Financial Comparison
Financial comparisons measure the difference between the estimated total delivery price and the actual final cost. Landed cost variance accounts for fluctuations in freight rates, customs duties, port fees, and inland transport. This metric helps procurement teams assess the accuracy of their initial budgets.
Expense Attribution
Discrepancies often arise from changes in port congestion surcharges or unexpected detention fees. If the actual expense exceeds the estimate, the profit margin on the finished garment is reduced. Accurate tracking of landed cost variance identifies which logistical legs contribute most to the instability of the final price, allowing managers to allocate resources to the most volatile routes.
Procurement teams use this data to refine their bidding process for future seasons.
Audit Method
Accounting departments reconcile invoices from freight forwarders and customs brokers against the original purchase order. This process requires a detailed breakdown of every component including insurance and inland transport. Comparison of these figures across different shipping lanes informs future carrier selection.
Business Consequence
Frequent deviations from the projected cost indicate a need for more conservative estimates or better contract terms. Sustained negative variance might force a mill to seek closer raw material sources to minimize exposure to international logistics risks.