Every month we publish a "feature of the month" where we ask one of our consultants to highlight a feature in MILAS AX (our specific ERP modules for Microsoft Dynamics AX). This month Bartek Cach shares his insights.

How efficient landed cost calculation affects your total costs

As the ingredient costs account for the lion’s share of an organisation’s total costs, it is of vital importance to have the entire business process, from contracting to the financial settlement, under control. It speaks for itself that the efficient management of raw material related costs can bring a lot of savings to any business. One of the elements of the business process with the highest impact on the total cost is the landed costs calculation.

The difficulties with landed cost calculation

Apart from the actual purchase price of the product, the landed costs, the total end cost of a shipped product, can include the following:

• Transport costs
• Transhipment costs
• Sampling costs
• Insurance costs
• Factoring costs
• Bi-monthly price increases
• Storage rent
• Clearance costs
• etc.

All these different costs are charged by a variety of vendors and are subject to variation. This makes it very difficult for the purchase manager and trader to make a correct and accurate assessment of the total costs of the operation.

Landed cost calculation in Dynamics AX

Incorrectly budgeted landed costs can have an enormous impact on your organisation. Adifo, being an experienced commodity industry partner, has created a dedicated MILAS AX module to address the issue from within your ERP.

Effectively handling all aspects of landed costs from within the ERP system offers the following advantages to the purchase and sales department:

• Budget all of the costs involved accurately and automatically
• Budget different cost components and reflect them on the total landed costs
• Accurately predict your selling price and margin
• Clear cost overview
• Control the quality of the delivered products thanks to the integration with quality management
• Automatically control costs after delivery
• Work in one system for the entire flow thanks to the full integration with purchase contract management

How does it work? Landed costs in practice: haulage costs

Companies often have to outsource transportation to 3rd parties. This makes the order and invoice processing work intensive and unnecessary complex. Within MILAS AX the invoice from the haulier (and other related costs) can automatically be linked to your purchase invoice, thus giving you a complete and correct overview of the entire landed costs.

Most of the time users end up setting up a separate cost matrix for carriers in excel:

In MILAS AX this entire process is much simpler. The costs that are usually saved in a separate cost matrix in excel are included as one of the base parameters. In practice, Microsoft Dynamics AX users that are responsible for order taking or shipment planning only fill in a limited number of fields. From that moment on everything is taken care of by MILAS AX.

The results of the landed cost module in Dynamics AX are remarkable: Efficiency increases and mistakes are almost completely eliminated, saving on the total cost price of your raw materials.