Month: February 2022

What is Batch Tracking

Batch tracking is in simple words, a traceability system.

It enables you to group together a set of inventory items that share similar properties in a batch.

Batch tracking offers better visibility and makes it possible to track the expiry date of products and trace defective units back to the specific batch it belonged to.

In other words, it optimizes the way inventory is managed across the distribution chain, as it helps to trace your products from start to finish – the complete production and distribution process, till it reaches the end consumer.

ALSO READ: Route and Van Sales

Batch tracking is essential if you are serious about not just efficiency, but quality control – and it is important whether you’re a B2C or B2B business.

Batch tracking helps businesses exercise more control over their inventory by enabling the tracking of batch movement, as well as tracking product development from start to finish.

Inventory batches comprise a specific number of items received on a particular date, for a definite cost.

There could be differences in every inventory batch, even if they are the same type of product.

For example, the expiry date, the exact location of its manufacture, its purchase price, or any other detail could be different.

It is very important to know the differences in products, especially when they are sold.

Apart from expiry dates, batches also help to analyze return dates for particular batches and to respond to customer queries about differences among the products.

Batch tracking also facilitates accurate report generation on elements like profit margins, revenues, and others.

ALSO READ: What is Negative Inventory?

What is Included in Batch Information?

Every batch has its unique details, like a number, purchase price and date, and expiry date.

Every batch is related to a specific item variant; multiple items or their variants are not part of the same batch.

Every batch number for the same item variants has to be separate.

Even though the same batch number can be used for different variants of items, it will still be a separate batch.

Each batch is associated only with a single item variant.

Multiple items or variants cannot be included in the same batch.

Items from one individual batch can be found at several locations.

Batches can be allocated to stock movements and transfers, to perform stock adjustments, and when moving stock from one location to another.

ALSO READ: Job Costing – Everything You Wanted to Know About

Strategies with Inventory Batch Tracking

It is essential that you perform smart inventory management if your business involves products, more so if they are of a perishable nature.

Let us look at some of the most common inventory strategies.

FIFO

This means, ‘First In, First Out, and in this method, products that come in first, are sent out first; this is a strategy employed usually by companies that deal in fast moving products.

LIFO

This stands for ‘Last In First Out, and in this method, products that come in last, are moved out first.

In times of rising prices, it provides a tax advantage.

FEFO

This acronym spells out ‘First Expired First Out’, and it is normally used where products have a low shelf life.

Products with the nearest expiry date are moved out first.

Keep in mind when you choose your strategy, that it will have a significant impact on your logistics.

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

Which Type of Business Requires a Batch Management System?

Batch management systems are necessary to streamline tracking, enabling the effective monitoring of your inventory.

However, this can be managed more efficiently with a robust inventory management system which is a module in a reliable ERP like Tranquil.

Industries like coffee and tea production, production of any type of food items like biscuits, breakfast cereals, snacks, milk powders, and so on, cosmetics, electronics, and any other business that manufactures and/or handles perishable products.

It is not just optional but absolutely essential for businesses in these segments to implement an efficient batch inventory management system as they have to trace raw materials with low shelf-life, or recall products in case a defect is detected later.

The most effective quickest, and easiest way to track the products and their location is by using batch tracking software.

ALSO READ: Important ERP Modules and Functions

What is a Batch Tracking Software or Batch Inventory Management System?

It is a tool that helps you to group and trace products manufactured using the same materials under the same conditions.

It is necessary for discrete manufacturing and businesses that handle perishable goods in addition to batch manufacturing businesses.

The software can help in:

• Tracking expiry date of products – this allows the implementation of efficient inventory management, decreases spoilage, and boosts profitability. In addition to perishable goods, it is also applicable to products that go out of vogue.
• Tracking defective products to the batch it was produced – when you discover faulty products, you can immediately trace them back to the relevant batch, reducing the risk of defective products being released in the market.
• Trace Defective Items Back to Batch
• Tracing your defective products means better transparency with faster and easier compliance for your business.
• Performing effective product recall, as you can easily track the locations of all your products
• Compliance with industry legislation and regulations

ALSO READ: What are Backorders and How to Manage or Avoid Them?

Real-life Scenario

A customer calls a department store saying that the ketchup bottles they had purchased were already beyond the expiry date.

The customer is of course promised a refund or replacement with fresh stock; however, the store will trace the bottles to the batch, check if any bottles from that batch are still lying in their warehouse, and take them out physically, as well as delete the stock from the system so that no more old ketchup bottles get sold.

Using Batch Management in Manufacturing

We have seen what is batch tracking, and how it can be easily achieved with the help of the proper software.

Let’s now look at how batch management is implemented in manufacturing.

1. Assigning Batch Numbers

Batch or lot numbers are used to trace items in the production process.

You can track end-to-end components, raw materials, supply chain, manufacturing process, up to delivery, as well as the service stages.

Batch numbers are assigned every time new inventory comes in.

Whenever there are complaints about the product from customers, and/or you need to recall a particular batch of products, the batch number helps do this quickly and effectively.

However, you must remember that batch numbers are complex, and doing this manually can be chaotic – you need a proper system that simplifies assigning numbers and tracking them.

It works something like this:

• Every product type is defined as an inventory item
• This is then allocated an inventory level
• Real-time inventory levels are tracked to check the product stock in warehouses
• Inventory levels are further divided into batches
• Real-time updating of inventory batches take place.
• Inventory levels in batches shift whenever inventory comes in or goes out

ALSO READ: What are the Procurement Challenges

2. Centralizing Your Business

Smart manufacturing is the process of creating an “ecosystem” that connects your machinery and tools via the internet, which is essential when learning how to track production in manufacturing.

A robust ERP solution like Tranquil has batch tracking and manufacturing modules that offer the following benefits:

• Predictive maintenance
• Cost reduction
• Automated data collection
• Smoother workflows
• Integrations
• Barcode scanning capabilities

The right batch inventory management software can help you achieve smart manufacturing.

ALSO READ: ERP in Production Planning

3. Connecting Sales Orders to Production Flow

This can significantly help improve batch tracking. When you implement a reliable ERP solution like Tranquil, it will not only help manage your resources but also link your manufacturing and sales, allowing you to check if your finished goods batches are adequate to fulfill sales orders.

It can also tell you if you are running low on finished products, and show you whether you have enough raw materials to create those products.

If the raw materials are also low in stock, you can immediately order the same with your vendor.

When production, sales, and inventory are integrated, you can plan and schedule your production much better.

4. Lean Manufacturing

The lean inventory approach in manufacturing helps to optimize not only inventory storage but your overall business management as well.

