Seeking Best Practices for Delayed Landed Cost Allocation in iDempiere

[Muhammad Rizwan Anwar]

Hi everyone,

We are looking for advice and best practices regarding the standard Landed Cost functionality when expense invoices are delayed.

The Challenge

When importing products, we receive the vendor's material cost invoice immediately, allowing us to process the Material Receipt and Vendor Invoice. However, third-party logistics invoices (freight, customs duties, etc.) are frequently delayed. By the time these landed costs arrive and are applied to the original Material Receipt, the items have already been sold or issued to production, which distorts current inventory valuations and final product costs.

Our Current Workaround

To manage this, we are considering recommending that users:

1. Receive imported goods into a dedicated "Transit/Import" Warehouse or Locator.

2. Hold the inventory there until all landed cost invoices are received and applied.

3. Move the goods to a regular warehouse location for production or sales utilization only after the true cost is finalized.

Our Questions

1. Has anyone handled this specific business scenario in a more optimal or automated way?

2. What is the standard or recommended workflow in iDempiere to manage delayed landed costs without locking up physical inventory in a temporary warehouse?

We have an internal development team and are fully capable of contributing code back to the community. We need expert opinions for the functionality workflow so we can develop a useful and configurable plugin. 

Thanks in advance for your guidance!

Rizwan Anwar

[Md Rifatul Islam]

Hi Anwar,
We encountered the same challenge while implementing our inventory planning and demand forecasting solution. Freight, customs and other logistics invoices were often received after the Material Receipt, by which time the inventory had already been transferred, consumed or sold. To address this, we use an "Estimated Landed Cost" approach at the time of Material Receipt.

Step 1 – Estimated Landed Cost at Material Receipt

When the Material Receipt is completed, an estimated landed cost is recognized.

Journal Entry

• Dr. Product Asset .................................................... Tk 50

• Cr. Landed Cost Accrual / Clearing Account .......... Tk 50

This allows inventory to be used immediately for production, warehouse transfers or sales without waiting for the actual freight or customs invoices.

Step 2 – Actual Landed Cost Invoice

When the actual invoice is received (e.g., Tk 55), the estimated accrual is cleared and the difference is posted as a variance.

Journal Entry

• Dr. Landed Cost Accrual / Clearing Account ......... Tk 50

• Dr. Landed Cost Variance (Gain/Loss) ................ Tk 5

• Cr. Accounts Payable (Vendor) ............................. Tk 55

Accounting Summary

Estimated Landed Cost at Material Receipt

• Dr. Product Asset ............................... .................... Tk 50

• Cr. Landed Cost Accrual / Clearing Account .......... Tk 50

Actual Landed Cost Invoice

• Dr. Landed Cost Accrual / Clearing Account ......... Tk 50

• Dr. Landed Cost Variance (Gain/Loss) ................ Tk 5

• Cr. Accounts Payable (Vendor) ............................. Tk 55

This approach allows inventory to be consumed, transferred, or sold immediately without the need to keep stock in a Transit/Import warehouse while waiting for logistics invoices. It keeps inventory valuation close to the actual acquisition cost, with only the difference between the estimated and actual landed cost recognized as a variance. As a result, procurement planning, inventory valuation, and demand forecasting become more reliable.

This approach has worked well for us and has significantly improved our inventory costing process while keeping warehouse operations running smoothly. The accounting process is also being implemented according to the ISA2 process, helping us maintain accurate records, improve demand forecasting, and plan inventory more effectively.

[Steven Sackett]

Hi Rizwan

This post discusses another approach to the problem you describe.

https://groups.google.com/g/idempiere/c/oN-1RakQSGA/m/TTir6YZJAQAJ

As is discussed in the post, this approach was used for costing imported parts needed for vehicle repairs where the imported parts had to be Shipped to the customer long before the landing costs were known and where the the total of the landing costs could be as much as 3 times the actual cost of the product from the overseas factory. Creating a pre-estimate of the landing costs and using that figure in the calculation of the Product Cost and inventory value worked ok. The difference between the estimated landing costs and the actual landing costs (when fully known) was then moved by an automated journal from the landed costs suspense account to the invoice price variance account.  Sometimes the differences were significant and provided an alert that the costing/pricing assumptions were wrong or that there had been overcharges by the the suppliers of the shipping/landing services.

regards

steven