Landed Cost Module has been recently introduced in Dynamics 365 F&O by Microsoft with the single idea to account for the final landed cost of the item once all other costs are incurred during the logistics.
Meaning, it aims to help organizations streamline their inbound shipping operations by empowering users with complete financial and logistical control over imported freight, beginning from item’s origin (i.e. manufacturer) to the point of delivery (i.e. warehouse). Also, as for imported items, the module can account for up to 40%+ of the total cost of each imported item, providing accurate estimates for landed costs.
The landed cost would provide a complete overview of not only the purchased price, but all of those steps along the way, or all those additional costs that may be added to the costs of those goods. So it gives you a complete view of profitability or overall costs for those goods that are sitting in your inventory.
Benefits
From the module perspective, within the application, what the landed cost module provides is four specific benefits teams will get for implementing the solution, specifically:
- Since the visibility has been improved, you will be able to track inbound purchase orders, as well as transfer orders;
- Then, you can track both estimated and actual landed costs associated with inbound voyages;
- Inquiries and reports for in-transit goods and costs;
- Finally, companies are able to take legal ownership of goods overseas to accrue item costs while they are in transit.
In other words, Landed Cost enhances teams with accurate and timely cost information for overhead landed costs. Moreover, the financial and logistical visibility over the supply chain has been improved, which eventually eliminates costing errors.
Terminology
From the key terminology perspective, here are some of the main ones you should get accustomed to. Check the link to have a glance at them all here.
Voyage – is the most important concept in the system, which is similar to what users usually call an inbound load from a transportation management perspective. However, this is what allows us to set up and specify carrier tracking information, assign all of those various different items on the purchase orders that are going to be getting placed onto this voyage. And then, you have the ability to track that over time.
Shipping Containers – is the next concept on the list, which is exactly what it means – big metal containers that are used in overseas travel. This is where you have the ability to go ahead and place items and quantities in a shipping container to put among other containers to the voyage – that you are then tracking.
Goods in Transit Order – a new type of order in the system to manage the receipt of goods after the original purchase order has been invoiced before the goods have been physically received.
Last but not least on the list is Costs. It can be configured for different steps of a voyage and apportioned to the item step through specific rules that support quantity, volume, amount, and other specifications. This works for both up-front estimates as well as actual costs at the time of invoice.
Getting started
The first thing to note is that the module is managed via feature. Should you want to enable the landed cost feature – you can do that within feature management. Once you’ve done that, the landed cost module will show up within your application.
From a configuration perspective, we would need to:
- Update delivery terms to show which delivery terms need to have goods in transit order automatically created for them at the time of AP invoice;
- Configure landed cost module, specifically costs and how they are going to get allocated as well as where we can set up our voyages, shipping containers, etc.;
- Configure procurement and sourcing.
There are some additional set-ups outside of these three main pillars around the module to get started though. If you are going to be using the module in the advanced warehouse or WMS, or WHS, you’d also need to:
- Add some menu items for goods in transit orders;
- Set up location directives and work templates for orders.
Landed Cost vs.Transportation Management
There is a lot of different considerations in regards to the difference between landed cost module and TMS, however, we would like to outline the four most important ones that should help you to determine whether you should be using landed cost, or TMS:
- Transportation management and landed costs do not share the reference data for entities such as the costs, set-up, journeys, legs, etc. You would need to recreate all of those set-ups in both of the different modules;
- Landed cost does not provide an ASN for the electronic receipt of goods. Just something to keep in mind, using the landed cost module will limit the available options that you have for the receiving of goods, since it is a different document type and receiving process itself.
- The inbound loads module does allow you to do rate shopping within that module. If you have requirements around the ability to input costs for multiple different vendors, run some rate shopping to determine the lowest cost shipping provider – that works well out of the box for transportation management. However, there is no such functionality from the landed cost perspective.
- TMS has the concept of freight reconciliation, so you can’t match up freight bills in the system. You can set up estimates on freight charges and do a reconciliation to the actual bill that you received, however, it is only matched against that vendor freight invoice and not necessarily for the landed cost, or the item cost perspective.