How to Build a Landed Cost Model for a Lighting Order

Landed cost is the number a buyer needs in order to set a retail price, and it is the number a supplier's quotation carefully does not provide. Building it once, properly, changes every subsequent negotiation.

The structure

Build it as a chain, per unit, and keep each line visible so the model can be audited when a rate changes:

Freight is per cubic metre, not per lamp

Lamps are bulky, so the freight line scales with packaging volume. This is why a two-piece base or a shorter carton changes the model more than a five percent price concession at the factory, and why buyers who own the packaging design usually have the cheaper product.

Duty is a range, not a number

The duty line depends on classification, origin and whatever additional measures are in force at the time. Model it as a variable with a conservative value, then confirm the current position with a customs broker before advising a retail price.

Include the cost of a wrong forecast

Two more lines belong in the model, even though nobody likes them: the cost of carrying slow stock, and the discount required to clear it. Buyers who include them make different decisions about the assortment and about how much to import.

Use it to compare sources

Run the same model for a direct import and for a domestic stockist. The comparison is only meaningful when both use identical assumptions for freight, duty and damage, and the conclusion frequently changes once they do.