Building the landed cost of a sweet potato container

Build it in this order

1. Product, FOB — the price per carton or per tonne at the load port, multiplied by the net weight in the container.
2. Freight — the reefer rate to your port, plus bunker and currency adjustments. Reefer rates move seasonally and are usually firmest in the peak, which is exactly when you want to ship.
3. Insurance — cargo cover at invoice value plus a margin. Cheap relative to the exposure.
4. Duty — at the applicable rate for the destination, applied to the customs value. Where preferential origin applies and the documents are right, this line can fall to zero, which is why the origin paperwork is worth attention.
5. Clearance and port charges — broker fee, terminal handling, any inspection fee, plus the cost of a physical inspection if the consignment is selected.
6. Haulage — port to your warehouse, and whether the rate includes waiting time.
7. Demurrage and detention risk — free time at destination is finite. A delayed clearance on a reefer is expensive because the unit is running.

The lines importers forget

Shrinkage. Sweet potato loses weight through the skin in transit. A container that leaves at its stated net weight arrives lighter, and you paid for the difference. Humidity control in the reefer is what limits it — another reason to specify humidity rather than temperature alone.

Waste at the repacker. Whatever falls outside your customer's specification on arrival is either downgraded or dumped. On a well-graded consignment this is small; on a poorly graded one it can eat the entire margin. This is the single largest variable between a good supplier and a cheap one, and it never appears in the offer.

Rework. If the pack has to be opened, re-sorted or re-labelled to meet the customer specification, that is labour you did not price.

Financing cost. Money is tied up from payment to sale. On a seven to twelve day transit plus storage and payment terms downstream, the working capital cost is real and belongs in the model.

Quality claim exposure. Not a line in the spreadsheet, but the reason the cheapest offer is often the most expensive outcome.

Compare offers on the right basis

Convert everything to cost per saleable kilo at your warehouse door — after shrinkage, after waste, after rework. That is the only number that compares two suppliers fairly. An offer two cents cheaper per kilo that delivers three per cent more waste is not cheaper.

When you run the comparison, ask each supplier for the same specification, the same size mix and the same packing format. Offers quoted against different specifications cannot be compared at all, and a supplier quoting a cheaper number against a looser specification is not offering you a better price.

Payment terms belong in the model

The terms change the financing line and therefore the landed cost. Terms structured around your cash cycle can be worth more than a discount on the unit price, and are often easier for a supplier to give. It is worth asking.

Related reading

• The season calendar and when to contract
• Load ports and transit times
• Size grades and weights explained
• Egyptian sweet potatoes — full specification and offer