What Are Landed Costs?
Landed cost is the total cost of getting a product from the vendor's location to your warehouse. Beyond the purchase price, it includes freight charges, customs duties, insurance, handling fees, port charges, and broker fees. Without proper landed cost allocation, your inventory is undervalued, product margins are overstated, and pricing decisions are based on incomplete data. Odoo's Landed Costs feature distributes these additional costs across received products accurately.
Why Landed Costs Matter
Consider importing electronics from Asia. The product price is $10 per unit, but after shipping ($1.50), customs duty ($0.80), insurance ($0.20), and handling ($0.30), the true landed cost is $12.80 per unit. If you price based on the $10 purchase price, your margins are 28% lower than you think. Landed cost allocation ensures your inventory valuation and cost of goods sold reflect reality.
Odoo Configuration
Enable Landed Costs
Go to Inventory → Settings and enable Landed Costs under the Valuation section. This feature requires FIFO or AVCO (Average Cost) inventory valuation — landed costs cannot be applied with standard cost valuation because standard cost uses a fixed predetermined cost rather than actual costs.
Create Landed Cost Products
Create service-type products for each cost category — freight, customs duty, insurance, handling, brokerage. Set the product type to Service and configure the accounting to the correct expense account. These products will be used as cost lines when creating landed cost records.
Allocation Methods
Odoo supports several methods for distributing landed costs across received products.
| Method | Basis | Best For |
|---|---|---|
| By Quantity | Number of units received | Similar-sized items |
| By Current Cost | Current inventory value | Mixed-value shipments |
| By Weight | Product weight | Weight-based freight charges |
| By Volume | Product volume | Volume-based shipping costs |
| Equal | Split equally | Simple equal distribution |
Choosing the Right Method
Freight charges are typically allocated by weight or volume since shipping costs correlate with physical dimensions. Customs duties are best allocated by current cost since duties are usually a percentage of value. Insurance is allocated by value since coverage is proportional to the goods' worth. Handling and brokerage can be split equally or by quantity.
The Landed Cost Process
Step 1: Receive Goods
Process the purchase receipt normally, validating received quantities against the purchase order. At this point, inventory is valued at the purchase price only.
Step 2: Collect Cost Documents
Gather all cost documents — freight invoices from the shipping company, customs duty assessments from the broker, insurance certificates, and handling bills. Each document provides a specific cost amount that needs allocation.
Step 3: Create Landed Cost Record
In Odoo, go to Inventory → Operations → Landed Costs. Create a new record and link it to the receipt (picking) from step 1. Add cost lines for each additional cost — select the landed cost product (freight, duty, etc.), enter the amount, and choose the allocation method. Odoo shows a preview of how costs will be distributed across received products.
Step 4: Validate and Post
Review the allocation preview to ensure costs are distributed logically. Validate the landed cost record. Odoo creates journal entries that increase inventory value by the allocated amounts and credit the expense accounts. Product unit costs are updated to reflect the full landed cost.
Multi-Vendor Shipments
A single shipment may contain goods from multiple vendors with a single freight charge covering everything. Odoo handles this by allowing you to link a landed cost record to multiple receipts. The cost is allocated across all received products from all linked receipts using the selected method.
Common Mistakes
- Forgetting allocation — Create a checklist of expected landed costs per import and verify all are allocated before closing the period.
- Wrong method — Using quantity-based allocation for freight when products vary significantly in weight misallocates costs. Match the method to the cost driver.
- Timing gaps — Some cost documents arrive weeks after receipt. Estimate and accrue costs, then adjust when actual amounts are known.
DeployMonkey + Landed Costs
Deploy Odoo on DeployMonkey and configure landed cost allocation with AI assistance. Get accurate product costing for international trade from day one.