Product 'Alpha'
A sure way to increase your margins!
In finance and accounting, a term often discussed is 'tax alpha'. Tax alpha is all
about legal ways to reduce your taxes, so that you can increase your net earnings,
or the amount of money you actually take home. Example of tax alpha are 401k's
or Roth 401K's (also known as RRSP's of TFSA's in Canada).
In procurement, there are other types of alpha that are equally important to know
about.
Tariff Alpha
Tariff Alpha occurs whe you choose products that have lower tariff rates. This can come in
two forms.
Choosing different products
All products have different tariff rates. Selecting items that have 5% tariff rates, instead of 50% tariff rates, can make a big difference in your landed cost.
Stainless steel or bamboo filter kitchen products can be great examples of tariff alpha items.
2. Making small changes within products
Even within products, there can be different tariff rates. For example, making a product in cotton vs. poly can have a lower tariff rate.
In some scenarios, you can actually receive a higher quality item at a lower price.
Another example would be choosing notebooks/ journals that are under 8x6". If over 8x6". they are subjected to Anti-Dumping duties, which can comes with an additional 250%+
Shipping Alpha
Shipping alpha is even easier to control. In forwarding and logistics, shipping is determined by:
Weight - The higher the weight, the more it costs to ship.
Volume - The higher the volume, the more it costs to ship.
Quantity - The higher the quantity, the lower it costs to ship (per item)
Products that are smaller and lighter do not necessarily have lower retail values. This creates some value gaps that are worth taking advantage of. An example of this would be jewelry. Jewelry is very economical to ship and it also can have a great. retail value.
For quantity, bundling similar products to ship together can also present cost savings oppurtunites.
Reach out to your Account Manager to discussions around, and lists of, tariff alpha and shipping alpha product ideas!
-Your Procuremint Team