Landed Cost Management

Venkatesh Kola Krishnamurthy

3rd Dec 2021

Landed Cost Management
• Agenda
• Introduction
• Purpose & Key capabilities,
• Landscape,
• Basic Flows
• Trade Operations
• What is a Trade Operation?
• Create Trade Operation
• Landed Cost Charge Basis & Landed Cost Allocation Basis
• Interfacing payables invoices to LCM
• Business Value
• Setups
• End-to-End Transaction Process (Application Demo)
• Accounting Entries
• Review On-hand Quantity Before and After the Process
• Review Item Cost Before and After the Process
• Review Transaction Cost
Landed Cost Management: Purpose
❑ Capture additional costs associated with procuring materials
❑ Estimate total purchase costs in advance for better decisions
❑ User defined landed cost entities
❑ Capture actual landed cost invoice data
Landed Cost Management: Key Capabilities
❑ Capture and itemize landed cost charges associated with material purchases

❑ More accurate total costs and gross margin reporting

❑ Regulatory compliance

❑ Better sourcing decisions

❑ Tools to automate matching of actual invoice amounts to estimated charges

Landed Cost Management: Landscape
❑ Capture landed cost charges
and process them.

❑ Perform tax calculation on

landed cost charges.

❑ Get accurate landed cost

charge details from AP Invoice.

❑ Review item unit cost, including

landed cost.
Landed Cost Management: Basic flows
Landed Cost – What is a Trade Operation?
❑ A landed cost charge can apply to one or more than one purchase order shipment (a “container” of
multiple material purchases)

❑ A trade operation can include multiple landed cost charges that apply to a shipment.

❑ A landed cost charge can be payable to a supplier who is different than the material supplier

❑ A material purchase can be involved in multiple trade operations on the journey from supplier to
destination

❑ A trade operation is flexible; tailorable to different business use cases.

Landed Cost – Create Trade Operation
❑ You can create a trade operation from scratch or from a template

❑ Trade operation templates streamline creation of trade operations – useful

for repeat purchases.

❑ Automatically populate new trade operations with the typical charges for a
type of purchase

❑ Associate purchase order schedules with the trade operation.

Trade Operation- Landed Cost Charge & Allocation Basis
❑ Landed Cost Charge Basis ❑Landed Cost Allocation Basis

▪ Aggregate - a total amount ▪ Equally – spread the charge across all

PO lines equally
▪ Per unit – an amount per unit
▪ Quantity – spread the charge across PO
▪ Percentage of item price – a percentage lines based on qty
of total material price
▪ Volume – spread the charge across PO
▪ Percentage of other charges – a percent lines based on volume
of other landed cost charges ▪ Weight – spread the charge across PO
▪ Variable per unit - user entered amount lines based on weight
for each purchase order associated with ▪ Item value - spread the charge across PO
the trade operation
lines based on Item value
▪ Variable percentage of item price - user ▪ Manual allocation factor – spread the
entered percentage for each purchase
charge across PO lines based on a user
order associated with the trade
operation entered factor
Interfacing Payables Invoices to LCM
❑ Associate the actual landed cost charge
invoices with the trade operation
charges.

❑ Use the reference type to let the system

automatically associate the actual
invoice amount with the trade operation.

❑ Adjusts estimated landed cost to actual

landed cost in Receipt Accounting and
Cost Accounting.

❑ Transfer Costs to Cost Management

▪ Invoices flagged for landed cost

management are transferred to
Landed Cost Management
▪ This process is for a specific
Business Unit for a given Cutoff
Date.

