Landed cost is the total end cost of a product until it lands at the buyer’s door. Depending on the type of industry, product and the mode of shipment the factors to calculate total landed cost may vary. Popular direct landed cost include transportation, crating, handling, insurance, customs, duties, taxes, currency conversion, payment and brokerage fees. Although they are not as straightforward as the actual cost price of the product, knowing this gives an accurate gross profit margin of every unit in stock. This helps to precisely report the actual complete product cost to make smart business decisions.
The reason for calculating total landed cost is to capture both obvious and hidden costs within the supply chain. If you don’t know the total landed cost you would be taking decisions irrationally, knowing the actual cost of a product improves decision making as to how to get the product to the end user in the most cost efficient manner.
Computing Actual Landed Cost Gives You an Insight into Your Business Financials Such as:
- Optimal sales price can be fixed based on the total landed cost.
- Each and every product’s profit can be ascertained.
- Identify exactly where cost can be reduced in the supply chain.
- Assets and monthly profits can be accounted with accuracy and ease.
Calculating Landed Cost Can be Daunting But it is Completely Achievable
TRANQUIL has simplified computing of landed costs by providing 3 different modes of distribution namely:
- Equally : Landed costs are split equally for each line of item.
- Price: Landed costs are split on the cost ratio of each item price.
- Quantity: Landed costs are split on the ratio of quantity.