Landed Cost: The Margin You Are Not Tracking
Freight, duty, brokerage, and currency: what it really costs to get product on your shelf, and why margin reports built on vendor price alone flatter the wrong products.
What you'll learn
- What belongs in landed cost and what it changes
- How un-landed costing distorts pricing and rebates
- Allocation methods: by value, weight, and quantity
- What automated landed cost looks like in an ERP
If your item cost is the vendor invoice price, your margin report is a work of fiction with a spreadsheet attached.
What's inside
Two products carry the same vendor price. One ships domestic in full cartons. The other crosses a border, pays duty and brokerage, and arrives in mixed pallets with a currency conversion on top. On a margin report that uses vendor price, they look identical. On your bank statement, they are not.
Landed cost is what the unit actually cost to put on your shelf. Distributors that do not track it are pricing some products too low, some too high, and cannot tell which is which.
- 1
What belongs in landed cost
Inbound freight, by shipment, allocated to the items on it
- 2
What un-landed costing distorts
Pricing inherits the error first: imported lines look more profitable than they are, so they get promoted, discounted, and quoted aggressively while margin quietly evaporates in freight and duty.
- 3
Allocation, briefly
Landed cost is a distribution problem: a $2,400 freight bill covering forty line items has to land somewhere. The standard methods allocate by value, weight, or quantity, and the right one depends on what drives the cost.
- 4
Done by system, not spreadsheet
In a modern ERP, landed cost documents attach to receipts, allocate by the chosen method, and flow into item cost automatically. Margin reports, pricing, and inventory valuation all update from the same numbers.
Keep exploring Distribution & Wholesale.
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