Although the Landed Cost module in D365 Finance and Operations is not a new feature, it remains underutilized by businesses. In this article, we explore the capabilities of this module.
What is a Landed Cost?
Landed cost, also known as total landed cost, includes all expenses associated with getting a product to a specific destination or market. These expenses cover purchasing the product, transporting it, handling it, paying customs duties and taxes, insuring it during transit, and other miscellaneous costs like packaging and quality control. Calculating landed cost accurately is crucial for businesses to set competitive prices, assess product profitability, and make informed decisions about their supply chain and sourcing strategies.
Landed cost module in D365 Finance and Operations
The Landed cost module helps businesses manage inbound shipping efficiently, offering users financial and logistical control over imported freight. Landed costs, which can exceed 40% of the total cost of imported items, are challenging to estimate accurately. This module enhances supply chain visibility, reducing administrative burdens and costing errors.
Key features of the Landed cost module
- Estimating landed costs when creating voyages.
- Distributing landed costs among various items and purchase or transfer orders within a single voyage.
- Simplifying the transfer of goods between different physical locations while considering landed costs.
- Managing accruals associated with goods in transit.
Advantages of using landed cost module
- Before finalizing product receipt, the module permits posting of Purchase Order invoices.
- Detailed tracking of goods in transit, from shipping location to warehouse, is facilitated.
- Adjustments to the ledger are automatically posted according to actual invoices from shipping companies (actual landed cost).
- The module manages over and under delivery of received products outside specified tolerance levels.
Key concepts for Landed cost
- Activity – Use activities to keep track of each critical step of a journey between two ports and to update dates.
- Auto cost – Works like trade agreements. For example, an auto cost is linked to a voyage level.
- Cost type – Identifies the costs that are associated with imports, such as duty, freight, and insurance.
- Folio – Customs regulations define a folio. It can consist of one vendor’s goods for each shipment for an entity/company. Additionally, you can limit a folio to a single container or distribute it across numerous containers.
- Goods in transit – In general, the goods are placed in an in-transit warehouse after an invoice has been updated. However, this process can change depending on how your parameters are set up.
- Journey template – Defines the routes that goods take between two ports.
- Port – Location where goods are received and transferred.
- Shipping container – Where the purchase order lines are stored. It’s located one level below the shipment level. They’re typically used if the cost of goods is by container or if the receiving is per-container.
- Shipping container type – Can affect the price of a cost category (for example, freight). Additionally, shipping container types provide valuable shipping information.
- Vessel – A medium that is used to transport goods, such as ships or airplanes.
- Voyage – Typically, a voyage refers to a single vessel. However, depending on your policies and procedures, it can also be a single vendor or purchase order. No restrictions are placed on how to use this concept.
Key Setups
- Landed Cost Parameters: Establish all necessary configurations for costing, shipping exchange rates, default journal settings for goods in transit (GIT) receiving and over/under delivery, number sequences, enabling feature visibility, etc.
- Containers Setup: Outline shipping container specifications, including types, units, and refrigeration options.
- Costing Setup: This pivotal configuration influences costing calculations and reflects in ledger entries. Define various cost type codes such as Freight, Fuel, Insurance, Local Transport, etc. Specify Auto costs akin to trade agreements, cost templates, and cost type groups for vendors, items, and transfer orders.
- Delivery Information Setup: Define shipping ports and tracking control center rules. Establish rules for lead time, status updates, and copying estimated delivery dates for different stages of a journey.
- Shipping Information Setup: Define shipping-related details for journey and custom processes, including goods descriptions for categorization, vessel details, exporters, commodity codes, and customs descriptions.
- Multi-leg Journeys Setup: Key setup facilitating goods transit tracking. Define legs, activities, and journey templates.
- Over/Under Setup: Establish over/under tolerances, reasons, and groups for item and vendor over/under tolerance
DEMO:
1. Create a Purchase Order and select terms of delivery that have “Goods in transit management enabled.” This is important; otherwise, GIT orders won’t be created.
2. Create a voyage. This can be done from the Purchase order or directly through the Voyage Navigation path in the Landed Cost module. You can include multiple Purchase order lines in a single voyage. Select the lines to be added to the voyage and click on “Add to staging list.”
3. Click on “View staging list” to see the lines added to the staging list. Add these lines either to a new shipping container or an existing container. Enter relevant details such as shipping container type, journey template, etc., and click OK. This will now display the shipping container details added in the section “Existing shipping container in voyage.”
4. Open the Voyage by clicking on the voyage number > Click on Cost enquiry. This will show all the associated estimated costs defined for the journey based on the Auto cost setup.
5. Post the Purchase order invoice first, and then “Goods in Transit Orders” will be visible.
6. Now, goods in transit orders can be tracked and updated for different legs of a journey. This can be managed using “inbound tracking.” When the last leg of the journey is updated for “Actual end date,” based on defined rules, the Voyage status will be changed to reflect that the item has now arrived at the warehouse.
7. Goods in transit orders can be received either using the Item arrival journal, Clicking Receive, or through the Warehouse App, depending on the setup used in the business. This step will complete the receiving of goods into the warehouse.
8. The last step is submitting the actual cost invoice received from the shipping company, which can be either the same as the estimated cost or vary. Create an Invoice Journal > enter shipping company details and Amount > Click on Functions > Select voyage costs > Select Cost area, e.g., voyage > Select the Voyage. This will show all the estimated costs and allow you to allocate actual costs. In this example, the estimated cost was 5915 USD, and the actual cost is 7000 USD, i.e., an adjustment of 1085 USD.
9. Post the Invoice journal.
10. Voucher transactions will show an additional adjustment of 1085 USD posted.
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