Lean manufacturing minimizes wastage from your processes – unnecessary steps in addition to removal of scrap and leftovers.

The appropriate lean manufacturing tools allow you to make your manufacturing process greener, recognize production bottlenecks, and carry out proactive maintenance.

You can implement lean manufacturing and streamline tracking even without a batch tracking system in place, but you won’t be able to be proactive, it will always be reactive actions, and you will not have access to production analytics and actionable insights.

ALSO READ: ERP vs CRM

5. Prioritize

When you refine your production schedule, you can significantly improve the effectiveness of your production tracking.

You can go as per plan to handle predicted demand and decrease manufacturing lead time drastically if you just optimize your production scheduling.

If you manually do this with spreadsheets, you will end up spending a lot of time, and it will have to be updated frequently; it is also not flexible.

For example, if for some reason, your production is delayed or changed in any way, you wouldn’t have a way of accounting for it.

Manually performing batch tracking can end up damaging your reputation as well.

ALSO READ: ERP Software to Enhance your Purchase Management

However, batch tracking and management software facilitate process automation, and schedules can be easily redesigned in case it’s required.

When you follow these steps, you will certainly be on the right track to enhancing your production and batch tracking.

It goes without saying that the important thing here is to find an apt batch inventory management system that will help you track your batches properly.

If your business deals in perishable products or products that can suddenly get out of fashion, it is imperative that you implement batch tracking in your business. Tranquil has robust batch tracking features that can help you trace your products end-to-end. Do schedule a demo with us to see how exactly our software works, and we will be happy to answer any query.

 

When competition keeps becoming steeper by the day, companies have to come up with innovative methods to increase sales and bring in revenue.

Offering their products through multiple methods and channels, in addition to the conventional in-store sales helps companies to reach out to a greater number of customers.

One such method, though not exactly new, is the route and van sales.

Here, the business goes to the customer, instead of customers coming to the place of business.

ALSO READ: What is Job Costing?

What is Van Sales?

Wholesalers sell and deliver products directly to the end customers instead of other businesses, by loading products into their branded vans or other vehicles.

The inventory comprises those products that are expected to be sold on a specific route each day.

The responsibility of building customer relationships, selling products, and introducing customers to newly launched products rests with the driver representatives.

In fact, each van driver is considered to be a distributor, with orders being booked every day; once orders are loaded, the sales representative has to give their approval.

If at the day’s close, there are unsold goods still in the van, the representative can either retain them to sell the next day or return them to the warehouse.

Van sales are looked upon as the backbone of supply chain management for companies in the FMCG and retail sector.

It is a very complex delivery system, as sales tracking can be pretty challenging for companies.

What is Route Sales?

It is simply creating a route map of the customer’s locations for that day – it is actually a part of van sales, not a separate activity.

Route sales agents make sales and provide services as designated to customers on specific routes.

The route sales agent has certain responsibilities:

• Creation of a sales strategy including selling door-to-door, and product demos
• Introducing new products, upgrades, and more to customers
• Studying customer behavior and working with the sales department to stay competitive
• Taking orders, collecting payments, and in some cases, entering into sales contracts
• Meeting targets for sales, keeping records, and updating the management regularly
• Collaborating with other departments to deliver excellent service and settling grievances
• Maintaining demonstration products and promotional material in excellent condition
• Ensuring safety and cleanliness of the sales vehicle, and maintaining it to prevent unexpected breakdowns
  For a business to grow and be sustainable, it is vital that your van sale activity is quick, with proper route management, while you keep costs low. Companies must optimize resources and enhance their invoice to cash cycle without increasing their operating costs on routes.

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

Industries that Use Van Sales

Businesses dealing in products with low shelf life, and/or fast-moving goods, use the van sales method of supply chain management as customers can be serviced quicker and at a lower cost.

1. Farm Goods and Fresh Produce

Retaining the freshness of fresh produce like fruit, vegetables, milk, fish, etc., till it is delivered to the consumer is a huge challenge. Though many online delivery services have made their appearance in the market, there is still tangible demand for fresh produce from retail stores.

Numerous supply chains all over the world are today investing in vans to ensure quick delivery of products to consumers’ doorsteps.

2. Perishable Food Products

Bread and other bakery products, dairy products, batters, prepared foods like sandwiches and salads – all need to reach consumers as quickly as possible as they have very less shelf life.

Businesses that sell such products benefit from van sales as they can reach them to the end-user quickly, and it’s convenient for the customers.

Traditionally, ice cream was the product sold from vans, in many parts of the world; in fact, children would wait for the familiar bell or horn of the ice-cream truck.

ALSO READ: What is Negative Inventory and How Can you Prevent it?

3. Vehicles and Equipment

This is one sector that has intense competition, and using trucks or vans to cover large areas and sell two-wheelers or machines makes sense.

Some dealers also offer service, and this is of great value in remote areas where the customers are not likely to have access to service options.

Medical equipment and farm machinery are the other two most popular van sale items after two-wheelers.

4. Tech-heavy Products

Businesses that deal in products that necessitate technical support and guidance benefit from van sales.

As dealers go on their routes and demonstrate the working of the product, it becomes easy for customers to make a decision.

ALSO READ: What are Backorders?

5. Businesses with Multiple Low-Priced Products

The global pandemic has motivated businesses that deal with a wide range of products that are priced low, like stationery, art and craft, groceries, cards, gifts, and so on, to enter the route sales arena.

It provides a great deal of convenience to customers who neither have to commute and wait in line nor wait for delivery after ordering online.

Challenges and Opportunities

While route and van sales provide a great opportunity to companies to attract more customers and increase their sales, the van sales process does have some challenges.

Let’s discuss some of them.

1. Finding New Routes

Identifying and managing new routes to get more customers can be challenging if you are a late entrant in that space; it’s true that customers are everywhere – but then so are brands!

Customers naturally purchase from wherever is convenient for them.

So you need to find a way to reach them first.

You will need dedicated van sales activities to reach out to a maximum number of customers, and pitch your products.

ALSO READ: Important ERP Modules and Features

2. Where to Visit on a Particular Day

Van sales can also cater to stores and not just the end customers.

You need to identify the stores to be visited on a particular day, week, etc.

If your driver has the responsibility of calculating store visits, you need to check how much time they spend on each route, while covering customers in that area efficiently.

You also need to check how best to set up store visits – daily/weekly/monthly etc. to cover the whole market, and if store knowledge can help in route optimization.

