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Optimizing Procurement Costs Implementing Foreign Trade Zones in Supply Chain Management

Author(s) Ravikumar Thinnatti Palanichamy
Country United States
Abstract Foreign Trade Zones (FTZs) are secure areas under U.S. Customs and Border Protection (CBP) supervision considered outside CBP territory for tariff laws and customs entry procedures. Companies utilize FTZs to defer, reduce, or eliminate customs duties, thus offering a competitive advantage. This paper investigates the impact of FTZs on procurement costs within supply chain management. Emphasis is placed on supporting the establishment of FTZs in organizations for importing inventory, tracking items throughout manufacturing and shipping, and ensuring compliance with tax regulations and government requirements. By analyzing data from FTZ-using firms and modeling FTZ implementation in a mid-sized manufacturing company, the study identifies procurement cost reductions and operational efficiencies. Results indicate that FTZs contribute to cost savings, improve supply chain visibility, and ensure regulatory compliance.
FTZs also support tax efficiency through enhanced inventory tracking mechanisms. Organizations can accurately allocate costs, track inventory usage, and report data required for government audits. In turn, this promotes transparency and reduces the risk of fines and penalties. A combination of financial, logistical, and regulatory advantages makes FTZs an attractive solution for companies engaged in international trade. The comprehensive analysis presented in this study not only underscores the financial impact of FTZs but also highlights best practices for their implementation. These include internal audits, employee training, and investment in IT infrastructure. The results are useful for logistics professionals, supply chain strategists, and compliance officers aiming to maximize cost-effectiveness and regulatory alignment in procurement operations. Furthermore, the paper explores how digital transformation technologies—such as blockchain and real-time tracking—can further elevate the benefits of FTZs.
Field Engineering
Published In Volume 3, Issue 1, January 2022
Published On 2022-01-07
Cite This Optimizing Procurement Costs Implementing Foreign Trade Zones in Supply Chain Management - Ravikumar Thinnatti Palanichamy - IJLRP Volume 3, Issue 1, January 2022. DOI 10.70528/IJLRP.v3.i1.1545
DOI https://doi.org/10.70528/IJLRP.v3.i1.1545
Short DOI https://doi.org/g9hnc7
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