Commentary: A new landed cost variable

   The cover story in the June issue of American Shipper (see pages 12-16) tackled a topic that has been crucial, but tricky, for most shippers: total landed cost.
   So I read with interest a recent blog post from Steve Banker, service director of supply chain management at ARC Advisory Group. Writing on the Logistics Viewpoints blog, he talked about when companies are trying to figure out their total landed cost, they’re really trying to calculate their total landed profit.
   He used the example of Apple’s ongoing tussle with Congress over corporate tax avoidance. The electronics powerhouse has kept $100 billion in a holding company in Ireland to avoid paying the roughly $35 billion in taxes on that amount.
   What does that have to do with logistics? Well, Banker surmised, after an interview with a pharmaceutical company, that most total landed cost calculations don’t really factor in the cost of corporate tax rates. So the location of a company’s supply chain executives — in other words, where they are deemed to be doing the majority of their work — can impact where its supply chain is taxed.
   As Banker wrote, “total landed profits are based upon both lowering supply chain costs and lowering tax burdens.”
   Setting up regional supply chains in tax-friendly nations could potentially help companies carve out supply chain-derived profits that aren’t necessarily visible in traditional landed costs calculations, but then those profits eventually need to be repatriated to the countries where the tax burden is higher. Banker rightly pointed out that those profits could be kept in tax-friendly locales and used to fund acquisitions or other investments.
   In any case, it’s an interesting factor to consider, and perhaps emblematic of the struggles shippers have in getting a true landed cost picture. There is always, it seems, another consideration around the corner that impacts where shippers should source from, and how they should transport their goods across borders. (Eric Johnson)