3. Managing Van Inventory

Picking the products and loading the van is normally the responsibility of warehouse staff, and the driver checks the inventory and vehicle and sets off on his route to sell.

Work out how you can ease the driver’s work if they are able to sell more with every store visit.

Ensure they have a visual representation of inventory and are able to automatically deduct stock with every sale so that they know how much stock they have and can sell.

Check if it will be possible for the driver to restock from a different warehouse or another van if he runs out of a popular product and if it can be added to the current inventory in the van.

Suppose stock delivered to the store was wrongly supplied and is being returned, is it possible to add to current van inventory directly, or send it back to the warehouse and reassigned?

You’ll need to find out the method that saves time for your business.

You will also need to check how to account for stock that’s past the expiry date, or damaged.

ALSO READ: Benefits of ERP for Accounting and Financial Management

4. Time Management

Time is critical; spending time creating orders, adding inventory, promotions, etc. can take time away from visiting other stores.

See if you can come up with quicker and more efficient methods to create order forms, calculate discounts, promotions, bonus stock, and so on, to save time.

Consider preloading bonus discount rules to facilitate immediate calculation.

5. Taking Payments

Though it would be great if the store your driver visited had funds to pay for all newly purchased goods, in reality, stores have credit limits, accounts, and payments to be collected.

You can empower sales reps to block sales if the store exceeds credit limits – based on historical data, or have them get authorization from the head office.

ALSO READ: Importance of ERP System in Different Industries

6. The End of Route Summary

If the vans have an unsold product, you need to calculate and total things like cash, checks, stores visited, products sold, etc., and compare the inventory in the van against the loaded inventory, less stock sold, and add the returns.

You have to check what products need to be stocked for the next day and how much time van drivers need to work out the next day’s inventory, and if it can be done more efficiently.

7. Store Performance from Sales Analysis

Check what products sell fast, and those that don’t, and also from which stores.

See if these stores can be divided to generate reports, which you can use to target specific stores and products for marketing.

You may find brands or products that get sold out more often than others; examine your sales data thoroughly, and you can make discount rules for specific products or selling price of products.

This will automatically show up when the van sales driver visits the targeted stores.

ALSO READ: How ERP Software is Playing Role to Improve Business Productivity?

Van sales drivers have their own challenges:

• Achieving sales targets
• Satisfying quickly-changing customer demands
• Ensure customer loyalty
• Learn about the competition
• Having to depend on manual admin work
• Promoting products
• Introducing new products
• Working with outdated tech

Advancements in the Van Sales Arena

If you still have route sales drivers on the road working with physical catalogs and taking orders manually on paper, and communicating with the office via phone or email – you need to rethink your method of conducting these sales.

With agents on the road all the time, it is difficult for them to be efficient and focused while performing these admin jobs, while achieving sales targets, not to mention driving their routes carefully.

But now we have van sales apps, and this application can deliver several benefits to your company and simplify the work of your route sales drivers. Let us check out the top benefits:

• The mobile app can be integrated with your ERP solution so that van sales drivers can access real-time information on products, stock, and customers to deliver personalized and efficient service
• The right sales tool can empower your employees and boost their productivity; a few taps on their phone, and they will be able to directly submit new sales orders to your ERP, access all relevant customer information like their credit limit and balance, and order history, etc. This can help them to execute orders quickly and deliver enhanced customer experiences.

ALSO READ: What are the Procurement Challenges?

• Integrated digital catalogs are always up-to-date, and can be used from any place at any time. It can be updated in a very short time, so that there’s no confusion about stocked out products, and new products can be seen.
• Businesses can save immensely on printing catalogs – it’s an expensive affair. They are also often very heavy and cumbersome, and digital catalogs solve all those problems. These can also be sent via email to customers if needed, without shipping costs.
• Digitization and automation help to reduce manual effort and errors; taking orders on paper and calling them into the office can result in duplication or loss of orders or incorrect order recording. All this can be avoided with a reliable van sales application.

At Tranquil ERP, we can help your van sales business with the right technology to support your drivers, and increase sales while bringing in more efficiency. If you want to implement digital transformation in your business, Tranquil can do it for you and help you achieve business growth. Schedule a demo with us to know-how!

 

In certain types of businesses, it is important to track individual costs related to specific tasks or jobs – and this is referred to as job costing.

What Is Job Costing?

Also named project-based accounting, job costing refers to the accounting of expenses and income for every individual project.

It studies every project minutely and breaks down materials, labor, and overhead costs, instead of performing job estimation.

Businesses of all sizes use this accounting tool – especially if they commission individual projects or tasks.

It is most commonly used in the construction industry, but also in manufacturing, law firms, creative agencies, etc.

Job costing allows businesses to assess individual jobs and check if expenses can be reduced when similar projects are undertaken in the future.

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

Features of Job Costing

In the job costing method of accounting, the expense associated with each job is calculated individually, allowing you to identify the jobs that made profits and those which did not.

This provides a template for establishing the cost of similar jobs to be executed in the future.

By calculating the variances or comparing estimated costs with the actuals, it becomes a valuable tool to manage and keep costs under control.

Who Uses Job Costing?

Any business that offers products or services for completing a customer’s project can use job costing.

These are the industries that use job costing primarily:

• Construction
• Shipbuilding
• Foundries
• Automotive garages
• Printing presses
• Film studios
• Hospitals and doctor’s practices
• Private investment firms
• Engineering firms
• Advertisement agencies
• Law firms
• Distribution agencies
• Food processing companies

A business that uses job costing has certain common characteristics like:

• Customized production as per customer requirement
• Distinct lots of products
• Manufactured products are not uniform in nature

ALSO READ: Benefits of ERP Software in Construction Industry

How to Calculate Job Cost

Let us look at the job costing procedure and how the cost is allocated for the various activities:

Materials

• When they are procured and stored in the warehouse – the allocation of any scrap or spoiled material is to the overhead costs initially, and from here it is allocated at a later stage when necessary.
• When they are retrieved from the store and assigned to a specific job, any abnormal loss is directly charged to the cost of goods that were sold. Once the job order is completed, the cost associated with the whole job is moved to finished goods inventory from work in progress inventory.
• When the goods are sold, the asset cost is transferred to the cost of goods sold account from inventory when the sale transaction is recorded.

ALSO READ: What are Backorders and How to Avoid Them?

Labour

• The hours logged by an employee are charged to a particular job, and then later assigned to each job depending on the wages paid.
• Direct labor, if traceable directly, is charged to specific jobs, and indirect labor is initially charged to the overhead cost pool from which it is allocated to different open jobs.

