NetSuite Landed Cost: Setup & Allocation Guide (2026)

Why landed cost matters

The purchase price on a vendor invoice is rarely the true cost of your inventory. Freight charges, customs duties, insurance, broker fees, port handling charges, inland transportation — all of these costs are part of what it actually costs to get that product into your warehouse and available for sale.

TL;DR: NetSuite's landed cost feature allocates freight, duties, insurance, and other import costs to inventory items using configurable allocation methods (by quantity, value, weight, volume, or manual). This gives you true unit costs for accurate gross margin analysis and pricing decisions -- companies often discover margins are 5-10% lower than they thought once landed costs are properly included.

If you're only costing inventory at the vendor invoice price, your gross margins are wrong. The additional costs show up somewhere in your P&L — usually buried in freight or duties expense accounts — but they're not attached to the inventory that caused them. Your product-level margin analysis is misleading, and you're making pricing and sourcing decisions on incomplete data.

Landed cost accounting assigns all of these additional costs to the inventory items they relate to, giving you a true unit cost that reflects the full expense of acquiring the product. NetSuite supports landed cost through its inventory management features.

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How NetSuite handles landed cost

NetSuite's landed cost functionality works through landed cost categories that define the types of additional costs and how they're allocated across items on a purchase order or item receipt.

Landed cost categories

You create categories for each type of cost you want to track and allocate:

• Freight — shipping and transportation charges
• Customs duties — import duty charges
• Insurance — cargo insurance premiums
• Brokerage — customs broker fees
• Port/handling — terminal and handling charges

Each category specifies how the cost should be allocated across the items on the receipt. The allocation method determines how the cost gets distributed.

Allocation methods

By quantity. The cost is divided equally across all units received. If you receive 100 units and the freight is $500, each unit gets $5 of freight. This works for shipments where all items are roughly the same size and weight.

By value. The cost is allocated proportionally based on each item's purchase price. A $100 item in a shipment with a $10 item gets 10x more of the freight allocation. This is appropriate when freight costs roughly correlate with item value.

By weight. The cost is allocated based on item weight. This requires weight data on your item records and is the most accurate method for freight allocation when shipping physical goods of varying weight.

By volume. Similar to weight but based on cubic dimensions. Useful when shipping charges are driven by dimensional weight rather than actual weight.

Manual. You specify exactly how much of each cost applies to each line item. More work, but useful when automated allocation methods don't fit your situation.

The workflow

1. Create the purchase order with your item lines at vendor invoice prices
2. Receive the items via item receipt
3. Enter landed costs on the item receipt — either directly on the receipt or via separate vendor bills that reference the receipt
4. NetSuite allocates the landed costs across items based on your category rules
5. Inventory valuation reflects the full landed cost per unit

The landed costs increase the inventory value of the received items. When those items are subsequently sold, the cost of goods sold reflects the full landed cost, not just the vendor price.

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Entering landed costs from vendor bills

In practice, landed costs often arrive as separate vendor bills — one from your freight forwarder, one from your customs broker, another from your insurance provider. NetSuite lets you link these vendor bills to the item receipt so the costs flow through the landed cost allocation.

When entering a vendor bill for freight, for example, you associate it with the item receipt and specify which landed cost category it belongs to. NetSuite then allocates that cost across the items on the receipt using the category's allocation method.

This approach keeps your vendor bill records clean (each vendor gets their own bill) while ensuring the costs are properly attributed to inventory.

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Common setup decisions

Which costs to include

Not every cost needs to go through landed cost allocation. General rule: if the cost is directly attributable to specific inventory items, include it. If it's general overhead (warehouse rent, general insurance), it's not a landed cost.

Costs that should typically be included:

• International and domestic freight for specific shipments
• Customs duties and tariffs
• Cargo insurance
• Broker and agent fees
• Port and handling charges
• Inspection and testing fees for incoming goods

Allocation method selection

Choose the method that best reflects the cost driver:

• Freight: Allocate by weight or volume (most accurate) or by value (simpler)
• Duties: Allocate by value (duties are typically a percentage of value)
• Insurance: Allocate by value (insurance is based on declared value)
• Brokerage: Allocate by quantity or value (broker fees are often per-shipment fixed costs)

Costing method interaction

Landed cost works with NetSuite's inventory costing methods (Average, FIFO, LIFO, Standard). The landed cost is added to the item's cost at the time of receipt:

• Average cost: The landed cost is averaged into the running average cost of the item
• FIFO/LIFO: The landed cost attaches to the specific cost layer created by the receipt
• Standard cost: Landed cost creates a variance against the standard cost (the standard doesn't change, but the variance accounts capture the difference)

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Multi-currency considerations

For companies importing internationally, landed costs arrive in multiple currencies. The freight bill might be in USD, customs duties in the local currency of the import country, and the vendor invoice in the supplier's currency.

NetSuite handles multi-currency landed costs through its standard currency management. Each vendor bill posts in the vendor's currency and converts to your base currency at the applicable exchange rate. The converted amount flows through the landed cost allocation.

Pay attention to exchange rate timing. The rate used for the vendor invoice conversion may differ from the rate used for the landed cost vendor bills if they're entered on different dates. This creates minor variances that are normal but should be understood.

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Reporting on landed costs

Once landed costs are properly allocated, several reports become more meaningful:

Inventory valuation reports show the true cost of inventory on hand, including all landed cost components. This gives you an accurate balance sheet valuation.

Gross margin analysis by item reflects actual margins including freight, duty, and other landed costs. Items you thought had 40% margins might actually be at 30% once landed costs are included.

Vendor comparison reports become more useful when you include landed costs. A vendor with lower unit prices but higher freight costs may not be cheaper overall. Landed cost data makes total cost of ownership comparisons possible.

Cost component analysis breaks down the total landed cost into its components. What percentage of your cost is freight? Duties? This analysis informs sourcing and logistics decisions.

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The bottom line

Landed cost configuration isn't complex, but it requires upfront decisions about which costs to track, how to allocate them, and how to integrate them with your vendor bill workflow. Companies that import goods or deal with significant shipping costs see immediate value: accurate margins, better pricing decisions, and inventory valuations that reflect reality.

Frequently Asked Questions

What is landed cost in NetSuite?expand_more

What landed cost allocation methods does NetSuite support?expand_more

How do you enter landed costs from separate vendor bills in NetSuite?expand_more

Does NetSuite landed cost work with average, FIFO, and standard costing?expand_more

Which costs should be included in landed cost vs. treated as overhead?expand_more