Unlock your Prime Day potential! Month-by-month strategies inside.
Download the complete calendar and playbook for free
Free Download
Are you prepared for 2024 fees? Download our free Amazon Fee
Stack White Paper
for 2024 to protect your business.
Carbon 6
NEW! Download the free Amazon
Fee Stack White Paper
for 2024.
Free Download
Free Download
Take your Seller Central operations off your to-do listHire us for around-the-clock Amazon account management!
Learn More
ManageByStats is now FREE! Get this ultimate, all-in-one tool suite to boost your profit on Amazon.
Learn More
We double our reimbursements efforts
to get you 20% more back from Amazon!
Learn More
Urgent: Amazon sellers take action now!
Amazon reduced the reimbursement window by a staggering 88.89%, from 18 months to 60 days starting October 23, 2024.
Start Your Free Audit
5
MINUTE READ TIME
Published
December 19, 2023
|
Sebastian Herz

|
Partner Spotlight

3 Supply Chain Optimization Tips to Improve Profitability

3 Supply Chain Optimization Tips to Improve Profitability
Loading the Elevenlabs Text to Speech AudioNative Player...

Table of Contents

Over the past two years, a significant shift in supply chain optimization strategies has been observed among many US-based clients, leading them to move away from China towards alternative manufacturing destinations, such as Vietnam and Mexico. The primary driver behind this transition is not merely shipping costs or delivery times, but predominantly the impact of Trump's tariffs, initiated in 2018.

In this blog post, we’ll delve into the intricacies of US import tariffs, highlighting their multifaceted purposes, from revenue generation to protecting domestic industries and addressing trade imbalances.

Recognizing the drawbacks of import tariffs, particularly the substantial anti-dumping tariffs against Chinese products, businesses are urged to navigate this challenging landscape through legal supply chain optimization tips.

Urgent: Amazon sellers take action now!
Amazon reduced the reimbursement window by 88.89%, from 18 months to 60 days starting October 23, 2024.
Start Your Free Audit
Take Seller Central operations off your to-do list
Trust our team of experts with 24/7 account management!
Learn More
NEW! Download the free Amazon Fee Stack White Paper for 2024.
Free Download
Unlock your Prime Day potential!
Download the complete playbook for free
Free Download
ManageByStats is now FREE!
Get the complete data suite to boost your profits.
Learn More
We double our reimbursements efforts to get you 20% more back
Learn More
NEW! Free Q4 Playbook to boost your Amazon sales! Your guide to peak-season success with key priorities and timelines.
Download Now

What are Import Tariffs?

Import tariffs, also known as customs duties or import duties, are taxes imposed by a government on imported goods. These tariffs are levied at the border when goods enter a country. The primary purpose of import tariffs is to protect domestic industries by making foreign goods more expensive, thus giving domestic products a competitive advantage.

Governments use import tariffs for various reasons, including:

  • Revenue Generation: Tariffs can be a significant source of government revenue. The funds collected from import tariffs can be used to finance public services, infrastructure, and other government expenditures.
  • Protecting Domestic Industries: Tariffs can protect domestic industries from foreign competition. By imposing taxes on imported goods, governments can make foreign products more expensive compared to locally produced ones, encouraging consumers to buy domestic goods.
  • Balancing Trade: Some countries use tariffs as a tool to address trade imbalances. By making imports more expensive, a country may reduce the demand for foreign goods and encourage its own exports.
  • Encouraging Domestic Production: Tariffs can incentivize domestic production by providing a competitive advantage to local industries. This can lead to increased employment and economic growth.
  • Addressing Dumping: Tariffs can be used to counteract the practice of “dumping,” where foreign producers sell goods in another country at prices lower than the cost of production. This practice can harm domestic industries, and tariffs serve as a protective measure.

It’s important to note that while import tariffs can have benefits, they also have drawbacks. They can lead to higher prices for imported goods, which may hurt consumers by reducing their purchasing power.

For instance, these anti-dumping tariffs implemented against Chinese products reached a substantial 25% when the market had already surpassed $250 billion. Recognizing these tariffs as a significant additional expense, sellers began seeking solutions to avoid financial setbacks.

The question then arises: How can one navigate this challenging landscape?

While some consider changing the tariff classification code, it's a risky move due to potential detection by customs, leading to hefty penalties. What else can you do?

Enhance Your Bottom Line with these Supply Chain Optimization Tips

Evergreen cargo ship

Below are some of the best supply chain strategies that you can (legally) apply right now to enhance your profitability amidst the government’s anti-dumping tariffs.

1. Take Your Business Elsewhere

A more viable alternative that is gaining popularity is relocating production to another country. The goal is to identify a country with comparable or superior product quality but with the advantage of potentially zero import tariffs.

A compelling example is a customer - a beauty accessory seller—who annually sold 500,000 units of products. By shifting production to Vietnam, not only did they find the product at a surprising $1 cheaper than in China, saving $500,000 on production costs, but they also enjoyed a 27% reduction in import taxes. 

This supply chain optimization resulted in a remarkable $810,000 in annual savings from anti-dumping import tariffs, contributing to a total annual saving of $1.31 million.

Related: Product Sourcing for Amazon: 5 Ways to Save Thousands

2. Renegotiate Sourcing Terms for Profitability

Another valuable strategy is to reconsider and renegotiate product terms or sourcing options after a year or more. Many sellers have discovered that, over time, renegotiating the purchasing cost can yield significant savings and improved production costs, whether sticking with the same supplier or exploring alternatives.

