Figuring out the real cost of getting your products from a supplier to your door can be tricky with all the different expenses involved. Landed costs cover everything—from production to shipping and customs—so you know exactly what you’re paying. Let’s break down how to calculate these costs simply, so your business stays profitable.

1. What Are Landed Costs and Why Do They Matter?

Landed costs are all the expenses that come with getting a product to its final destination. They cover things like manufacturing costs, shipping fees, customs duties, insurance, and any other charges along the way. Knowing these costs helps you set the right prices and avoid any surprises, making sure you stay profitable.

2. The Key Components of Landed Costs

To calculate your landed costs accurately, include these key components:

• Product Cost: The price of making or buying the product from your supplier in Vietnam.
• Shipping Costs: Air freight is faster but more expensive, while ocean freight is cheaper for larger shipments.
• Customs Duties and Taxes: Fees depend on the type of goods imported, so research these in advance.
• Insurance: Covers potential damages or losses during transit.
• Miscellaneous Fees: Handling charges, port fees, and other small costs that can add up.

3. A Simple Formula for Calculating Landed Costs

Here’s an easy formula to help you figure out your landed costs:

Landed Cost = Product Cost + Shipping Fees + Customs Duties + Insurance + Miscellaneous Charges

Using this formula, you’ll have a clear idea of your total expenses per unit, which helps you set the right prices for your products.

Example Calculation (All Prices Are Assumptions)

Let’s say you’re sourcing a product from Vietnam, and here are the costs involved:

• Product Cost: $5 per unit
• Shipping and Freight Costs: $1.50 per unit (ocean freight)
• Customs Duties and Taxes: $0.75 per unit
• Insurance: $0.25 per unit
• Miscellaneous Fees: $0.50 per unit

Using the formula:

Landed Cost = Product Cost + Shipping Fees + Customs Duties + Insurance + Miscellaneous Charges

Landed Cost = $5 + $1.50 + $0.75 + $0.25 + $0.50 = $8.00 per unit

This means your total landed cost per unit is $8.00. By knowing this, you can set a price that ensures you’re covering all your expenses and making a profit.

4. Tips for Cutting Down Landed Costs

• Partner with Reliable Freight Forwarders: A good freight forwarder can make the shipping process smoother, help you cut unnecessary fees, and prevent delays.
• Negotiate with Suppliers: Building a solid relationship with your supplier can lead to better prices and terms, which can really help lower your landed costs.
• Consolidate Shipments: If you can, combine your shipments to cut down on freight and handling charges. This works especially well if you’re sourcing multiple products from Vietnam.

Final Thoughts

Understanding landed costs is key when sourcing from Vietnam. Breaking down each component helps you make informed pricing decisions. At Vietnam Direct Sourcing, we’re here to make logistics easy so you can focus on growth.

Want to streamline your sourcing? Let’s chat!

How to Use a Sourcing Agent to Grow Your Business: A Step-by-Step Guide

Sustainability in Global Sourcing A New Standard for 2024