Overheads

• All overhead costs are just allocated to the overhead cost pool initially; later, they are assigned to individual jobs.
• Non-direct costs are assigned to open jobs from the overhead cost pools depending on the cost usage measure.
• Standard costs are assigned from the overhead cost pool by studying the historical cost data to determine the per-unit standard cost for each activity. These amounts are then assigned to jobs depending on how many activity units have been performed for each job.
• The allocated overhead cost is subtracted from the actual cost incurred to arrive at the difference. The variances are accounted for in any of the following ways:
  o Charged directly to the cost of goods sold
  o Allocated to each activity like work-in-progress, cost of goods sold, or finished goods, depending on their closing balances
  o Assigned to ongoing jobs of the reporting period

ALSO READ: What is Negative Inventory?

What is Job Cost Accounting?

Now that we have a fair idea of what job costing is, let us now see how to calculate total job cost.

We need to determine the cost of materials, labor, and overheads on each job, and this is how the accounting is carried out.

Calculation of Material Costs

We need to account for every expense associated with materials used for a particular job.

If we talk about the construction industry, this would include everything from steel and cement to lumber and wiring, tiles and paint to screws and switches.

It is recommended that you add a small margin to the exact cost so that you can recover costs related to wastage, delivery charges, and so on.

Calculation of Labor Costs

Here we need to work out how much it costs the business with regard to the salaries and wages paid to all the employees working on a project each day.

You need to multiply the daily payroll amount by the number of days estimated for the completion of the job.

It is possible you have sub-contractors for certain activities that you don’t directly do; in such cases, the costs associated with those activities have to be factored into the total labor cost for each job – it would be a good idea to get estimates from the various contractors you have.

ALSO READ: ERP vs CRM

Estimation of Applied Overhead

Calculating overheads is quite difficult, as exact figures are hard to come by, and you often have to depend on educated guesswork.

Allocating expenses like office rent, administrative expenses, equipment depreciation, and so on, is not straightforward and easy.

Some companies have a policy of applying a flat rate to every project, like say 10 or 15 percent for each job.

An experienced accountant can help in the analysis of your business, and the development of a specific approach to overhead – you can of course, always fall back on a predetermined overhead rate calculation.

If we had to write how job costing is conducted as an equation, it would look like this:

Total Job Cost = Direct Labor + Direct Materials + Applied Overhead

What Is a Predetermined Overhead Rate?

It is simply a calculation used to establish approximated overhead costs for each job in a given time period.

Businesses usually make budgets for a year that mention the estimated activity and overhead for that particular year.

Using these estimates, you can arrive at an overhead rate that can be applied to every specific job.

The equation for calculating the predetermined overhead rate is:

Estimated Overhead / Estimated Activity.

The budget is likely to include various estimates for activities; you should ideally choose the activity that is most directly related to the overhead costs for your company, like the estimated hours of direct labor.

ALSO READ: Guide on ERP in Production Planning

Predetermined Overhead Rate Example

Let’s assume you have a construction business, and you use job costing; you want to arrive at the predetermined overhead rate to use for this.

You estimate that in 2022, you will incur 400,000 Riyals in overheads and that your employees will work 8000 hours.

In that case, your calculation would be:

Overhead / direct labor hours -> 400,000 / 8000 = 5 Riyals per hour direct labor

You can now apply this calculation of predetermined overhead rate to jobs to conduct job costing, as the overhead cost applied.

You will add 5 Riyals to the specific job for every direct labor hour, and this becomes your applied overhead.

This is what you add to the cost of direct labor and materials cost to arrive at the total job cost.

Job Costing Example

Now we have the applied overhead cost – let’s assume that it is 30,000 Riyals. You have spent 15,000 Riyals on direct labor, and 10,000 Riyals on materials. The total job costing is now:

30,000+ 15,000+ 10,000 = 55,000 Riyals. (going by the formula, Total job cost = direct labor + direct materials + applied overhead)

ALSO READ: ERP Modules and Features

Advantages of Job Costing

Since we have seen how we can calculate the total job cost and how expenses are allocated, let’s take a quick look at the advantages of job costing:

• Determine profitability for individual jobs
• Get in-depth cost analysis of labor, materials, and overheads for individual jobs whenever you need
• Ensure greater efficiency by focusing on costs of each job
• Prepare estimates easily
• Calculate variances by comparing actual and estimated costs
• Points out jobs that are not profitable
• Enables drafting of accurate product quotations

When to Use the Job Cost Formula

The exact time to use this formula varies according to businesses, but ideally, it is to be calculated on completion of a job.

A job cost sheet is maintained to record all costs as the job is in progress.

The following is tracked on this sheet:

• Direct materials – used on the job, and their cost
• Direct labor – hours worked by employees and managers on the job
• Per hour overhead costs
• If so applicable, the service product cost or unit cost.

By estimating the number of direct material and labor costs, the job cost formula can be applied to arrive at an estimated total cost; if you use the services of a professional accountant for doing this, fees paid to them are also to be included.

Once the service is completed, the job sheet can be used to draft a final invoice to be generated and sent to the customer.

ALSO READ: How Do ERP Systems Work?

What is a Job-Order Costing?

Job order costing system is used by businesses that regularly create unique products for their customers so that they can easily track every order.

A job order costing system is helpful in ensuring that the effort and resources spent in making a product will be profitable for the business.

There are many factors involved in creating a job order costing system so that we can make sure that the cost of each job is precisely calculated.

This system is used in businesses that receive small orders from customers for unique product batches; here, the price of every product is separately computed.

It also helps to ensure that the product is priced in such a way that it’s not unreasonably expensive for the customer, yet brings in decent profit for the company.

ALSO READ: Benefits of ERP for Accounting and Financial Management

Job order costing systems use financial resources like invoices from suppliers, payroll records, overhead cost allocations, and material costs for information gathering.

Then with the help of a job sheet or job order database, the cost is calculated, while tracking individual products with a unique ID number.

Every item in the system has a record for job cost that shows the materials used in creating the item, the number of employees that worked, the number of hours required in making it, and the overhead cost for the product.

This way, accountants can accurately track the expense on every item, and the present inventory and help prevent the occurrence of unexpected loss.

Documents Used

For job order costing, the main documents used are:

Materials Requisition Form

This helps track materials used and contains information like

• Date of retrieval from inventory
• Unique job ID
• Exact quantity retrieved
• Cost of material items
• Total items retrieved
• Who requested, priced and received the items

ALSO READ: How ERP Software is Playing Role to Improve Business Productivity?

