete against other supply chains. Each link in the chain must be strong.
Companies are seeking greater margins through sophisticated products and operational excellence that are well aligned with strategic goals. To be successful, it means focusing on the steps that can deliver sustainable results and they are, better demand and supply planning to improve inventory turns and costs, customer service, and visibility across the supply and demand chains. According to KPMG research, companies that plan well reach, on average, 8 points higher return-on-equity (ROE) than companies that don't.
Furthermore, a detailed knowledge of the cost-to-serve allows supply chain executives to support sales negotiations and transformation plans with facts, options and solutions, while addressing the root cause of cost increases. Understanding key drivers of supply chain cost by product, customer, channel, and regional hub also allows you to identify the loss generators and the opportunities for supply chain added-value services.
The expectations of the procurement function are shifting
Procurement as a function is on a journey toward greater importance and influence. It's evolving beyond its transactional and back-office function, and the department is becoming a strategic role focused on the total value delivered. This includes supporting organizational growth goals, reducing total cost of ownership, and improving quality and integration of supply.
Based on KPMG research and leading practices, chief procurement officers should engage their organizations in strategic conversations about how the supply chain can be optimized, identify innovative and collaborative solutions, and manage risks to deliver the greatest returns. Procurement's future role will be the one that challenges many of the existing assumptions and perceptions of procurement as a "cost savings enabler," evolving into a "trusted partner," and finally moving into a future role as a "supply chain innovator."
Organizations of all sizes are leveraging e-procurement solutions to automate transactional tasks and realize enhanced value. By doing so, it takes away the traditional manual procurement processes, lengthy management approvals, reconciliations, and payment cycles, in favour of a unified platform that creates efficiencies and low transaction costs.
Want to know how well your supply chain is working? Take KPMG's Supply Chain Self-Assessment to find out.
Partner, National Lead Supply Chain and Operations, KPMG in Canada
GTA Trade and Customs Practice Leader, KPMG in Canada
* Source: World Trade Organization, July 2016, www.wto.org/english/tratop_e/region_e.htm
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