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How to Avoid Low-Cost, Low-Value Suppliers
Oracle is providing new details about Oracle Landed Cost Management, a set of sourcing-analysis capabilities important for Lean practitioners that were first previewed at last fall’s Oracle OpenWorld conference.

The new costing capability could help managers make fundamental sourcing decisions, such as whether to contract with a local supplier, a “near-shoring” partner in the same hemisphere, or an offshore company on the far side of the world.

Experts say landed-cost considerations can help supply chain managers analyze all the hard and soft expenses associated not only with manufacturing components but also with the associated logistics of delivering the products to buyers, including any risks that arise during the full lifecycle span of the parts.

"Landed-cost analyses have been difficult in the past because of the complex interrelationships of these multiple factors,” says Maha Muzumdar, vice president of supply chain marketing at Oracle. “But the need to consider all the data points has become essential for Lean supply chains as product recalls, delivery delays, and fluctuating transportation costs demonstrate that the lowest-cost suppliers don’t necessarily offer the most business value.

“Companies need to perform an ‘apples-to-apples’ analysis of all relevant costs associated with products, including the carrying costs for capital, on-ocean and airborne insurance, project management, customs, on-dock storage, port handling fees, and extended communications,” Muzumdar explains. “Do I ship it by freight, ship by ocean, or expedite by air? And what risks do I face with this particular source in terms of failure rates and reliability? In the event there’s a manufacturing defect, what does the buyer do with those parts?”

Oracle Landed Cost Management may be included in an upcoming release of the Oracle E-Business Suite now being designed by Oracle.

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