Operations
Landed cost
The full cost of getting a product to your door, not just its purchase price.
Last reviewedWhat does Landed cost mean?
Landed cost is the total cost of a product once it arrives where you need it: the supplier price plus freight, insurance, customs duties, taxes you cannot reclaim, port and handling fees, and any agent fees. Comparing suppliers on purchase price alone can mislead. Example: supplier A offers a part at 10.00, but freight of 1.20, duty of 12 percent of the price (1.20) and handling of 0.30 bring its landed cost to 12.70. Supplier B nearby charges 11.50 with 0.40 of freight and no duty, a landed cost of 11.90, so B is cheaper even though its price is higher.
Where does it come up in case interview prep?
- Supply chains explainedLesson in How industries work: the toolkit
- Industrial and aerospace players, trends 2024 to 2026, and how to crack the casesLesson in Industrial manufacturing, machinery and aerospace
- Logistics players, hubs and trade lanes, trends 2024 to 2026, and how to crack the casesLesson in Logistics, shipping, ports and supply-chain services
Related terms
- COGS (cost of goods sold)The direct cost of making the products that were sold.
- Lead timeThe time from placing an order to receiving it.
- Value chainThe activities a firm performs to create and deliver value.
- BottleneckThe slowest step, which limits the output of the whole process.
- Capacity utilizationActual output as a share of the most that could be produced.
- Little's lawItems in a system = arrival rate × time each item spends in it.
- Inventory turnoverHow many times stock is sold and replaced in a year.
- Cash conversion cycle (CCC)How many days cash is tied up between paying suppliers and collecting from customers.