NetSuite Landed Cost is a feature within Oracle NetSuite that calculates the true cost of inventory by allocating all expenses related to bringing goods to their final destination, including the product cost, transportation, customs duties, taxes, and other shipping charges. It supports manual allocation by category or vendor bill, automated allocation through estimated landed cost templates, and integrates with the inventory valuation report so businesses can price products accurately, protect margins, and make informed purchasing decisions.
Understanding and managing inventory costs is a pivotal aspect of maintaining profitability and competitiveness. Oracle NetSuite, a leading cloud-based ERP system, offers robust solutions for managing landed costs – a critical component in calculating the total cost of inventory.
Continue reading to learn more about NetSuite’s Landed Costs feature, its significance, and a use case that demonstrates the functionality within NetSuite and its benefits for your company. This will help you get clarity on landed cost and learn how it plays into your overall NetSuite price structure.
What is NetSuite Landed Cost?
At its core, landed cost encompasses all expenses incurred in bringing goods to their final destination. This includes the cost of the product, transportation fees, customs duties, taxes, and any other charges that arise during the shipping process.
Understanding landed costs is not just about knowing these expenses; it’s about grasping the true cost of products. This insight is crucial for businesses to price their products accurately, manage profitability effectively, and make informed decisions about purchasing and shipping.
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Why Landed Cost in NetSuite Matters
Accurately calculating landed costs provides a comprehensive view of a product’s total expenditure. This understanding is fundamental for businesses to:
Set Realistic Pricing
In the competitive marketplace, accurate pricing is not just a factor of profit margins but also market positioning. Without a comprehensive understanding of the total cost including purchase price, shipping, duties, and taxes businesses risk underpricing, which erodes profits, or overpricing, which can diminish market share.
Maintain Profitability
Proper allocation of landed costs ensures that all expenses are accounted for. This level of precision safeguards against the erosion of profits through unaccounted costs, ensuring financial health and sustainability.
Make Informed Decisions
The ability to view the full cost spectrum of products empowers decision-makers. Whether it's choosing between suppliers, deciding on shipping methods, or managing inventory levels, accurate cost data provides a foundation for strategic decision-making.
NetSuite’s functionality, particularly in instances with Advanced Receiving enabled, automates the inventory costing process at the item receipt level. NetSuite offers multiple approaches:
Manual Allocation
Users can manually attribute landed costs per category or source them from vendor bills.
Automated Templates
NetSuite allows using estimated landed cost templates for automation.
Limitations
A notable limitation is that a vendor bill can only be allocated to one item receipt.
Use-Case: Enhancing Reporting with NetSuite’s Landed Cost
Challenge
Despite NetSuite’s robust features, challenges can arise, especially for companies dealing with needing to report on high volumes of item receipts or those requiring precise cost allocation methods. Manual methods can be time-consuming and prone to errors, while estimated costing might not suffice for businesses operating on smaller margins.
Solution
NetSuite's Landed Cost feature allows for the customization of the inventory valuation report to display the Lot/Serial Numbers field. When landed costs are applied, they appear on the report with the same transaction ID, the landed cost category name in the description, and a zero quantity.
Benefits
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Efficiency in Operations
The automation of landed cost allocation within NetSuite significantly streamlines operational processes, marking a departure from traditional, manual methods that are often time-consuming and error-prone.
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Precise Costing
NetSuite Landed Cost solution enhances the accuracy of inventory cost management by allocating expenses directly related to the procurement and transportation of goods in a precise manner.
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Scalability
One of the standout features of NetSuite Landed Cost functionality is its scalability. As businesses grow and transaction volumes increase, the need for a robust system that can handle this growth without a drop in performance becomes paramount.
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Industry Adaptability
Whether it's wholesale distribution, manufacturing, retail, or any other sector that deals with the importation and distribution of goods, NetSuite Landed Cost functionality can be tailored to meet the unique needs and challenges of each industry.
Dealing with tariff restrictions? See How NetSuite’s Landed Costs Can Help
Looking for other solutions?
As an award-winning NetSuite Alliance and Solution Partner, GURUS has been offering custom solutions to NetSuite users across North America. If you’re interested in learning more about our selection of custom solutions, visit our customizations page. Or, fill out the form below and speak to a solution specialist.
Streamline Your NetSuite Landed Cost Allocation with GURUS Solutions
GURUS Solutions has been implementing and customizing NetSuite ERP for over 20 years across 2,500+ projects, with deep expertise configuring landed cost templates, custom allocation logic, Advanced Receiving workflows, and inventory valuation reporting for businesses that import, distribute, and manufacture across multiple jurisdictions. Whether you're managing tariffs, freight, duties, or complex multi-bill cost allocations, our team configures NetSuite to fit how your business operates, not the other way around.
Contact GURUS Solutions to discuss your landed cost management needs and get started.
Frequently Asked Questions
What costs can be included in NetSuite Landed Cost?
NetSuite Landed Cost can include any expense related to bringing goods to their final destination: the base product cost, freight and transportation fees, customs duties, import taxes, brokerage fees, insurance, and any other charges incurred during the shipping process. Each cost can be assigned to a landed cost category and allocated by weight, quantity, value, or a custom basis.
How does NetSuite calculate landed cost?
NetSuite calculates landed cost at the item receipt level when Advanced Receiving is enabled. Users can either manually allocate costs by category or vendor bill, or use estimated landed cost templates to automate allocation. The system then updates the inventory valuation to reflect the true cost of each unit, which flows through to the inventory valuation report and COGS calculations.
Can NetSuite landed cost allocation be automated?
Yes. NetSuite supports automated allocation through estimated landed cost templates, which apply pre-defined allocation rules to qualifying item receipts. This removes the need for manual entry on every shipment and is particularly useful for businesses with high item receipt volumes or consistent cost structures.
Does NetSuite Landed Cost require Advanced Receiving?
Yes. The Landed Cost functionality is tied to the Advanced Receiving feature in NetSuite. Advanced Receiving must be enabled in your account before landed costs can be applied at the item receipt level.
Can one vendor bill be allocated to multiple item receipts in NetSuite?
No. A notable limitation of NetSuite Landed Cost is that a single vendor bill can only be allocated to one item receipt. Businesses that need to split a single freight or customs invoice across multiple shipments typically need a custom allocation solution to work around this constraint.
How do landed costs appear on the inventory valuation report?
Once landed costs are applied to an item receipt, they appear on the inventory valuation report with the same transaction ID as the receipt, the landed cost category name in the description field, and a zero quantity. This makes it easy to trace which costs were added on top of the base item cost.
