Microsoft D365 Supply Chain: Advanced Landed Cost Capabilities

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Many products travel from places that you have never been to or seen. In fact, countless things happen on a product’s journey from manufacturing to store shelf that are unseen or unknown until after the product arrives at its destination. And certainly, much of a product’s journey is paid for while being unseen.

The new landed cost capabilities in Dynamics 365 for Supply Chain, part of Microsoft’s 2021 Wave 1 release, gives visibility into the product journey and associated costs. This newly added solution ratchets up item profitability with detailed shipping cost estimation and provides clear value across the supply chain and finance branches of the organization.

The ability to embed apps in the Dynamics interface provides users with a more with access to existing web applications and a more consistent experience.

Landed Costs and Profits

While in transit, goods accrue several landed costs–or costs added to the purchase price of the supplied and shipped goods. These added charges can include any costs required to transfer goods locally or internationally, including brokerage fees, freight insurance documents, inspections duties, taxes, and other fees.

Companies have two major incentives to implement the new Dynamics 365 Landed Cost solution:

  • From a financial perspective, landed costs can represent a significant percentage of unknown liabilities and commitments that won’t be made clear until service vendor invoices are received.
  • From a supply chain perspective, long lead times and the number of steps in a complex delivery process can adversely affect the reliability of information on the product and the supply chain.

A Closer Look at Tracking

The new functionality provides tracking each leg of the goods journey from suppliers’ warehouse to the destination warehouse. This is especially beneficial for D365 Supply Chain users who are tracking international shipments.

Landed Cost Shipping thin 2

Through this landed cost function, the voyage number can be used to gain access to all details of the product’s journey. Now a microscopic view of the shipment is viewable, all the way from the supplier warehouse, international port, through the freight forwarder, domestic port, local freight company, and eventually to the destination warehouse. This visibility gives you better insight to sales, customer service, and logistics stakeholders.

When we have these goods in transit, you need to know when they will arrive at your location. With Microsoft’s landed cost capability, the status of goods in transit updates in real-time, anytime – even when dates and perimeters are changed. These adjustments are visible whenever a shipment’s activities are altered and throughout every step of the journey.

Generating Automatic Costs

You can now predict shipment costs more accurately by providing automatic costs at the shipping lane. With this, a “transportation mode” is visible for the overall shipment, container, purchase/transfer order header, or line and item level, which allows for as much granularity as needed.

And this insight, paired with D365’s other capabilities, offers the capability to take it one step further and receive the goods while they’re in transit, via D365’s WMS.

Ownership of goods can be claimed while they’re still in transit, with the extra benefit of pre-receiving these goods into the destination. This new function resolves previous gaps in the costs associated with shipping and transportation, like:

  • Gap #1: When ownership of goods must be accepted from the supplier based on the delivery terms.
  • Gap #2: When goods are still in transit, but the supplier must be paid (this happens often when the shipped goods require manual processing or customization at destination).

When the actual freight and handling bills are received, the finance team can streamline the invoicing process of matching estimated to actual costs, automate accrual clearing, and update the actual inventory costs (based on inventory cost model). For D365 customers using the standard cost inventory cost model, landed cost can be used to simulate shipping scenarios to predict a standard price for the item.

Capturing Estimated Costs

Different cost component configurations drive any product’s estimated costs. But with Microsoft’s new landed cost solution, the estimated cost for the product’s voyage is updated in real-time, based on the size of the container, the in-transit product, the quantity and weight of that product, and the items that are on the purchase order itself.

The voyage’s FOB (or “Free On Board,” which is the price of goods at seller’s expense plus delivery to a location and no further) is even viewable on the purchase order. This means that even the estimated costs in the inventory subledger are accessible. Of course, for security purposes, this visibility into FOB and inventory subledger is available only to certain individuals with access.

With unprecedented insight into every product’s tracking, auto-costs, and estimated costs, in what other ways could you utilize this new landing cost module to make the entire product’s journey to your warehouse safer and more efficient?

Sabrina is a Solution Architect at Blue Horseshoe Solutions. Sabrina uses her experience with traditional accounting services to implement Microsoft D365. She works closely with businesses to understand their practices, recognize their needs, and analyze their business processes to develop solutions to meet their ultimate goals and objectives. Her background as a Certified Public Accountant allows her to help companies balance business, financial, and reporting needs with effective technology solutions.

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