How Can Odoo 17’s Landed Cost Feature Help in Accurate Costing of Products?

In today’s hyper-competitive global market, accurate product costing is no longer a luxury, it’s a lifeline. Businesses juggling complex supply chains and fluctuating international trade environments need a robust system to track and manage every penny associated with bringing their products to market. 

Odoo 17‘s Landed Cost feature, a game-changer for businesses seeking pinpoint precision in their cost calculations.

Gone are the days of underestimating or overpricing products due to hidden expenses. Odoo 17’s Landed Cost empowers you to capture the complete picture, seamlessly integrating shipment fees, insurance premiums, customs duties and other ancillary costs into your final product price. This newfound transparency translates to improved profitability, informed pricing strategies and a competitive edge that leaves your rivals in the dust.

This blog aims to unravel the intricacies of this feature and its profound impact on accurate product costing. With Odoo 17, companies can navigate the complexities of modern inventory management with unprecedented precision. 

Let’s dive into the ways this innovative feature is reshaping the approach to product cost calculation.

THE ESSENCE OF LANDED COSTS IN Odoo 17

1) Conceptual Clarity

In Odoo 17, ‘Landed Costs’ encompass all supplementary expenses incurred during the acquisition of products, including shipping, insurance, and customs duties. Accurately accounting for these costs is crucial for determining the true cost of inventory, thus affecting pricing strategies and profit margins.

2) Key Configuration Steps

Activating this feature involves a simple setup in the Inventory settings. The process is user-friendly, ensuring that even newcomers to Odoo can navigate it with ease.

ACCURATE PRODUCT COSTING : THE Odoo 17 ADVANTAGE

1) Integrating Diverse Cost Elements

Odoo 17 enables businesses to seamlessly add various cost elements like freight, insurance and duties to the product cost. This integration provides a comprehensive view of the total expenditure on each item, enhancing pricing accuracy.

2) Enhanced Valuation Methods

With support for different inventory valuation methods like FIFO (First-In, First-Out) or AVCO (Average Cost), Odoo 17 allows for more precise cost calculations tailored to the nature of the business.

3) Streamlined Vendor Bill Management

The feature simplifies the inclusion of landed costs in vendor bills. Users can directly associate additional costs with specific products, ensuring that every expense is accounted for in the product valuation.

4) Improved Cost Allocation

Odoo 17’s Landed Cost feature facilitates the allocation of costs across multiple products in a consignment. This proportional distribution of expenses ensures a more accurate reflection of each product’s actual cost.

5) Real-time Cost Analysis

With real-time tracking and analysis, businesses can monitor landed costs as they occur, leading to more dynamic and accurate pricing strategies.

IMPLEMENTING Odoo 17’S LANDED COST FEATURE FOR ACCURATE PRODUCT COSTING

To elucidate how Odoo 17’s Landed Cost feature can revolutionize product costing, let’s take a real world use case.

A company, ‘Global Imports Inc.’, which imports electronic components and sells them domestically. Accurate product costing is crucial for Global Imports Inc. to maintain competitive pricing while ensuring healthy profit margins.

SCENARIO : 

Global Imports Inc. regularly imports a batch of electronic components from various international suppliers. Each shipment incurs additional costs like freight, insurance, and customs duties, which vary per shipment. The challenge is to integrate these costs accurately into the product cost to reflect the true expense of acquiring the inventory.

STEP-BY-STEP IMPLEMENTATION

Step 1 : Activating Landed Costs

Action : The company’s Odoo administrator activates the Landed Cost feature by navigating to Inventory → Configuration → Settings → Valuation and enabling the Landed Costs option.

Step 2 : Setting Up Landed Cost Products

Action : The administrator creates a ‘Landed Cost’ product in Odoo. This is done by going to Inventory → Products → Products → Create. The product is named ‘Freight Charges’, set as a Service type, and marked as ‘Is a Landed Cost’ under the Purchase tab.

Step 3 : Vendor Bill Creation and Inclusion of Landed Costs

Situation : Global Imports Inc. receives a shipment with an associated vendor bill, which includes the product cost and a separate invoice for freight charges.

Action : The administrator creates a vendor bill in Odoo and adds two lines – one for the electronic components and another for ‘Freight Charges’. The Landed Costs option is checked for the freight charges.

Step 4 : Allocating Landed Costs to Products

Action : Upon validation of the vendor bill, the administrator navigates to Inventory → Operations → Landed Costs and creates a new landed cost record. Here, the freight charges are allocated to the received shipment of electronic components.

Step 5 : Computing and Validating Landed Costs

Action : In the landed cost record, the administrator selects the transfer corresponding to the received shipment and clicks ‘Compute’. Odoo automatically distributes the freight charges proportionally across the products in the shipment based on their value, weight, or volume.

Result : The electronic components’ cost is updated to include their share of the freight charges, reflecting the true cost of acquiring the inventory.

Step 6 : Analyzing the Financial Impact

Observation : The accurate reflection of landed costs in the product valuation allows Global Imports Inc. to set more precise selling prices, ensuring that all costs are covered and profit margins are maintained.

This use case demonstrates the practical application of Odoo 17’s Landed Cost feature in a typical business scenario.

At Pragmatic Techsoft, we specialize in tailoring such Odoo functionalities to align with diverse business requirements, ensuring seamless integration and optimal utilization of ERP capabilities. With our deep expertise in Odoo solutions and our  proficiency in implementation, migration, customization and support ensures that our clients harness the full potential of the Landed Cost feature and other Odoo 17 advancements.

For businesses looking to refine their inventory and product costing processes, partnering with Pragmatic Techsoft for Odoo solutions is a strategic move towards achieving efficiency and accuracy. 

Stay tuned to our blogs for more insights on leveraging Odoo 17.

Contact us to explore how we can transform your business operations with Odoo 17.