Landed cost by definition means the total cost of a product by the time it reaches your warehouse or doorstep and not just its purchase price.When companies import products, the extra costs like shipping, taxes, and handling can make up 40% or more of the total cost. So, it’s really important to estimate these costs accurately.
The Landed cost module helps businesses achieve exactly the same. It helps manage and track all the costs involved in shipping goods from a supplier to their warehouse.
Key Features of Landed Cost in Dynamics 365
Voyage Creation
- Inbound shipments can managed using a concept called a voyage. A voyage represents the complete shipment journey from the supplier to the destination warehouse.
- A voyage acts as a central record that groups purchase orders, containers, costs, and different stages of the journey (called legs). Landed costs can be applied and managed at the voyage level.
- Multiple purchase orders can be linked to a single voyage when they are part of the same shipment. Items can also be tracked at a container level, allowing businesses to record which container each item is shipped in.
- This concept is important because all landed cost calculations, shipment tracking, and goods-in-transit processes are managed through the voyage.
Track Good in transit order
- The Landed Cost feature helps businesses handle EX WORKS (EXW) scenarios, where the buyer takes ownership of goods right from the supplier’s location.
- Normally, companies invoice goods after they arrive at the warehouse. But in international shipping, ownership often transfers as soon as the goods leave the supplier’s port, even though they are still in transit. Using landed cost, companies can post the invoice earlier in the system, before the goods are physically received.
- At this stage, the goods are moved into a “goods in transit (GIT)” status and are updated in a GIT warehouse. These goods are not available for use, sale, or consumption until they reach the actual warehouse. Once physically received, product receipt can be posted in the system.
Detailed Shipment Tracking
- The Landed Cost feature allows businesses to capture very detailed information about imports and shipments. Companies can record details such as the shipping company, container information, vessel, and the capacity of the vessel, etc. They can also track the different ports involved in the journey.
- The entire shipment journey can be broken down into smaller stages called “legs” in the system. Each leg represents a stage of the journey (for example, from one port to another), making it easier to track, manage, and monitor the shipment step by step. This level of detail helps businesses get better visibility, control, and accuracy over their import process, improving planning, tracking, and cost management
Tracking and delivery updates
- When defining the different stages of a journey, you can set the lead time for each leg (stage). This lead time is used to calculate the ‘Confirmed Receipt Date’ on the purchase order.
- You can also update the actual completion date for each stage. Based on these updates, the purchase order receipt date is automatically adjusted. This also helps in keeping track of when each stage of the journey was completed.
Estimated Cost Functionality
- Businesses can also set up auto costs, which automatically apply charges based on predefined conditions such as: Delivery terms (Incoterms), Specific shipping company & Journey (from one port to another).
- This means the system can automatically calculate expected charges like freight, insurance, or duty without manual input on a Voyage if auto cost is set.
- These estimated costs are applied during voyage costing and are posted as accruals to a clearing account before the actual vendor invoice is received.
Landed Cost Apportionment
- Landed cost provides multiple methods to distribute (apportion) costs across items in a shipment. Common allocation methods include: Quantity , Percentage, Fixed amount, Volume, Weight, Value.
- This ensures each product gets the right share of the total cost, helping maintain accurate inventory value and margins.
Handling Third-party logistics provider
- While standard charges functionality can handle basic cost additions, it has limitations in complex third-party logistics scenarios.
- In Landed Cost, you can create an invoice for a third-party logistic vendor and this invoice can be linked to the voyage during the vendor invoice journal process. This allows you to associate the actual invoice amount with the estimated landed costs recorded for that shipment.
- The actual cost is then allocated across different charge categories.
- It also allows you to handle differences between estimated and actual costs. If there is a variation, the system automatically adjusts the amount.
Landed Cost V/s Transportation Management
- Transportation management can be used for both incoming (inbound) and outgoing (outbound) operations. Landed cost works in a similar way to transportation management but includes additional features. It is generally recommended to use transportation management for outbound operations and landed cost for inbound operations.
- Landed cost is helpful because it provides better tracking of goods while they are in transit. It also allows a company to take financial ownership of goods even before they physically arrive at the warehouse.
End to End Process Flow Overview
- Create a voyage and attach purchase orders to it, or alternatively, create a purchase order first and generate a voyage from it.
- Add items on the purchase order lines to the shipping container.
- Apply and estimate automatic costs.
- Costs are allocated (apportioned) across the items.
- Vendor invoices are posted and settled.
- Goods are transferred to the Goods in Transit warehouse (if the in-transit scenario is applicable).
- Goods are received into the final warehouse.
Note: The above process sequence is applicable for good in transit scenario. For the rest cases sequence remains same first receiving and then invoicing.
Hope you found this helpful.
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