Job Cost Sheet

We have already discussed earlier how accountants use job sheets to track the spending on each job, it may include:

• Job start date
• Completion date
• Shipment date
• Customer information
• Material, labor, and overhead cost
• Summary of the total cost

Time Ticket

Employees usually submit a timesheet to show work done by them. It includes:

• Employee ID and name
• Job number working on
• List of jobs and date each started
• Hours required to complete the job
• Hourly rate payable
• Total job cost

Are you in a business where it’s essential to calculate the cost of each job? At Tranquil ERP, we have the technology and expertise to make your work simple. Our robust ERP software has a powerful project management module with efficient estimation, activity, and cost features. Do schedule a demo at your convenience to see how this can help your business.

 

The terms human capital management (HCM) and human resource management (HRM) are often used in place of each other but they are not exactly the same.

It is true that HRM and HCM are very similar and they do have commonalities, but they also differ quite a bit.

To give a very simple explanation, HRM is all about fundamental human resource functions that are administrative in nature, like onboarding, maintaining records, evaluations, ensuring compliance with labor laws, handling payroll, employee benefits, and offboarding employees.

ALSO READ: The Must-Have Modules and Features for an HRMS

HCM however, is a much broader term that includes HRM also, but its main focus is maximizing the value and return on the investment made on employees in n organization.

In other words, HRM places stress on the creation and management of processes and systems that allow employees to perform their jobs effectively, while HCM stress ensuring the maximum economic value of employees to a company.

HRM is the foundation on which HCM function grows.

Let’s delve a little deeper now.

What is HRM?

HRM functions ensure that the right person for the right job is hired and that employees are managed efficiently to ensure high productivity.

It facilitates workflow automation and streamlining, and reduces administrative burdens, enabling smooth compliance with regulations – ultimately leading to enhanced productivity, and boosting profitability in the long run.

HRM software is often integrated with ERP software as a module, and includes most of these functions/features:

• Payroll
• Administering of Benefits
• Billable hours, leave, attendance
• Recruitment and Onboarding
• Talent management including performance appraisals.

ALSO READ: Need of Having HR & Payroll Management Software in SMEs?

What is HCM in Business?

The conventional HR admin functions like hiring, payroll, talent management, etc., are transformed into opportunities for enhancing productivity, driving engagement, and boosting business value.

Rather than look at employees as a major cost of operating a business, HCM considers the workforce as a fundamental business asset that can be invested in and managed strategically to maximize its value, akin to any other asset.

You can think of it as a cumulative platform of multiple functions designed to promote business growth and stay on top of workforce requirements proactively.

Defining Human Capital Management

HCM is used to refer to not only the business strategy but also software applications and technologies that help in the implementation of that strategy.

In fact, it is one of the most important technologies that companies can implement to bring about transformation in their business, and HCM is of critical importance in today’s uber-competitive world.

It helps HR professionals to automate and streamline HR processes and empowers employees to perform better.

Overview of HCM Processes

HCM software includes all processes related to HR and employees in their personnel files; they may include the end-to-end business process of hiring to firing/retiring.

That is, from the time a candidate applies for a job, through the hiring process, onboarding, and application for benefits.

Performance evaluation, feedback, and training are used to develop their skills and improve their performance and contribution to the organization’s success.

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

HCM software helps to automate this entire process.

While HCM applications automate processes to ease the work of HR departments, they also afford direct access to employees to their HR files.

This helps employees in matters like getting clarity about payroll, applying for benefits, and so on. The software also helps to track organization charts and reporting hierarchies within a company.

Several organizations depend on word-of-mouth knowledge to learn about the organizational structure, to work out hierarchies, and to whom to report.

HCM software can help bring clarity in this regard.

Why is HCM Important?

Now that we have got a brief idea of what HCM is, let us examine the benefits of HCM.

Both HRM and HCM have become critical functions for any business, as they have realized that it provides a competitive edge if they can develop and manage their workforce better than other companies.

This is especially true for industries where businesses offer products or services that are very similar to others and have low margins.

Here, a clear distinction can be made with HCM.

ALSO READ: Guide on ERP in Production Planning

It is vital that employees in such companies are committed, engaged, and passionate about their roles, and that they stay in their jobs for long periods.

Processes can be automated to usher in greater efficiency, helping to build strong teams and develop talent that will help in business growth through enhanced efficiency and productivity.

• HCM helps to bring out the best in the employees, boosting their efficiency and rendering them indispensable for the company.
• The ideal candidate for a given role can be hired with the help of this software. This is extremely important, as hiring the wrong person can lead to multiple problems and chaos. Whereas, a person who is a good fit, isn’t likely to need a lot of time and energy to train. These recruits can be oriented to the system quickly, motivating them to give their best. Induction sessions must be designed to be interactive, with trainers familiarizing the new hires with company policies and culture.
• It ensures smooth, two-way information flow between employees and management, regardless of designation, eliminating unnecessary misunderstanding and confusion.
• Training and skill development helps to upgrade the current skills and capabilities of employees, increasing their efficiency, and ultimately, overall organizational productivity. In today’s competitive world, it is essential that employees remain updated with the latest developments and technologies in their areas. HCM empowers employees to be independent and adapt to dynamic situations.

         ALSO READ: What is Negative Inventory and How Can you Prevent it?

• Frequent appraisals of employees and giving them feedback, which is imperative for any business that wants to achieve growth, is facilitated by HCM software. Employees are kept informed of management expectations regarding their performance, and reporting systems enable senior management to access the performance details of subordinates.
• Soft skills and personality development can be easily implemented with HCM applications; employees can be trained on communication skills, which will come in handy for troubleshooting, negotiations, client presentations, etc.
• Finally, employees can see where they lag behind and can take steps to improve, thus benefiting the company as a whole.

Key Differences Between HRM Vs. HCM

We have already seen what HRM and HCM are, now let us see how HCM vs HRM stand head-to-head. For that, let us examine the similarities first:

Both applications are about the people in an organization and are solutions driven by data, that can help in crafting innovative workforce strategies and in their effective implementation.

• Automates cumbersome tasks like timekeeping and payroll for greater efficiency
• Integration of chief HR processes helps to improve information flow
• Managers can be freed from routine tasks as employees are empowered to complete tasks themselves.
• Cloud-based software apps help reduce cyber-attack threats with multiple security protocols
• They monitor local and global regulations continuously to ensure compliance with regulatory requirements

ALSO READ : Ways to Improve the Procurement Process?

