Landed cost is the total cost of acquiring a product, including purchase price, shipping, duties, insurance, and other fees. In NetSuite, landed costs help businesses accurately calculate inventory valuation and cost of goods sold (COGS).
. Components of Landed Cost in NetSuite
Landed costs in NetSuite can include multiple cost components:
- Freight Charges – Shipping costs from the supplier to the warehouse.
- Customs Duties – Import/export taxes and tariffs.
- Handling Fees – Labor or third-party logistics fees.
- Insurance – Cost to insure goods during transit.
- Storage Costs – Warehousing fees incurred before reaching final inventory.
How Landed Cost is Applied in NetSuite
NetSuite allows landed costs to be allocated to inventory in different ways:
- On Item Receipt
- Landed costs are recorded at the time of receiving goods.
- Costs are applied to items received in the same transaction.
- On Vendor Bills
- If landed costs are billed separately (e.g., freight invoice), they can be added to an item’s cost later.
- On Purchase Order (PO) Matching
- Costs from vendor bills can be matched to purchase orders and applied as landed cost.
Landed Cost Allocation Methods
NetSuite provides different methods to allocate landed costs across received inventory:
a) By Quantity
- Landed cost is distributed evenly per unit.
- Example:
- Total landed cost = $1,000
- 500 items received → Each item gets $2 as landed cost.
b) By Value
- Higher cost items receive a larger portion of the landed cost.
- Example:
- Item A: 10 units @ $50 each ($500)
- Item B: 10 units @ $100 each ($1,000)
- Total Landed Cost = $300
- Allocation:
- Item A → (500/1,500) × 300 = $100
- Item B → (1,000/1,500) × 300 = $200
c) By Weight or Volume
- Useful for products where cost is based on size or weight.
- Example: Heavier products absorb more freight cost.
d) Manually Assigned
- Users can manually enter the landed cost allocation for each item.
Landed Cost Setup in NetSuite
To enable and configure landed costs in NetSuite:
- Enable Landed Cost Feature
- Navigate to:
- Setup > Company > Enable Features > Items & Inventory > Landed Cost
- Check the box to enable Landed Cost.
- Create Landed Cost Categories
- Navigate to:
- Lists > Accounting > Landed Cost Categories > New
- Define different cost categories (e.g., Freight, Duties).
- Define Landed Cost Allocation Method
- Go to Setup > Accounting > Accounting Preferences.
- Under Landed Cost Allocation, choose an allocation method.
- Apply Landed Costs to Transactions
- On Item Receipt, go to the Landed Cost subtab.
- Select a cost category and enter the amount.
5. Landed Cost in Reporting
NetSuite provides reports to track landed costs:
- Landed Cost Summary Report → Shows total landed costs for inventory.
- Inventory Valuation Report → Reflects updated inventory values including landed costs.
- COGS Report → Includes landed costs in total COGS calculations.