Landed costing is a budgeting mechanism that allows businesses to price products more accurately by seeing all their costs upfront. A global pandemic and two years of supply chain issues later, landed cost management has never been more important for businesses, particularly for those that rely on goods and raw materials coming in from interstate or distributors and manufacturers who import products.
Amidst ongoing supply chain disruptions and logistics challenges, more and more Australian distribution and manufacturing businesses are now looking to cloud ERP systems as a secure and reliable way to track their landed costs and set better margins. Here's five reasons why.
1. Leave complex calculations to your ERP
Landed costing can involve complex calculations. If you manage landed costs in Excel spreadsheets, you know how long it takes your team to carefully input data from different systems and use advanced formulas to estimate your landed costs. Not only is this time-consuming, but it can also lead to data entry errors.
A cloud-based ERP system like Wiise takes away the complexity of landed costing. The apportionment method pre-programmed in Wiise helps you calculate your landed costs accurately and efficiently, reducing the time it takes to calculate your landed costs in the first place and minimising the time spent on fixing data entry errors.
2. Don't let hidden costs chew up margins
When you calculate landed costs manually, you risk calculating margins based on shipping fees or exchange rates that are out-of-date or based on incorrectly entered data. It's also easy to overlook costs that are not in the same system and have to be manually entered every time. So, when you post your actual invoices, you might be surprised to see that your profits are not sitting where you thought they would.
Cloud ERP systems like Wiise show you the full cost of getting your goods to the warehouse by adding up shipping fees, exchange rates, clearance costs, port duties, and any freight charges. This allows you to be more certain about the profit margins you can expect on sold goods.
3. Price to keep your customers happy
Between skyrocketing shipping charges and highly price-sensitive customers, margins are slimmer than ever and businesses are having to fight hard for every dollar of profit. This puts pressure on decision-makers to cost their goods accurately.
Businesses can no longer afford to estimate landed costs loosely and hope that their margins will see them through. In a post-pandemic world, costing products accurately is less about profits and more about survival. Using an advanced ERP system to accurately predict landed costs can help businesses get more certainty around margins and price their goods competitively while also keeping their customers happy.
4. Tailored for your complex business needs
Businesses have different needs when it comes to making pricing decisions. If you import goods for distribution, your unit cost is not your true cost of goods sold. You have to factor in variable costs and other costs such as insurance, shipping costs, clearing charges, and port duties before you can decide on the final price.
Manufacturers who import parts to make a finished product have slightly more complex needs. In addition to labour costs and overheads, estimating the cost of goods sold relies on working out how many finished products can be created from each bundle of raw materials.
But no matter what your needs are as a business, a cloud-based ERP system can help you see all your costs in one place, giving you a quick and efficient way to price goods.
5. See your entire supply chain in one place
Managing landed costs in the same system as your finances, inventory, and warehousing gives you end-to-end visibility over your entire supply chain. This is especially important given the knock-on effects of the pandemic on shipping and logistics worldwide. Businesses can really benefit from having the cloud infrastructure in place that allows them to be more responsive to changing market conditions. Investing in a cloud ERP allows decision-makers to get real-time business-wide insights and be more nimble when making pricing decisions.
Wiise can help you get your landed costs right
Streamline your landed costing process with Wiise ERP. See all your costs in one place, predict your margins better with estimated invoices, and easily reverse budgeted costs when you post your invoices.
Watch our webinar to see Wiise landed costing in action.