Avoiding the See-Saw Effect When Cutting Costs: Tax Effective Supply Chain Management
Much like a see-saw on a playground, you can work to make costs go down, only to see other costs go up in response.
Companies might bring down supply chain costs through changes to operations, for example, but these changes can create a surprising upswing in other costs. One of these danger areas is taxes, or for global companies, the Effective Tax Rate (ETR).
Supply chain managers do not always understand ETR, and tax planners are not always fully aware of operational decisions regarding outsourcing, transportation and distribution on a global scale across multiple borders. So changes to one can make costs rise in the other category.
Even a slight tax rate restructuring that ignores optimization with a supply chain can inadvertently force product prices to rise, as well as total delivered costs.
Tax Effective Supply Chain Management (TESCM) helps integrate tax planning into supply chains. However, less than half of multinational corporations actually have tax effective supply chains.
A chapter of the recent white paper from Tompkins Associates, "Leveraging the Supply Chain for Increased Shareholder Value," explains how ETR and supply chain management can be optimized.
Although it is not necessary for supply chain managers to understand global tax law, it is helpful for tax planners and supply chain managers at the same organization to collaborate -- especially with global taxes and incentives that can lead to a see-saw effect.
What is your organization doing in the way of TESCM? Is tax management integrated into your supply chain?
Jim
Tompkins Associates
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