Learn how to automate landed cost tracking to determine your true cost of inventory after incorporating costs such as duty, brokerage, and freight.
0:00-0:30 The Blue Link advanced landed cost component helps you understand your true cost to bring inventory into your warehouse and therefore allows you to calculate an accurate gross margin and profitability by product. If you only take into account the price that you're paying, the supply of products when in fact you're adding on costs for transportation or freight into your warehouse possibly, things like duty and brokerage. If you're importing, then you’re understating your cost and overstating your profitability.
0:30-0:40 On this screen we're looking at, now you are able to define as many different types of additional costs or landed cost factors that may be involved in bringing products into your inventory and making them saleable.
0:40-1:05 When we look at the inventory item maintenance screen, the screen will define products, you'll see that we can select from that list of master landed cost factors, the ones that most frequently applied to this particular product. It all comes together on the actual purchase order screen when we are placing a purchase order or when we've completed assembling the purchase order to supplier.
1:05-1:25 Look at the landed cost factors that we've defined as by default for all the products that are on this inventory item, they all get added here, and then we're able to first of all at a high level for each landed cost type of factor review and if necessary, correct the way it's calculated. You'll notice that the first two are calculated as a percentage whereas the freight amount is actually a flat dollar amount.
1:25- 2:15 In each case we have the ability to define how they are prorated across the product on the actual purchase order, so percentages usually it's obviously just a straight percentage, but with things like freight, we have a choice of how we can allocate those based on things like weight, cube, quantity, custom allocation, etc., and then in addition, what we can do is we can specify for each of these landed cost factors which product they apply to. There may be certain products, for example, that do not incur brokerage and therefore those ones that boxes will be unchecked. And again we can edit that an override these defaults and get the appropriate calculation of how to apply brokerage duty and freight. In this example that any other landed cost factors, to all the items on any given purchase order.
2:15-2:45 So finally, when we come back to the inventory item maintenance screening, we look at the purchase history, the top line which is the most recent shipment shows a price in the price column per unit of $19 each. And that was the price we pay the supplier. But it shows the landed cost of $20.97, which is the cost which we brought it into inventory. Showing our true cost and lines us to access gross margin against the real cost of almost $21 rather than a notional supplier cost of $19 per unit.
2:45-3:10 Now if we want to understand how we got from $19.00 to $20 and 97, we've got the full history here. These are the individual landed cost factors that were added on to that particular shipment and so there you can see the unit cost added on for brokerage $0.40 for Judy was $0.57 and for freight was a nice even dollar which comes to the dollar 97 which was the difference between your price and landed costs and there you have it.