Differences

The main difference lies in the objective behind the approach of each strategy/software.
While both HRM and HCM play an important part in training, there is a big difference:

• HRM identifies and develops the right training methodologies and software to help deliver desired outcomes like improved employee knowledge and skills, and tracks and measures the success of training programs by evaluating employee performance to see how much they have learnt.
• HCM identifies the competitive skills needed by employees to deliver value to the organization.

HRM takes care of the fundamental HR requirement of small and medium businesses, whereas HCM covers a vast array of functions across the whole lifecycle of employees; it is designed to support the requirements of multinational corporations and large enterprises with regard to payroll and global compliance.

HCM also has sophisticated analytics, cutting-edge data and reporting, and so on.

When you look at recruiting, HCM identifies the employees with the requisite skillset to add value to a company; HRM develops and manages an efficient process for hiring and onboarding that allows businesses to hire the most suitable candidates.

ALSO READ: ERP vs CRM

Should you Choose HRM Or HCM?

Both of these software applications are not mutually exclusive; in fact, most organizations enjoy the best performance when the two are combined – especially in the long term.

Strategic corporate goals can be better met when these two strategies and software apps are used in combination or integrated.

Both systems work towards achieving business growth by making employees the primary focus of all HR functions from recruiting through training and compensation, up to retirement or firing, so that they can reach their maximum potential.

ALSO READ: Benefits of ERP for Accounting and Financial Management

Take the Right HR Solution for your Business

There is no doubt that the Covid-19 pandemic has impacted the way businesses function all over the world; it has numerous implications for HR with regard to productivity, managing virtual workforces, swiftly changing talent pool that makes recruitment tougher, fewer women in the workforce, and providing great employee experiences through innovative initiatives.

ALSO READ: How to Manage Your Business from Home in Pandemic Situation?

Look at the challenges your organization is facing, and what are the requirements for growth. You can evaluate this by:

• Identifying problems – are your workflows complicated, how efficient are the processes, are you maintaining compliance, and more.
• Exploring solutions by examining applications for scalability, robust data and analytics, and global capabilities among others
• Does the software help support growth, boost revenues, and help with not just hiring the right employees, but also retention?
• Compare the software vendor capabilities against the HR requirements you have, and get feedback from employees and other stakeholders to arrive at the right decision.

Tranquil ERP is a cloud-based, robust, flexible, and scalable ERP solution with a powerful HR module that can be tweaked to include whatever functionality your business may need. Schedule a demo to see how it works and how it can benefit your business; choose a time and date that is convenient to you. We will be happy to provide detailed explanations and answer all your queries to your satisfaction.

In any business, managing all the processes and controlling everything becomes more and more difficult as it grows.

ERP systems like Tranquil have become essential for a business that wants to improve efficiency, maintain consistency, and enhance productivity and profitability.

Companies also enjoy a significant reduction in costs, especially working capital, and gain a competitive edge.

Enterprise Resource Planning System is a software solution used by management to integrate business processes into the unified and manageable workflow to manage and monitor critical business processes.

In addition to automating processes like project planning, and sales, it also keeps track of the performance of those departments, and handles payroll, accounting, and other administrative tasks.

The emergence of cloud computing has multiplied options for ERP integration, as compared to traditional on-premise ERP systems.

How exactly do these two types of ERP differ?

To understand this, let’s first look closely at both systems.

On-Premise ERP

In this system, the software is deployed on the company’s servers and made available via internal networks – it was the way ERP was deployed till cloud computing was fully adopted, that is, the mid to late 2000s.

Conventional or on-premise ERP still accounts for more than half of the total ERP market.

As the entire system is on the company premises, it has full control over the assets, and it bears complete responsibility for the safety and integrity of the software; the company also bears the entire cost of the deployment, hosting, and so on.

You would also need to have the dedicated infrastructure, and have an in-house IT department to keep it operational.

This control and greater security are the chief reasons that companies choose the on-premise implementation of ERP.

Industries that handle a lot of sensitive data, like healthcare, industrial, and government institutions, prefer conventional deployment.

ALSO READ: Some Interesting facts about the CLOUD ERP Solutions

Advantages and Disadvantages of On-Premise ERPs

ERP systems deployed on the premises are easy to customize as per the specific needs of that company; in niche industries like specialized manufacturing and most financial institutions, this is essential.

It gives organizations greater control over the software and ensures the safety of the data.

However, mobile accessibility is a huge problem for conventional ERP deployments, as it usually necessitates a third-party client for enabling communication between the software and the mobile device.

This can create problems and confusion.

Cloud ERP

Here, the ERP software is deployed remotely, on a cloud platform, as a complete app.

It is easy to use and has the essential functionality to streamline the processes of most businesses.

It is a set of readymade tools, which may not be possible to modify significantly.

These are lean apps that can be scaled as your business grows, and are available for maximum time thanks to cloud computing.

It doesn’t necessitate complex infrastructure, which makes it ideal for smaller companies.

The industry is witnessing a major shift from conventional to ERP cloud computing.

It enables automation and is flexible, helping to increase the overall workflow efficiency.

It operates as a web app but with access management that’s more flexible.

Though some companies are concerned over data security, cloud vendors actually have stringent data security standards, even conducting audits by third parties to be sure.

This is ideal for companies that don’t require extensive customization, like consulting and recruiting firms, software development and outsourcing companies, and so on.

In fact, heavy customization is not required for most businesses and is mainly sought by the banking and financial sector, industrial orchestrations, and more.

Cloud ERPs are also the first choice of small and medium-sized companies, and startups.

ALSO READ:  Benefits of Public Cloud Computing

Advantages and Disadvantages of Cloud ERPs

Data security is a huge concern for businesses who want to invest in ERP software, as a lot of sensitive information is stored in its database, like employee information, customer information, company financial information, and even trade secrets.

However, with reputed cloud providers, this is not an issue as they employ extremely strict protocols to maintain data security; customers can also get an audit performed by a third party if they are not convinced about the cloud provider.

One of the biggest benefits of cloud ERP systems is the mobile accessibility feature – with some providers even offering mobile apps on native platforms.

The need for any time, anywhere access skyrocketed during the Covid-19 pandemic, with lockdowns forcing most employees to work remotely, from their homes.

Though mobile accessibility gives rise to security concerns, cloud providers give the assurance that the access is strictly controlled with two-factor authentication and other layers of security.

Customization is also possible with cloud ERP, though perhaps not to the extent offered by conventional ERP deployment; but then again, not all types of business require extensive and highly specialized software.

ALSO READ: Benefits of Mobile ERP and Features

How Do Conventional ERP and Cloud Computing ERP Differ?

