Case studies / Industrial Raw Material Trading
Case studyLanded cost allocation for a polymer and chemicals trader
An Asian polymer and chemicals trader replaced estimated costs with actual landed cost by lot, tracked shipments in transit and currency exposure, and found lots that lost money after freight and duty.
Overview
A Singapore-headquartered distributor of plastic resins, rubber and industrial chemicals, with sales branches and bonded warehouses in Indonesia, Vietnam, Thailand and India.
Scale. Eleven branches, around 2,000 inbound container shipments a year from producers in the Middle East, Korea and Europe, purchases in US dollars and euros and sales in five local currencies, delivered as a phased, multi-location programme.
The challenge
Costs were estimated. When a trader priced a sale, they used the supplier price plus a standard percentage for freight, insurance, duty and handling. The real costs arrived weeks later, on separate invoices from shipping lines, forwarders, customs brokers and warehouses, and were posted to general expense accounts rather than to the lot they belonged to.
Currency swings made matters worse. Purchases were in dollars or euros, sales in rupiah, dong, baht or rupees, and the exchange rate could move several per cent between ordering and payment. Each branch handled this differently, and few traders knew what rate their margin depended on.
Shipments in transit were tracked on spreadsheets kept by the logistics team. Sales staff sometimes sold stock that was still at sea, at prices that assumed it was already landed, or bought more of something already on the water. At month end, finance spent days reconciling what had arrived, what was in transit and what had been paid.
The solution
Every purchase lot now carries its own landed cost. Freight, insurance, duty, port and haulage charges are allocated to lots as invoices arrive, using the agreed rules, and estimated costs are replaced by actual ones automatically. Traders can see the real cost of what they are selling, lot by lot.
Shipments in transit are visible to everyone, with vessel status, expected arrival and expected landed cost. Sales staff can offer goods still at sea, clearly marked, at prices that reflect their true cost and arrival date.
Currency exposure is tracked from purchase to payment, using the rates treasury actually achieves. Pricing rules warn a trader when a proposed price would fall below the target margin at current landed cost and exchange rate. Shared master data for products, suppliers and duty codes connects the branches, and the data warehouse gives finance one view of margin by lot, product and customer.
The engagement
- Seven months
- Five specialists, with trading, logistics, treasury and finance leads
- Process mapping, landed cost allocation, in-transit stock tracking, currency exposure, pricing controls, shared master data, pilot and phased rollout.
Integrations
- Customer ordering portal and ecommerce
- Bank payments and freight forwarder updates
- Supplier price and catalogue feeds
- Data warehouse
How we delivered it
- 01
Map the work with the people who do it
Five weeks
We followed shipments from purchase order to customer delivery in three branches, working with traders, logistics coordinators, customs brokers' contacts, treasury and accountants. With the chief financial officer we agreed the scope: landed cost, in-transit tracking, currency and pricing.
- 02
Design common processes and integrations
Ten weeks
Finance and logistics agreed how each cost type, from ocean freight and insurance to duty, port charges and inland haulage, would be allocated to lots, by weight, value or container. Freight forwarder updates fed shipment status, and bank and treasury data supplied the exchange rates actually achieved.
- 03
Pilot in one branch
Six weeks
The Jakarta branch piloted the processes. The pilot exposed forwarder invoices that covered several shipments without a breakdown, and duty codes applied inconsistently. Both were fixed with suppliers and brokers before the wider rollout.
- 04
Roll out in waves and track results
Nine weeks
The remaining branches followed in two waves. Leadership reviewed margin accuracy, in-transit stock and currency exposure monthly.
Results
- Pricing accuracy improved
- Actual landed cost known for every lot
- Shipments in transit visible to sales and finance
- Teams worked from the same data across eleven branches
Pricing accuracy improved. The gap between the margin a trader expected and the margin actually earned has narrowed sharply, and traders now price with confidence rather than padding for uncertainty.
With actual costs on every lot, finance found that a meaningful share of lots had lost money once freight, duty and currency were counted, concentrated in a few product grades and routes. The company renegotiated freight on two routes and stopped buying one grade that rarely made money.
Teams across all eleven branches work from the same data, month-end close is faster, and leadership reviews results monthly.
We thought we knew our margins. Once every cost landed on the right lot, we found business we should never have taken.
What made the difference
The trader found that some lots lost money after freight and duty. A small pilot exposed problems, such as unsplit forwarder invoices, while they were cheap to fix.
