Landed cost concepts and terminology
The following sections explain the key concepts and terminology in the Landed cost module.
Voyages
In Landed cost, a voyage involves a distinct movement from an outbound location to the final inbound warehouse location through a series of specific destinations over a set period of time. After a voyage has been created, you can add purchase orders and order lines to a single container or multiple containers, and then the associated costs will be accurately allocated to the item line. In addition, you can apply orders and order lines to multiple legal entities in a single voyage.
Watch the video for an overview of voyages.
Item ownership
In Supply Chain Management, you would usually wait until the goods are received at the destination warehouse before invoicing them. However, under most international trade agreements, a company acquires ownership of the goods after they have left the point of origin and before they arrive at the final destination. Landed costs allow companies to invoice goods before they're physically received, which is referred to as a Goods in transit order. This process establishes a new type of order to track and handle the receipt of goods after the original purchase order has been invoiced.
Costs
After it's been created, a voyage can automatically have costs added to it. Various cost options and cost bases are available in the Landed cost module. You can define each cost for different levels of a voyage and then assign them to an item level by using assigned rules that support quantity, volume, weight, amount, and defined volumetric divisors. These estimated costs help to accurately represent the total cost of a voyage.
Then, Landed cost will do a preliminary posting/accrual of the estimated landed costs to ensure that an accurate cost calculation is provided at the time of voyage creation. When these automatic expenses are billed, the predicted costs will be reversed and replaced with the actual costs, as determined by cost invoices.
Actual costs are estimated costs that are reversed and reported at the time of cost invoicing using clearing accounts that are designated for each type of cost (for example, duty, freight, and insurance). These postings follow the posting behavior that is connected with the item, and they update inventory postings automatically, regardless of whether they're first in, first out (FIFO), last in, first out (LIFO), moving weighted average, or moving average. All posting types for inventory model groups are supported. Purchase price variance accounts are used to record the discrepancies between estimated and actual costs for moving average and standard cost postings.
Watch the video for a summary of the costs.
Item and order tracking
Users can change each stage, or leg, of a voyage as it travels from the originating outbound location to the final destination warehouse. Each leg is assigned a lead time and a shipment status. Additionally, confirmed delivery dates for the next leg of the voyage are identified. When combined, these delivery dates provide an estimate for the goods' arrival at the inbound warehouse. Users can modify these delivery dates. Then, the expected delivery date of the products is updated automatically based on the lead times and legs of the journey. Prior to receipt of the goods, visibility into items in transit by voyage and vessel is available on a per-container basis. Because the dates on each purchase order line are updated, companies have greater control over logistics and warehouse planning.
Landed cost terminology
Key concepts for Landed cost are as follows:
Activity - Use activities to keep track of each critical step of a journey between two ports and to update dates.
Auto cost - Works like trade agreements. For example, an auto cost is linked to a voyage level.
Cost type - Identifies the costs that are associated with imports, such as duty, freight, and insurance.
Folio - Customs regulations define a folio. It can consist of one vendor's goods for each shipment for an entity/company. Additionally, you can limit a folio to a single container or distribute it across numerous containers.
Goods in transit - In general, the goods are placed in an in-transit warehouse after an invoice has been updated. However, this process can change depending on how your parameters are set up.
Journey template - Defines the routes that goods take between two ports.
Port - Location where goods are received and transferred.
Shipping container - Where the purchase order lines are stored. It's located one level below the shipment level. They're typically used if the cost of goods is by container or if the receiving is per-container.
Shipping container type - Can affect the price of a cost category (for example, freight). Additionally, shipping container types provide valuable shipping information.
Vessel - A medium that is used to transport goods, such as ships or airplanes.
Voyage - Typically, a voyage refers to a single vessel. However, depending on your policies and procedures, it can also be a single vendor or purchase order. No restrictions are placed on how to use this concept.
Landed cost scenarios
With the Landed cost Supply Chain Management, you streamline inbound shipping operations by completing financial and logistical control over imported freight from the manufacturer to the warehouse. The out-of-the-box functionality supports the following scenarios.
Estimating landed costs at the time of voyage creation
Appropriating landed costs to multiple items and purchase orders or transfer orders in a single voyage
Transferring goods between physical locations by recognizing landed costs
Realizing accruals for goods in transit
Landed cost provides accurate and timely cost estimates for overhead landed costs while simultaneously providing increased financial and logistical visibility into the extended supply chain. It also helps reduce the administration of costing and costing errors.
Supply Chain Management provides two different modules for working with transportation: Transportation management and Landed cost.
Landed cost vs Transportation management
Landed cost and Transportation management have both shared and differing functionalities and finding the best option for you depends on which best aligns with your business operations. Some practices may be more effective with Transportation management, while others excel with Landed cost. Depending on your business needs, you may choose to use one module exclusively or integrate both. However, this is not an exhaustive review of all features of either module. Instead, it emphasizes the relevant functionality concerning the transportation of goods from a vendor to your business warehouse for consumption.
For more information on Landed cost and Transportation management, see, Landed cost vs. Transportation management