Top 3 Hidden Cost Drivers in Your Landed Cost

Hey again,

Every brand thinks they know their landed cost.

But time and again, I’ve had founders tell me their COGS is $6.50…
…and after a proper audit, it turns out to be closer to $8.10.

That $1.60 per unit? Multiplied by 50,000 units, that’s an $80,000 leak.

Here’s why most brands miss it:

💸 Top 3 Hidden Landed Cost Drivers

1. Packaging Creep

You started with a kraft pouch, now you’re using premium rigid boxes with inserts and UV coating. Beautiful, but did you update your BOM?

How to fix it:

• Request an updated component-level quote from your supplier.

• Add packaging labor to COGS, not just materials.

• Always track version changes in your master BOM.

2. Unplanned Storage, Handling & 3PL Fees

That buffer stock sitting in your warehouse isn’t free. It’s eating up space, and margin.

How to fix it:

• Run an aging inventory report monthly.

• Set hard rules: no more than 30 days of excess stock unless pre-approved.

• Use FIFO logic to prevent expiration, degradation, or markdowns.

3. Duties & Tariffs That Could’ve Been Avoided

We once helped a client reduce duty from 17.6% to 5.5% by applying First Sale Valuation and unbundling accessories from the kit.

How to fix it:

• Talk to your customs broker about FSV and HS code classification.

• Break down kits into components, some parts may qualify for lower duty.

• Check if you can ship DDP via vendor, or route through bonded warehouses.

✅ Real Impact

Before:

• Landed cost: $7.95 (on paper)

• After audit: $9.80 (actual)

• Margin: ↓ from 61% → 47%

After 3 weeks of optimization:

• Final landed cost: $8.30

Margin recovered: $45,000 across one order cycle

📌 What You Should Do:

• Pull your last 2 landed cost breakdowns.

• Do a full BOM + packaging review.

• Add 3PL and duty % per SKU.

• Create a tracker so these costs don’t go unnoticed.

Margins aren’t lost at the end. They’re lost in the middle.

- Lara