Landed costs can be tricky to calculate, given their moving components. Companies operating in the supply chain management space can face significant financial risks with inaccurate calculations and manual tracking of these costs. Businesses require robust technological solutions and strategic implementation to transition from estimation to precision.
In the second part of ERP Today’s interview with Aylwin Agraviador, Principal Consultant in the SuitePaths practice at CloudPaths, we explore the specific capabilities of an ERP system like NetSuite for managing landed costs and the value of expert partners like CloudPaths in configuring these systems for maximum effect.
Core NetSuite Features for Landed Cost Management
Modern ERP systems are designed to automate and streamline complex financial processes, including landed cost tracking. NetSuite offers several key features that provide clarity and control over these expenses.
“One of the biggest features is the automatic distribution of landed costs at the item receipt level,” Agraviador notes. “At this point, it gets reflected upon the GL impact.”
This automation provides several key advantages:
- Real-Time General Ledger Impact: As goods are received, all associated costs are allocated to the items and immediately posted to the general ledger. This ensures that financial statements are always up-to-date and accurate.
- Accurate Inventory Valuation: NetSuite provides a true valuation of inventory by assigning costs at the line-item level based on pre-defined rules.
- Multi-Warehouse Costing: The system can track costs on a per-location basis. “It updates a roll-up at the item location level,” says Agraviador. “If you have more than one warehouse, you can determine the cost across the board and which warehouse is more expensive to land your goods.” This enables more strategic inventory and logistical decisions.
The Impact of a Strategic Implementation
Technology alone is insufficient; a successful outcome also depends on expert implementation. Agraviador illustrates this point with the example of a Midwest-based belt manufacturer that managed landed costs using spreadsheets and manual journal entries.
By implementing NetSuite, CloudPaths automated the company’s entire process. “We could, upon receipt through the WMS, automate what was received, automate the value based off weight and container value, and distribute that accurately amongst the item records and the item receipts,” Agraviador says.
With accurate cost data, the company could refine its pricing strategy. This led to more competitive prices, higher sales volume, and market share growth. The key was a methodology that combines standard functionality with tailored adjustments. “We derive solutions which incorporate roughly 70-80% of their standards, but 30% customization,” Agraviador explains. “This ensures the solution aligns with industry best practices and unique client needs.”
Recommended First Steps for Businesses
For organizations seeking to improve their landed cost management, Agraviador recommends a structured approach:
- Cease Manual Processes: The first priority is to move away from error-prone spreadsheets.
- Document and Define Processes: Before adopting new technology, map your current process and define an ideal future state. Determine the required level of tracking, too.
- Engage Specialized Resources: Partner with experts who can bridge the gap between business requirements and the system’s capabilities. “Bring in a specialized resource such as CloudPaths to help understand the value of landed cost at multiple levels and demonstrate what it does to the bottom line,” says Agraviador.
Finally, effectively managing landed costs is a critical business function that directly influences profitability and strategic decision-making.
What This Means for ERP Insiders
Landed cost data is a strategic forecasting tool. As Agraviador explains, accurate landed cost data allows businesses to make smarter purchasing decisions and lead times. For ERP professionals, this means framing a landed cost implementation as a strategic initiative that provides the procurement and sales teams with critical data for forecasting.
Implementation methodology matters. The trend in ERP is to move away from rigid, one-size-fits-all deployments. CloudPaths’ approach of using roughly 70-80% of standardized solutions and 30% customization is key. For ERP professionals, this highlights the value of a partner who doesn’t force a business into a box but blends industry best practices with bespoke configurations that address the client’s unique competitive differentiators.
Automation must drive real-time financials. The ultimate goal of automation is timely, accurate data. This means a landed cost module isn’t just a supply chain tool; it’s a core financial instrument. A successful implementation by a partner like CloudPaths ensures that logistical events like receiving goods have an immediate and accurate financial consequence in the ERP, eliminating the lag and error associated with manual journal entries.
