How to calculate Total Landed Cost?

There’s the math, and then there’s the data collection effort. First the math:

Purchase Price:

  • Price paid to seller (which may include some of the following)
  • INCOTERMS
  • Payment terms
  • Exchange rates over time

Transportation and Logistics:

  • Foreign inland
  • Line haul
  • U.S. inland
  • Accessorials
  • Insurance
  • Packaging

Customs and Imports:

  • HTSUSA (tariff) rate
  • Merchandise processing
  • Harbor maintenance fee
  • Broker fee
  • Less: Duty Drawback

Inventory Costs:*

*Inventory costs can vary depending on the INCOTERMS in category 1 (when does ownership of the inventory change) and the way a company values its inventory.

Overhead and Administration:

  • Sourcing and Supplier Quality staff
  • Due diligence
  • Relationship building/travel
  • Learning curve

Risk and Compliance:

  • Compliance costs (technology, staff, other)
  • C-TPAT program costs
  • Channel Master carbon footprint mandate compliance costs
  • Insurance costs
  • Cost of potential risk of supply disruption
  • Cost of potential risk of damage to reputation Health, Safety, Environment

Did I miss any?

To this add trends and forecasts for the drivers of these factors.  Such things as labor rates, social costs, fuel, cap and trade, currency exchange rates.  After all it’s tomorrow’s total landed cost that we’re after.

Next, the data collection plan …