Like tax planning, landed costs are a subtle but important business consideration for maximizing profit margins and ensuring profitability.
It seemed like an efficient purchase order. A batch of camera equipment was ordered from a UK supplier for a warehouse in Thailand based on a good unit price. After customs duties and shipment insurance were factored into the total landed cost to acquire the equipment, however, it quickly became apparent that it would have been more efficient to use an in-country supplier even though the equipment came with a slightly higher unit cost. The actual landed cost for the UK supplier proved much higher than originally understood.
A business that sells locally and relies on a handful of suppliers can probably get by without paying much attention to landed costs.
But few businesses are in that situation today. Sales are global, and supplier relationships are even more so. With an increasingly tight weave of logistical considerations, businesses need greater landed cost visibility and automation to price both inbound and outbound shipments correctly.
There’s an App for That: Advanced Landed Cost Automation in SAP Business ByDesign
Because calculating and tracking landed costs can be complicated, especially for international orders, Navigator Business Solutions has developed an advanced landed cost automation add-on for SAP’s Business ByDesign ERP solution that serves small and fast-growing businesses.
With the module, companies that run Business ByDesign can accurately and automatically calculate all the costs associated with the creation, transport, and delivery of goods. This includes shipping costs such as crating, packing, handling, and freight; customs costs such as duties, tariffs, broker and harbor fees; risk costs like insurance, compliance, quality, safety, and stock costs; and the costs of overhead such as added staff, travel, and exchange rates.
When a purchase order is created, or an invoice issued, the advanced landed cost automation module helps ensure that all the various costs are clearly outlined for an accurate total landed cost calculation. No more overlooked or forgotten costs, no more vague or complex landed cost calculations.
Set and Forget it with Landed Cost Automation
The advanced landed cost automation module enables businesses to input costs and shipping options once, then have the associated landed cost for an order automatically calculated at the time of purchase order or invoice creation.
During setup, businesses can define the accrual types, modes of transportation available, and rates based on accrual type. These can be linked to specific suppliers and geographies to enable quick and accurate landed cost calculations at the time of order creation.
Once these variables have been defined, landed cost calculations during order creation become easy. At the time of order, Business ByDesign lets the user select among transportation types and enter shipment specifications for an automatic landed cost calculation. The correct line items are then added automatically based on these specifications, with an accurate cost breakdown during order creation for a clear understanding of the actual landed cost for the given order.
Automated Landed Cost Accounting, Too
By automating landed cost calculations, the module also ensures that landed costs are accurately recorded and segregated into the correct accounts within a firm’s general ledger.
Costs can be allocated by dimensions and value by lines, line amount, quantity, and weight, and journal entries within the general ledger will automatically be created for each transaction in the correct accounts as specified during setup.
From this, businesses can define and accurately assess the various shipment costs and understand these cost dynamics in real time for improved cost and operational efficiency. Because everything is recorded and categorized automatically in the general ledger, assessing areas for landed cost optimization is much easier to spot as well.
At the same time, the advanced landed cost module also can uncover cost variances by automatically alerting the business if the landed cost from a given order is higher or lower than expected.
See Advanced Landing Cost Automation in Action
We’ve put together a quick demo so you can see how automating landed cost automation actually works with SAP Business ByDesign and our advanced landing cost automation module.
In the demo, we do an end-to-end walkthrough of the landed cost extension so you can see exactly how it works. The demo includes an inbound order creation and a detailed look at how landed costs are recorded in a company’s general ledger.
Worried about setup? We’ve also created a short demo that walks you through the process of setting up the landed cost module, including how to associate a preferred supplier and define which accounts to use for journal entries within the general ledger.
For more information on the advanced landed cost automation module or SAP Business ByDesign, contact us here, call (801) 642-0123, or email us at firstname.lastname@example.org.