Change of Purchase Terms (Incoterms 2000)
Sector: FMCG – Major International Retailer of Consumer Electronics
The development of a new strategy to leverage a proven record of direct sourcing expertise by influencing the vendors of key branded products to change purchase terms to factory gate pricing, allowing the Retailer to control the international supply chain from point of origin to destination.
This strategy would lead to a significant improvement in cost to serve, lead times, on time in full delivery and Customer choice.
Target and approach suppliers of key branded product and change purchasing terms from delivered duty paid (DDP) to Free on Board/ExWorks (FOB/EXW).
Present a proposal to the Commercial function of our client, focusing on improving net margin, securing availability and enhancing the control and visibility of the end-to-end supply chain. Demonstrate a proven capability of importing and consolidation at origin allowing orders to be demand driven and inventories optimised.
Engage with the Commercial function to help identify key vendors and product lines, (laptop computers), achieve a commitment to embrace the change of terms, and implement the strategy by making trial shipments.
Key elements of the negotiations were to ask vendors to submit FOB/EXW selling price, in order to determine the expected benefit.
- Choice of discrete product lines allowed measurement of change
- Improved availability by 25% at client’s local Distribution Centres
- Improved net margin by US$1.5m p.a., against US$175m spend
- End to end visibility & control of orders from production to delivery at client’s DC’s
“I worked with Nav for many years within the OEM sourcing team where Nav was responsible for the Logistics and shipping for import of products from the Far East and Europe. I found Nav’s knowledge and advice in this specialist area invaluable and he is extremely diligent and detailed in his application to his job. Also his attitude and disposition are a great asset within any team and he is a strong team player.”
Alan Nothard, Group Buying Manager
DSG international plc
Other Case Studies:Shipment Consolidation at Far East Origin