Introduction

When businesses import or purchase products, the actual cost of the product is often higher than the supplier price. Additional expenses such as shipping, customs duties, insurance, and handling fees must be included in the product cost to calculate accurate profitability.

In Odoo 19, the Landed Cost feature helps businesses allocate these extra expenses to the product's cost. This ensures that inventory valuation and profit calculations are accurate. Landed costs can be allocated using different methods based on a company’s policies. Once applied in the Inventory module, they adjust the cost per unit, ensuring businesses price products correctly and avoid losses on transactions.

This guide explains how to manage product pricing using landed costs and how it impacts your inventory and accounting.

What are Landed Costs?

Landed costs are the additional expenses incurred to bring a product to your warehouse.

Common examples include:

Freight or shipping charges ,Import duties and customs fees, Insurance costs, Handling and logistics fees and Port or clearing charges etc.

Instead of recording these costs separately, Odoo distributes them across products, adjusting the final cost price.

To use the landed cost feature in Odoo 19, navigate to the Inventory settings and enable the Landed Costs option under the Valuation section.

Enabling this option in Odoo 19 allows you to apply customized landed costs to products. However, landed costs can only be used for products with automated inventory valuation and costing methods such as AVCO or FIFO.

Now, Create a product which is used as landed cost with the service type.

Additionally, you can set up this service product as a landed cost from the purchasing tab.

In Odoo 19, you can also choose a default split method to distribute landed costs among products. The allocation can be adjusted when confirming the landed cost. The available methods include:

· Equal: The landed cost is distributed equally among all products in the transfer receipt.

· By Quantity: The cost is allocated based on the quantity of each product.

· By Current Cost: The cost is divided according to the current cost of each product.

· By Weight: The landed cost is distributed based on the weight of each product.

· By Volume: The cost is allocated according to the volume of each product in the transfer receipt.

Landed Cost with the Average Costing Method in Odoo 19

To apply landed costs using Average Costing (AVCO) or FIFO, first set the costing method in the Product Category settings in Odoo 19. Make sure the same product category is also assigned to the product where the costing method is defined.

The Average Cost (AVCO) method calculates the Cost of Goods Sold (COGS) by averaging the cost of all available inventory units, while FIFO (First In, First Out) values inventory based on the cost of the earliest purchased items. After selecting either costing method in the product category, landed costs can be applied to update the product’s actual inventory cost.

Now, Create a new product under this category and no cost is added to this product.

After completing the setup in Odoo 19, create a purchase order that includes the related costs. For example, an RFQ can be created for 10 Baggy Pants priced at $1,000 each. Once the RFQ is confirmed as a purchase order, proceed to validate the receipt.

As shown, the vendor is sending the product. Make sure to note the transfer reference number, as the additional fee will be applied to this transfer in Odoo 19.

You can therefore include the landing cost associated with your product transfer in the draft bill.

The additional port fee is automatically added to the landed cost. Once reviewed, confirm the draft to proceed.

By selecting the "Create landed cost" button, you may configure the landed cost. Then, validate it.

Here, you can view the product’s original cost and the updated value after adding the landed cost. Since the Equal split method was selected, the additional cost is distributed evenly across all items. After reviewing the details, click Validate to complete the process in Odoo 19.

The product used to cost nothing. The current amount is $1050. The vendor's price was $1,000. Additionally, the ten quantities we bought are divided among the $500 additional landed cost. Therefore, the landed cost was increased by $50 for each amount. As a result, the product's price increased to $1050. This demonstrates how landed costs update product transfers and adjust the inventory value in Odoo 19.

Landed Cost with the First In First Out (FIFO) Costing Method in Odoo 19

In the FIFO method, when products are sold, the system first uses the cost of the earliest purchased items. Only after the first batch is completely sold will the system move to the next purchase cost (including its landed cost) to calculate the Cost of Goods Sold (COGS).

The costing method of the Product Category was changed to FIFO (First In First Out).

l Go to Inventory l Open Configuration → Product Categories  l Open the category of the product l Change Costing Method → FIFO l Save

Now, we need to create a new product under this product category, which has the FIFO costing method configured.

In this example, the product is Baggy Shirt, and initially no cost is assigned to the product. Now we will create a Purchase Order to buy 10 units of this product at a unit price of $500.

After Confirming purchase order and validate the receipt to bring the products into the stocks.

After receiving the products, create a vendor bill and add the landed cost service product.

Confirm the vendor bill and click the Create Landed Cost button to generate the landed cost entry.

Now, Validate it then review the Valuation.

The original unit cost is $500, and the landed cost is $100. With the Equal split method, the landed cost is distributed across 10 units, adding $10 per unit. Therefore, the final unit cost of the Baggy Shirt becomes $510 in Odoo. 

Now, we can purchase it second time from another vendor.

Now confirm another purchase where the quantity is 5 units and the unit price is $400 for each Baggy Shirt. Also Validate it and and create the vendor bill.

After confirming the bill, create and validate the landed cost.

In the Valuation Adjustment tab in Odoo, the purchase value is $2,000 and the landed cost is $100. With the Equal split method, each unit gets $20 extra, so the final unit cost of the second purchase becomes $420.

In the Inventory Valuation report in Odoo, the product shows two valuation layers: 10 units at $500 and 5 units at $400

.This shows how the cost and quantities are reflected, confirming that under the FIFO costing method, the product cost updates to the next purchase price only after the earlier stock is fully sold in Odoo.

Overall, the landed cost feature is very valuable for businesses. By including additional expenses such as shipping, customs duties, and insurance in the product cost, companies can calculate the true cost of their inventory. This helps businesses set more accurate selling prices, maintain better profit margins, and avoid financial losses caused by incorrect pricing or poor inventory management.