As margins around the country continue to contract due to factors such as increases in freight costs, impact of natural disasters, regulatory costs, etc., recognition of the cost of landing raw materials earlier in the supply chain process is becoming increasingly critical.
A tool like ColumbusFood's Extra Charges functionality is a great way to recognize those charges as early as possible in your business process flow. By allowing landing costs to be assessed, allocated and recorded at the time of purchase and accrued with the item's expected cost, purchasing managers and cost accountants can assess the impact immediately and are able to react to these market shifts.
With complete flexibility to assign costs to the entire order or just an individual line, to allocate those costs based on a variety of methods across a variety of cost centers or departments, a purchasing manager can detail all of the related charges and insure that these projected costs are recorded immediately as part of the item's expected inventory cost.
Let's look at an example:
A purchasing agent enters an order for apples and pears from Canada.
The following charges will apply to all items delivered and will be allocated by the average weight of each case.
The apples will also need to be graded — that charge is per case, or quantity received. This item will receive an allocated portion of the import fees, the food safety testing and the inbound freight.
The full expected cost of each line is then shown on the order:
When received, the expected cost is recorded, including the extra charges.
When the invoices for these costs are finally realized, costs are actualized and any variance recorded automatically.
Analytic reporting, using tools like Power BI, can now be performed to assess cost portions as well as the expected vs. actual cost.
Trending these costs allows insight into changes in cost metrics, as well as how much of recorded costs is certain, and how much is predicted based on the remaining expected cost at each analytic point.
Now management is empowered with needed information to adjust pricing, projections and forecasts, and perhaps even look into alternatives for reducing the freight that's causing the pain. Further analytics can be performed to review freight on a regional or seasonal basis, for example, or look for an outlaying factor that's causing the increase in freight costs when bringing in less material than usual.
Get the best view of your costs as early in your business process as possible. No crystal ball needed actually. Check out ColumbusFood to learn how.
