Most sourcing decisions are made on a number that does not predict profitability. FOB price is one input among a dozen, and in multi-category programs the omitted inputs are frequently larger than the difference between the quotations being compared.
The full model
Build the comparison per saleable unit, not per shipped unit:
- Ex-works or FOB unit price.
- Tooling and NRE, amortised over a realistic twelve-month volume — not the optimistic forecast.
- Packaging and labelling, including retail-ready presentation and print-run minimums.
- Compliance testing, per market and per material, plus periodic retesting.
- Inspection cost per shipment and any re-inspection after a failed lot.
- Inland transport to the consolidation point or port.
- Consolidation and handling at the warehouse.
- Ocean or air freight, with a realistic cube and weight calculation across mixed categories.
- Destination charges, customs brokerage and duty, adjusted for any preferential rate you can actually document.
- Financing cost of the payment terms, from deposit to sale.
- Defect and shrinkage allowance, based on your own history rather than the factory's promise.
- Delay cost: markdown risk, expedited freight, lost placement.
Divide by units you can actually sell, not units shipped. That single change reorders most quotation comparisons.
Where multi-category programs leak money
LCL fragmentation. Shipping four categories separately means paying handling and destination charges four times. Two or three LCL lots often cost more than the full container they would have filled together. Consolidation is usually the largest single saving available to a multi-category brand — see our consolidated shipping guide.
Unclaimed preferential duty. Free trade agreement treatment exists for qualifying goods, but only with correct rules-of-origin documentation. Buyers routinely pay full rates on goods that qualify because nobody prepared the paperwork.
Cube inefficiency. Bulky-light categories and dense-heavy categories loaded together fill both weight and volume capacity. Single-category containers rarely do.
Tooling amortised against fantasy. A mould spread over a forecast that never materialises turns a cheap unit into an expensive one. Amortise conservatively and revisit at six months.
Testing duplicated by market. Design the test plan once against the strictest applicable market and reuse the reports wherever they are accepted, instead of commissioning three overlapping test packages.
Sensitivity, not certainty
Run the model at three volumes and two freight rates. The point is not a precise number; it is to see which line items your result actually depends on. In most multi-category programs, sensitivity concentrates in freight structure, duty treatment and defect rate — not in the FOB difference the negotiation focused on.
Governance of the number
A landed cost model that lives in one spreadsheet on one laptop stops being true within a quarter. Update it when freight rates move materially, when a duty classification is confirmed or challenged, when a tooling amortisation period ends, and after every inspection failure. Keep an actual-versus-model variance column; the variance is where the next saving lives.
Frequently asked questions
Is ASEAN cheaper than China on total cost? For many categories the landed cost is comparable to better once tariff exposure and concentration risk are priced in. It is rarely a dramatic unit-price discount, and any partner promising one should be questioned.
How much should we allow for defects? Use your own historical rate by category if you have one. If you do not, a conservative allowance during qualification, tightened once inspection data accumulates, is more honest than assuming zero.
Does air freight ever make sense? For launch quantities, replenishment of a hero SKU, and high-value low-cube goods, yes. Modelled properly it often beats a markdown caused by a stock-out.
Who should own the model? The brand, not the supplier. A partner should populate it transparently, but the buyer must own the assumptions.
What is the fastest saving available? Consolidation, then duty documentation. Both are structural and neither requires renegotiating a single unit price.
Want your program modelled properly? Request a sourcing assessment.