Financial Calculation
Financial calculations determine the total expense of a product from the moment it is manufactured to its arrival at the customer’s warehouse. A landed cost model includes the base price and all associated fees for transport and taxes. The calculation remains valid only for the specific shipment route and volume analyzed.
Expense Tracking
Logistics managers use these figures to evaluate the profitability of different sourcing regions. The landed cost model incorporates ocean freight along with inland trucking. Customs duties and brokerage fees are often the most variable components of the total.
By aggregating these costs, a company can compare the actual price of a domestic part against a cheaper foreign alternative.
Procurement Strategy
Accurate forecasting relies on understanding how fluctuations in fuel prices or currency exchange rates affect the bottom line. The landed cost model is updated regularly to account for changes in trade tariffs or port handling charges. This data supports decisions about inventory levels and shipping methods.
Analyzing the cost per unit helps in setting the final retail price for the market.
Risk Assessment
Unexpected delays at the border can add storage fees that were not in the original budget. A landed cost model must include a margin for such contingencies to prevent profit loss.
