Glossary
Landed cost
Landed cost is the full cost of getting one unit into stock: the product cost plus freight, duties, and fees, resolved to a true unit cost per SKU.
What it is
Landed cost is the full cost of getting one unit into stock. The purchase price is the biggest part, but not the whole story. Freight to move it, duties to clear it, and fees to receive it all belong to the unit, because the unit would not be on the shelf without them. Landed cost puts them together and resolves them to a true unit cost per SKU.
Why it matters
Margin is price minus cost. If the cost is wrong, the margin is wrong, and every decision built on it is wrong: which products to push, which channels to feed, which orders to accept. A product that looks profitable at purchase price can be a loss once freight and duties land on it. Landed cost is what keeps that from being a surprise at the end of the quarter.
Landed cost also keeps inventory value honest. Stock on the shelf is worth what it cost to get there, not what the supplier charged for the goods alone.
A worked example
A fictional product, SKU WDG-1040, costs 10.00 per unit from the supplier. Freight adds 1.20 per unit, duties add 0.80. The landed cost is 12.00 per unit. At a selling price of 18.00, the true margin is 6.00, not the 8.00 the purchase price alone would suggest.
How DockingWare does it
Landed cost resolves to true unit cost per SKU, so the margin on the order just shipped is a number, not a guess. The landed cost feeds the cost basis the system carries for the unit.
Questions
- What is landed cost?
- The full cost of getting one unit into stock: the product cost plus freight, duties, and fees, resolved to a true unit cost per SKU.
- Why not use the purchase price as the cost?
- Because the purchase price is only part of what the unit cost. Freight, duties, and fees are real money spent to get it onto the shelf, and a margin computed without them is a guess.
- How is landed cost different from cost basis?
- Landed cost is what it cost to get the unit here. Cost basis is the cost value the system carries for the unit. Landed cost feeds cost basis; cost basis is what margin and valuation read.