❑
Landed Cost – Business Value
❑ Inventory value includes total landed
cost

❑ Accurate product profitability analysis

❑ Corrective action possible when

landed costs trend away from plan

❑ Better sourcing decisions

Landed Cost Management: Setups – Charge Names
❑Manage Charges Names
▪ Required setup
▪ Seeded charges are Discount, Freight, Insurance, Miscellaneous
▪ User-defined charge names to capture landed cost
▪ Option to enable automatic tax calculation on charges
Landed Cost Management: Setups – Reference Types
❑Manage Landed Cost Reference Types
▪ Optional setup
▪ Use reference types to capture charge-related document details
▪ Match landed cost charges to payables invoice lines
Landed Cost Management: Setups – Routes
❑Manage Routes
▪ Optional setup
▪ Route names are used to map transportation routes
▪ They are used for further analysis of landed costs
Landed Cost – End-To-End Process Steps
No. Business /ERP Activity Fusion Module Task Name
1 Create and Approve Purchase Order Procurement Create Purchase Order
2 Interface PO to LCM Receipt Accounting Manage Landed Cost Processes
3 Create Trade Operation Receipt Accounting Review Purchase Orders for Landed Cost
4 Receive Material Inventory Management Receipt Expected Shipments
5 Run interface job ESS Job Transfer Transactions from Receiving to Costing
6 Allocate landed cost charges Receipt Accounting Manage Landed Cost Process
7 Receipt Accounting Receipt Accounting Create Receipt Accounting Distributions
8 Review Receipt Accounting Receipt Accounting Review Receipt Accounting Distributions
9 Run interface job ESS Job Transfer Transactions from Inventory to Costing
10 Create Cost Accounting Cost Accounting Create Cost Accounting Distributions
11 Review Cost Accounting Cost Accounting Review Cost Accounting Distributions
12 Create the AP Invoice – Landed Cost Payables Create Invoices
13 Create the AP Invoice – Match PO Payables Create Invoices
14 Interfacing AP Invoice LC to LCM ESS Job Transfer Costs to Cost Management
Landed Cost – End-To-End Process Steps
No. Business /ERP Activity Fusion Module Task Name
15 Prepare Invoice Data Receipt Accounting Manage Landed Cost Process
16 Charge Invoice Associations Receipt Accounting Manage Charge Invoice Associations
17 Allocate Charges Receipt Accounting Manage Trade Operations
18 Receipt Accounting (Actual LC tax) Receipt Accounting Create Receipt Accounting Distributions
19 Review Receipt Accounting (Actual LC tax) Receipt Accounting Review Receipt Accounting Distributions
20 Create Cost Accounting Cost Accounting Create Cost Accounting Distributions
21 Review Cost Accounting Cost Accounting Review Cost Accounting Distributions
Accounting Entries
No. Business /ERP Activity Fusion Module Task Name
8 Review Receipt Accounting Receipt Accounting Review Receipt Accounting Distributions

Accounting Line Type Source Debit Credit

Receiving Inspection Landed costs 100.00
Landed Cost Clearing Landed costs 100.00

Receiving Inspection Purchase Order 200.00

Accrual Purchase Order 200.00

Receiving Inspection Transaction taxes-STATE 13.00

Accrual Transaction taxes-STATE 13.00

Receiving Inspection Transaction taxes-CITY 6.00

Accrual Transaction taxes-CITY 6.00

Receiving Inspection Transaction taxes-COUNTY 0.00

Accrual Transaction taxes-COUNTY 0.00
Accounting Entries
No. Business /ERP Activity Fusion Module Task Name
11 Review Cost Accounting Cost Accounting Review Cost Accounting Distributions

Accounting Line Type Cost Element Type Cost Element Debit Credit
Inventory Valuation Material MATERIAL 100.00
Receiving Inspection Material MATERIAL 100.00

Inventory Valuation Material MATERIAL 200.00

Receiving Inspection Material MATERIAL 200.00

Inventory Valuation Material TAX-NR 19.00

Receiving Inspection Material TAX-NR 19.00
Accounting Entries
No. Business /ERP Activity Fusion Module Task Name
12 Create the AP Invoice – Landed Cost Payables Create Invoices
Account Class Debit Credit
Item expenses 100.00
Nonrecoverable tax 6.50
Nonrecoverable tax 3.00
Liability 100.00
Liability 6.50
Liability 3.00
No. Business /ERP Activity Fusion Module Task Name
12 Create the AP Invoice – Landed Cost Payables Create Invoices
Account Class Debit Credit
Item expenses 200.00
Nonrecoverable tax 13.00
Nonrecoverable tax 6.00
Liability 200.00
Liability 13.00
Liability 6.00
Accounting Entries
No. Business /ERP Activity Fusion Module Task Name
19 Review Receipt Accounting (Actual LC tax) Receipt Accounting Review Receipt Accounting Distributions

Accounting Line Type Source Debit Credit

Receiving Inspection Landed costs 9.50
Landed Cost Clearing Landed costs 9.50

No. Business /ERP Activity Fusion Module Task Name

21 Review Cost Accounting Cost Accounting Review Cost Accounting Distributions

Accounting Line Type Cost Element Type Cost Element Debit Credit
Inventory Valuation Material MATERIAL 9.50
Receiving Inspection Material MATERIAL 9.50