1. Ownership Costs

Conventional, on-premise ERP deployments necessitate huge investments not only at the outset for buying the software, but ongoing expenditure to manage it, including hardware, servers, and other facilities, trained IT personnel, and so on.

If you don’t already have a dedicated IT department, you may have to create one and invest in hiring and training additional staff.

Moreover, your IT department has to spend most of their time, effort, and money to ensure maximum availability of the software; they have to maintain the server rooms, hardware, and the software.

Cloud-based ERP systems don’t require organizations to make huge investments either initially or even later.

It is simply implemented, and accessed via the computers’ internet connection.

The IT infrastructure is hosted and maintained by the ERP vendor, and they also ensure that the system is up and running with minimal downtime.

Securing the data and protecting it from cyber-attacks is also their responsibility.

This means you don’t have to worry about having dedicated IT staff, or can do with skeletal IT department; they can concentrate on innovation, and strategizing to ensure swift and effective business growth instead of spending energy on the maintenance and management of on-premise systems.

Cloud ERPs are normally paid as you use systems that you can subscribe to, and increase or decrease as per your needs, easing management of your cash flows.

The IT savings add up over time; cloud-based ERPs can cost 50% less than conventionally deployed ERP software.

ALSO READ: How Cloud-ERP Software Helps Saudi Businesses?

2. System Upgrades and Enhancements

Though customization is easier with on-premise ERP, when it is time to upgrade the software, those customizations cannot be easily re-implemented with the newer versions.

When the ERP vendor releases new functionalities and fixes, the previous customization will be lost in the upgrade process.

Your IT team will have to restart the customization process all over again.

That is, the ERP has to be redeployed on all the computers that had it earlier, and re-implement the different customizations and integrations that were part of the previous version of your ERP.

It often happens that to avoid this time-consuming and costly process, businesses just avoid getting the upgrades, and prefer to continue with outdated technology for as long as possible.

However, with cloud ERP solutions, the vendor provides continuous bug fixes, new features, and upgrades, and it is automatically updated in all the user computers.

Cloud ERPs like Tranquil is built on sophisticated and reputed cloud platforms, ensuring that your previous integrations and custom features are retained when the software itself is upgraded by the vendor, without you having to incur any additional expense.

ALSO READ: A Detailed Guide to Retail ERP

3. Improved System Performance and Accessibility

Cloud-based ERP solutions generally perform better than conventionally deployed systems, as the cloud software architecture is designed to ensure maximum performance and availability.

It also affords optimized performance, which can be tweaked to suit your specific needs.

Cloud ERP is also more flexible and can perform a dynamic provision of additional resources to handle the extra workload during surges.

An in-house IT department is not likely to be able to do this; in fact, it is doubtful if they will be able to report system uptime results to management.

Thanks to mobile accessibility, ERP software delivers data in real-time whenever and wherever your team needs it. When sales executives are able to access accurate and relevant information on their mobile devices on the field, they will be able to close deals quickly by providing personalized and immaculate service.

Furthermore, you can save on additional charges of setting up or other ongoing costs.

ALSO READ : Benefits of ERP for Accounting and Financial Management

4. Deployment Speed

It goes without saying that ERP deployment should be carried out after proper planning, and cannot be rushed.

However, cloud ERP is definitely the winner when it comes to deployment speed.

It does not necessitate additional hardware, which means you don’t have to spend time, money, and effort in purchasing and installing hardware, servers, cabling, and so on.

Cloud ERP can be easily implemented across numerous locations, divisions, and subsidiaries, at surprisingly affordable rates.

These differences can eventually mean significant savings in time and money.

For example, a typical on-premise deployment can take at least 12 months to be up and running completely; in comparison, a cloud ERP can be implemented in 3 to 6 months.

Cloud ERP software is easily scalable, and hence more flexible than on-premise ERP software; this means you can add any number of users as you want, depending on the growth of your business.

This is not so easily done in the case of conventional on-premise ERP systems.

You will usually need to provide supplementary hardware to accommodate more users.

ALSO READ: Important ERP Modules and Features

You would agree that cloud ERP systems have a distinct advantage in this pandemic era where social distancing and lockdowns have made remote working quite the norm; also, the cost involved is a huge factor, and if you’re a startup or small enterprise, it definitely makes sense to invest in a robust cloud-based ERP like Tranquil.

Are you wondering how it works and how it can help your business? Do schedule a demo with us, and we’ll be happy to tell you!

 

As a business owner, you would naturally look for the best deals on raw materials or products – and you may find them with an overseas supplier. But before you sign the dotted line, stop and think how much it will actually cost to get the products to your warehouse from your supplier.

It’s not just the cost of the goods itself; you will have to bear other costs too.

To get a clear idea of the cost of shipping the goods from your supplier, you have to calculate landed cost of the goods.

ALSO READ: What is Negative Inventory and How Can you Prevent it?

What is Landed Cost?

The landed cost simply means the total cost you incur to get a product from the supplier to your warehouse/store.

To arrive at this cost, you will have to add shipping and freight charges, commissions, customs duty, storage, insurance, and any other expense incurred in obtaining the products.

All of the money you paid to get the shipment delivered to your location is your total landed cost.

The landed unit cost can also be calculated, instead of the whole shipment.

The ‘unit’ may refer to pieces of an individual product, by weight (suppose the product is, for example, grains), or by volume.

This tells you how much cost you incurred to ship each product or kilo or liter of the product from the supplier.

ALSO READ: What are Backorders?

Importance of Landed Cost Analysis

By analyzing your shipments’ landed cost, you get a full picture of your costs, and it empowers you to make informed decisions.

These are the benefits it offers:

1. More Accurate Information

The cost of the products is the most obvious expense of a given shipment; however, there are other, less obvious costs, like insurance, storage, duties, taxes, and more.

Calculating the landed cost provides the full picture, allowing you to eliminate unforeseen expenditure, and allowing for precise reports and budgeting.

2. Enables Optimal Product Pricing

Pricing products too high or low can result in reduced sales and profitability; it is critical that you know the exact landed cost price of each product so that you can set an optimal price for your item.

Moreover, it also signals your sales team regarding the amount of discount they can offer on products without suffering a loss.

ALSO READ: What Are the Challenges Facing Purchasing and Supply Management?

3. Reduce Expenses

When you’re importing goods, the cheapest products may not always be the best, as numerous other factors are involved, and calculating landed cost means including every expense related to shipping the products.

This can open the doors to looking at more affordable shipping methods services and can empower you to be able to negotiate strongly.

4. Supports Global Expansion

To sustain growth in the long term, it’s essential that you go global.

