Calculating Landed Costs Accurately for Imported Tile & Stone

For Canadian tile and stone suppliers, importing materials from overseas is a common practice. However, the true cost of that imported inventory is far more than just the price paid to the manufacturer. Shipping fees, customs duties, taxes, insurance, and other associated expenses all add to the final cost of getting the product "landed" in your warehouse. Accurately calculating this "landed cost" is absolutely critical for setting correct selling prices, determining true profitability, and making informed purchasing decisions.

What is Landed Cost?

Landed cost is the total cost of a product once it has arrived at the buyer's doorstep. It includes the original cost of the item plus all additional costs incurred to get it there. For imported tile and stone, this typically includes:

• Product Cost: The price paid to the overseas supplier.
• Shipping and Freight: Costs for transporting the goods (ocean freight, trucking, etc.).
• Customs Duties and Tariffs: Taxes imposed on imported goods.
• Brokerage Fees: Fees paid to customs brokers for clearing the goods.
• Insurance: Cost of insuring the shipment during transit.
• Handling Fees: Costs associated with loading, unloading, and moving the goods.
• Currency Conversion Fees: If paying in a foreign currency.

Failing to include all these costs in your inventory valuation means you're underestimating the true cost of your goods, which directly impacts your reported profit margins.

Why Accurate Landed Cost Calculation Matters

Precise landed cost calculation is vital for tile and stone suppliers:

Accurate Pricing

Knowing the true cost of your imported materials allows you to set competitive yet profitable selling prices. Underestimating costs can lead to underpricing and reduced margins.

True Profitability Analysis

Accurate landed costs are essential for calculating the true cost of goods sold (COGS) and, therefore, your actual gross profit margin on imported items.

Informed Purchasing Decisions

Understanding the full cost of importing from different suppliers or regions helps you make better decisions about where to source your materials.

Inventory Valuation

Landed costs are included in the valuation of your inventory on hand, providing a more accurate representation of your assets.

Financial Reporting

Accurate COGS and inventory valuation are necessary for accurate financial statements and tax reporting.

The Challenges of Manual Landed Cost Calculation

Manually calculating landed costs for every imported shipment is complex and prone to errors:

Tracking Multiple Costs

Gathering and allocating various costs (freight bills, duty invoices, brokerage statements) for a single shipment is cumbersome.

Allocation Complexity

Distributing shared costs (like a single freight bill for a container with multiple product types) accurately across different inventory items requires complex calculations.

Time-Consuming

Manual calculation is a labor-intensive process that takes valuable time away from other tasks.

Risk of Error

Spreadsheet formulas or manual calculations can easily contain errors, leading to inaccurate costings.

How Inventory Software Simplifies Landed Cost Calculation

Inventory management or ERP software with landed cost capabilities automates and simplifies this process:

1. Capture All Associated Costs

The software allows you to enter and associate all the various costs (freight, duty, etc.) with a specific incoming shipment or purchase order.

2. Automated Cost Allocation

The system can automatically allocate these additional costs across the items in the shipment based on predefined methods (e.g., by value, weight, or quantity).

3. Accurate Inventory Valuation

Once costs are allocated, the software updates the cost basis of the received inventory items, providing an accurate landed cost for each product.

4. Streamlined Process

Automating the calculation and allocation process saves significant time and reduces the risk of manual errors.

5. Improved Reporting

Generate reports that show the breakdown of landed costs for different products or shipments, providing valuable insights into your import expenses.

Conclusion

For Canadian tile and stone suppliers who import materials, accurately calculating landed costs is fundamental to understanding true profitability and making sound business decisions. By leveraging inventory management software with built-in landed cost functionality, you can automate this complex process, ensure accurate costing, and gain better control over your imported inventory's financial picture.

Interested in improving your landed cost calculation? Learn how InterSource can help.