Landed Cost
Beyond its initial purchase price, landed cost directly impacts profit margins by accounting for all expenses associated with acquiring and delivering a product. Calculating landed cost is crucial for businesses to ensure profitability. By understanding the total cost of delivering a product, companies can set appropriate prices, avoiding potential losses from hidden fees.
The landed cost includes the following components:
Product: The cost of sourcing raw materials and manufacturing expenses
Shipping/Freight: Fees for transporting goods from the supplier to the customer. Shipping costs can vary based on factors such as shipping zones, package dimensions and delivery speed.
Customs duties and Taxes: For international shipments, these are fees imposed by countries for importing goods, including tariffs, VAT, and broker fees. Customs may also apply other regulatory fees.
Insurance: Shipping insurance protects against loss, theft or damage during transit.
Overhead costs: Often overlooked, these may include special handling fees, currency conversion charges, inventory fees, and payment processing surcharges.
The importance of landed cost cannot be overstated as it helps to identify bottlenecks and inefficiencies in the supply chain. This insight can lead to cost-saving strategies such as optimizing shipping routes or negotiating better terms with suppliers.
DHL's My Global Trade Services (myGTS) platform helps businesses navigate the complexities of international shipping, particularly landed costs. It provides tools like a Landed Cost Estimator, offering a guideline to all expenses incurred in bringing a product to its final destination. For example, when selling internationally, myGTS helps estimate not just the price of your product and the shipping fee, but also the import duties and taxes a customer will need to pay in a specific country.
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