Buying and selling internationally offer additional growth opportunities, allowing you to tap into new markets and build your brand.

Again, it’s important to know the cost of expanding operations and partnerships globally. Studying the landed costs helps you make data-driven decisions regarding international expansion.

How to Calculate Landed Cost

Calculating the estimated landed cost, you simply have to add all the direct costs you incurred in getting the products shipped from your vendor; you get the total landed cost when you add all the expenses for that shipment.

To determine the landed unit cost, you only need to divide the total landed cost by the number of units in the shipment – pieces, kilos, liters, etc., depending on the type of product.

ALSO READ: ERP in Production Planning

What is Landed Cost in Accounting?

You can add all the direct costs incurred in getting the goods and then decide how much of each expense you want to assign to each unit.

Say you have to pay insurance on your shipment; divide the total insurance charges by the number of units to get your per unit insurance cost.

Likewise, do this calculation for all other expenses like taxes, duties, storage, etc.

If the shipment contains diverse product types, it may make more sense to use weight or volume rather than a number of pieces.

You can also choose to use the same method for determining the costs – freight may be charged by weight, so you can use weight as the unit for the per-unit landed cost.

It may also happen that only some of the products in your shipment are insured – this means that those products will have a slightly higher per-unit landed cost; the costs may also differ according to shipment.

This makes it essential to have an exhaustive list of expenses to ensure the most possible calculation of landed cost.

It’s good practice to request your supplier to provide a quote that will help in your calculation – like product price, the currency used, shipment method, etc.

Usually, buyers are responsible for all costs incurred after the goods are loaded, but it is a good idea to double-check what costs you are responsible for, in the agreement.

ALSO READ: Important ERP Modules and Features

What Is Included in Total Landed Cost?

Let us look at what comprises the landed cost in some detail:

1. Product Cost

The price of the products itself forms the main component of the total landed cost; you can begin calculating the per-unit price you have to pay your supplier, and this information is available in the invoice.

2. Freight and Shipping Costs

How to calculate landing cost of a product without including freight and shipping charges? It’s the next most obvious and major expense you incur.

However, this is not as straightforward as product price, as it could comprise of several different charges, and differ according to shipping methods.

Examples are packing, handling, transportation, and other charges; international shipping may include a special shipping fee, port handling charges and transportation to the final destination, etc.

3. Customs Duties

Any goods exported or imported usually attract customs duties, and you must include them in your landed cost calculations.

Apart from duties, you may also have to pay taxes, brokerage, tariffs, levies, harbor fees, and so on.

It is vital that your invoice includes all essential information related to customs charges.

Customs duty on imported goods are typically charged as a percentage of the product costs, or combined cost of products, freight, and insurance, depending on the product.

As these costs can be pretty high and vary a lot, be sure to account for them properly.

International shipments are subject to numerous laws and regulations, and there are brokers who help to maintain compliances and file for clearances – for a fee; certain shipments may also be levied countervailing duties.

ALSO READ: How Do ERP Systems Work?

4. Export licenses

Export licenses or permits may be required for certain products, and this can add to your landed cost.

Make sure to research well and be prepared to apply for special permission/licenses if needed at the earliest, to avoid delays and additional expenses, and legal issues.

5. Taxes

Depending on the country of import or export, you may need to pay certain taxes on the shipment, and they can be quite significant.

Do your research and look for countries with favorable tax policies.

6. Risk-Related Costs

Every shipment carries some risk, and you may need to spend on mitigating those risks and protecting your products and business – insurance, quality assurance and compliance expenses, and so on.

You can buy insurance from third parties or the freight forwarders themselves; just remember that the insurance should not cover only the product costs, but the full cost of shipping your products.

You may need the services of a third party to maintain compliance, and incur expenses for documentation, pay salaries to QA professionals or purchase software for the same – all adding to your landed cost.

ALSO READ: Benefits of ERP for Accounting and Financial Management

7. Storage Fees

Demurrage or storage fees may have to be paid if the shipment languishes in a terminal for excess time than what it was permitted for.

The delay could be due to waiting for customs clearance or non-availability of transportation etc., so plan your shipment appropriately to minimize delays.

8. Other Overhead Costs

These are costs that usually slip the mind – currency conversion, commissions to agents, bank charges, processing fees for payments, and so on.

Nevertheless, these are expenses incurred for the shipment of your products, and therefore you must include them while calculating landed cost in supply chain.

Tips for Calculating Landed Costs

Exporting or importing goods means mountains of paperwork, rules, and innumerable calculations.

Before your mind gets boggled, here are some tips to help you:

Exchange Rates

International shipping involves multiple currencies in most cases; ergo, you need to check the exchange rates of all the currencies that will be used in your transactions and invoices.

To have the most accurate numbers, it is better to calculate the exchange rate on the date of the receipt of goods.

ALSO READ: Challenges in ERP Implementation

Estimate

It is not always possible to have exact figures for costs of particular services, till the shipment arrives.

Here you need to make an estimation that is as close to the actual as you can.

This can be done by getting estimates from your suppliers, shippers, and checking shipment history, and it will give you a fair picture of what you can expect to pay eventually.

Of course, ideally, you need to decide your costs as early as possible, but an educated estimation will do just as fine. Later when you get the actual final costs in hand, perform a reconciliation against your estimates.

Landed Cost Can Vary Between Shipments

Regardless of whether consecutive shipments are similar, landed costs can change with each.

To arrive at the most accurate figure, calculate the landed cost of either every shipment or periodically.

Freight rates fluctuate throughout, and duties, taxes, fees, and so on, can suddenly rise or drop.

Two shipments with exactly identical goods, methods, and shippers may still incur different costs if shipped at different times.

Only certain shipments may attract demurrage – after all, not all circumstances are in your control.

ALSO READ: ERP software in Warehouse & Fixed Asset Management

Returns Management

Leverage your landed cost data to enhance your returns management process.

Returning goods to international customers means thinking about how to handle duties, taxes, shipping, and all the myriad costs; you can consider asking the customer to absorb some of the cost.

If you have a free shipping policy, you will need to consider all the costs to work out how much the free returns will cost your business.

Your return policies depend on the type of products and shipment methods, among other things. Knowing the landed cost can help you craft the right strategy.

At Tranquil, our professionals work with you to craft a solution that aligns with your unique business requirements. Our cloud-based ERP solution consists of a robust and flexible inventory management module that offers landed cost calculation tools among others and integrates with a range of third-party software. To see how this works, schedule a demo at your convenience, and we will be happy to guide you.