This tactic gains traction as the market sees an influx of suppliers and factories producing the same items. This surge not only fosters competition for quality but also drives providers to offer more competitive prices. 

Collecting multiple quotations gives you the leverage to negotiate or renegotiate prices for your best-selling products, streamlining current purchasing costs through strategic negotiation. Crucially, during negotiations, always aim for the same or better quality. This emphasis on quality makes local quality control a pivotal step in the process.

Supply chain optimization companies like Zignify Global not only specializes in product sourcing but also excels in quality control, local inspections, and factory audits. This comprehensive approach ensures that your focus during negotiations isn't solely on what suppliers present but on what aligns with your predetermined standards. 

By entrusting this process to professionals, you gain the advantage of inspecting more than just the products presented to you, ensuring consistently high quality across your product line.

3. Optimize Production and Purchasing Costs

Men working in a warehouse

Optimizing production and purchasing costs is imperative for businesses seeking to avoid the impact of high import tariffs. Shifting away from countries with steep import tariffs can yield substantial savings, safeguarding profit margins and enhancing overall financial performance.

Moreover, finding new profitable products through automated tools like ScanUnlimited or alternative producers by doing diligent supplier exploration can translate into millions in savings without compromising product quality. Diversifying the supplier portfolio further reinforces resilience in the supply chain, offering flexibility and creating opportunities for additional cost savings. 

Collectively, by implementing these strategies in collaboration with suppliers, businesses have achieved savings exceeding half a billion dollars. The funds saved through supply chain optimization can be redirected into various business-enhancing activities, ultimately leading to increased sales and higher profit margins.

Related: Simplify Your Amazon Purchase Ordering Process
Urgent: Amazon sellers take action now!
Amazon reduced the reimbursement window by 88.89%, from 18 months to 60 days starting October 23, 2024.
Start Your Free Audit
NEW! Free Q4 Playbook to boost your Amazon sales for peak-season success.
Download Now
Unlock your Prime Day potential!

Download the playbook for free
Free Download
Take Seller Central operations off your to-do list
Trust our team of experts with 24/7 account management!
Learn More

Beyond Cutting Costs: Maximizing Margins for Growth

In conclusion, the past two years have witnessed a significant transformation in strategies for many US sellers, spurred by the impact of tariffs initiated in 2018. The shift away from China towards alternative manufacturing destinations like Vietnam, renegotiating terms with suppliers, and diversifying supplier portfolios reflect a strategic response to mitigate the financial repercussions of these tariffs. 

It has now become more crucial than ever for businesses to proactively evaluate their production processes and explore ways to optimize costs. The resulting increased margins not only contribute to higher profits but also provide additional resources for advertising and other revenue-generating activities.

Related: A Comprehensive Guide to Global Ecommerce for US Sellers

Recent Newsletters

Insights: PixelMe Amazon integration, Carbon6 named a Top Startup, and new omnichannel solutions
Carbon6 Team
Oct 8, 2024
Amazon Seller News
Insights: PixelMe Amazon integration, Carbon6 named a Top Startup, and new omnichannel solutions
Welcome to our first monthly newsletter of Q4, and happy Amazon’s Big Deal Days! Today is the start of the fall sales event and we wish you the best of luck for your businesses this week.
See Article
Insights: Acquisition alert, the latest in AI, and more
Carbon6 Team
Sep 11, 2024
Amazon Seller News
Insights: Acquisition alert, the latest in AI, and more
With only one month left until Q4, plans and preparations are happening in earnest across ecommerce for this bumper selling season. Make sure you’re ready with the checklists in our latest free resource, the Q4 Amazon Playbook.
See Article
Insights: Amazon’s 90% reduction, new partnerships, and more
Carbon6 Team
Aug 1, 2024
Amazon Seller News
Insights: Amazon’s 90% reduction, new partnerships, and more
August 2024 With Prime Day behind us, thoughts are already turning towards Q4 planning, but don’t forget to finish up your post-Prime Day tasks!
See Article

Recent Posts

LTL Carrier Selection Guide for Ecommerce Fulfillment
Burak Yolga
Oct 15, 2024
Partner Spotlight
LTL Carrier Selection Guide for Ecommerce Fulfillment
Discover how to choose the best LTL carriers for your ecommerce fulfillment needs. Optimize your logistics with cost-effective and reliable shipping solutions.
See Article
Amazon UK: Changes to Reimbursement Automation and Claim Eligibility Windows Starting January 2025
Shannon Curley
Oct 11, 2024
EU & Global
Amazon UK: Changes to Reimbursement Automation and Claim Eligibility Windows Starting January 2025
From January 15, 2025, Amazon UK will introduce an important update to its FBA (Fulfilment by Amazon) reimbursement process. 
See Article
Amazon Seller Updates: Amazon AI Shopping Guides, Brain-Controlled Devices, and More
Chelsea Cohen
Oct 11, 2024
Amazon Seller News
Amazon Seller Updates: Amazon AI Shopping Guides, Brain-Controlled Devices, and More
Explore Amazon's AI Shopping Guides, delivery tech upgrades, plus Meta's AI video ads and Google's visual search enhancements for ecommerce.
See Article