Landed cost: the number that decides whether an import is profitable

An overseas supplier quotes a price that looks excellent next to local alternatives. Months later, margins are thinner than expected and nobody is quite sure why. The usual answer is that the decision was made on the supplier price instead of the landed cost.

What landed cost includes

• The product cost, converted at a realistic exchange rate with a buffer for movement.
• International freight and insurance to the port or airport of entry.
• Customs duty, which depends on the product's tariff classification.
• Import VAT, generally calculated on an uplifted customs value.
• Clearing and forwarding fees, port charges and local delivery to your premises.

The hidden variables

Exchange-rate movement between order and payment, demurrage when documents are late, and the cost of capital tied up in stock during long lead times can each move the number materially. A good landed-cost model includes a contingency for all three.

Making better sourcing decisions

Compare suppliers on landed cost per unit, not on price. Factor in lead time and reliability, because a cheaper supplier that runs out of stock at peak season can cost more than it saves. Confirm tariff classifications and duty rates with a registered clearing agent before you commit.

Try the landed cost estimator on our Supply Chain & Logistics page to see how the elements add up for your own products.

TLR Corp Insights · Sandton, Johannesburg