Landed Cost
The total cost to acquire goods and take delivery of them at your location. Landed cost includes the supplier's quoted price plus international freight, import duties, port and handling charges, and any currency conversion costs - giving the true cost per unit before margin is applied.
Landed cost is the total amount a business pays to get purchased goods into its hands, ready for use or resale. It goes beyond the supplier's quoted price to include every charge incurred between placing the order and the goods arriving at your facility. For businesses that source products internationally, the gap between a supplier's quoted unit cost and the actual landed cost can be significant. A promotional merchandise distributor buying 1,000 branded items from an overseas factory at $4.50 per unit might land them at $5.80 per unit once freight, duties, and handling are added. Without calculating landed cost, the margin on the customer quote disappears on delivery.
What Makes Up a Landed Cost
Landed cost typically includes five categories.
Product cost: The supplier's unit price at the agreed Incoterm, commonly FOB (Free On Board), meaning the price to load goods onto a vessel at the origin port.
International freight: Sea, air, or road freight from origin to the destination port. Sea freight typically adds 3-8% of product cost; air freight considerably more.
Import duties and tariffs: Charges levied by the importing country's customs authority, calculated as a percentage of the declared goods value. Rates depend on the product's HS (Harmonised System) code and the trade relationship between the two countries.
Port and customs charges: Local handling fees, documentation, customs clearance costs, and any inspection charges at the port of entry.
Local delivery: Trucking or courier costs from the port to your warehouse or distribution point.
Currency Exposure
If purchasing in a foreign currency, a 2% move in exchange rates on a $20,000 order adds $400 to the landed cost. Building a currency buffer into your landed cost estimate protects margin when rates move between order placement and payment.
Why Landed Cost Matters for Pricing
Quoting from purchase price alone is a common margin error. If a product costs $4.50 to buy and you quote at $9.00, that looks like a 100% markup. But if the landed cost is $5.80, the real markup on landed cost is only 55% - and the margin on the $9.00 selling price drops to 36%. Building your pricing from landed cost, not purchase price, gives an accurate picture of what each order actually earns.
Record Landed Cost on Each PO
Note the estimated landed cost per unit alongside the supplier price when raising purchase orders. This lets you reconcile actual delivered cost against the estimate you used when quoting, and flag any discrepancy before you invoice the customer.
Zigaflow's purchase order module lets you record full supplier costs at job level, giving you the data to track whether actual landed costs match the figures you built your quotes around.
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