This page explains how to weigh landed cost, not just factory price, across two sourcing origins, for a buyer or merchandiser who has quotations from both and must recommend one. This lesson mainly teaches money: how to add freight and duty to a factory price so two origins with different prices, different distances, and different duty rates can actually be compared on the same basis. Sara, the buyer at Northline Apparel, meets this decision whenever her own buying office brings back a quotation from a factory outside Delta Garments' region.
A person who compares only the factory price on two quotations is comparing two different things dressed as one number, because freight and duty are not the same for every origin. A cheaper factory price from a farther origin can still leave the buyer paying more once its goods actually cross a border, while a slightly higher factory price from a nearer origin can end up the cheaper choice once landed. Without turning both quotations into landed cost first, a buyer risks choosing the origin that only looks cheaper on paper.
You need: lesson 5.1 is useful background, since it names the factors this lesson turns into one number, but it is not required.
By the end of this lesson you can:
Not covered here: naming the four factors that separate sourcing origins (lesson 5.1); how lead time and minimum order quantity can shift a choice landed cost alone would not (lesson 5.3); splitting one order across two origins at once (lesson 5.4).
| Term | Meaning |
|---|---|
| FOB price | The price the factory charges for the garment, delivered on board the ship at its own port. |
| Landed cost | The FOB price plus shipping and duty once goods reach the buyer's own country, USD 3.70 per piece on Order A. |
| Delivered cost | The buyer's true cost once the goods have reached its own warehouse: the ex-factory price plus delivery, freight, insurance and duty for an imported order, or local transport for a domestic one. |
| Sea freight | Moving goods by ship. Slower and much cheaper per unit of weight than air freight. |
| Air freight | Moving goods by aeroplane. Much faster and much more expensive per unit of weight than sea freight. |
| Freight forwarder | A company that arranges the shipping and paperwork for moving goods from factory to buyer. |
Landed cost adds freight and duty to a factory's own price, turning two quotations that are not directly comparable into two numbers that are. A factory's price alone tells a buyer what the factory charges before the goods leave its own port; it says nothing about what it costs to move those goods to the buyer's own country and clear them through customs there, and that second amount can differ sharply between a nearer and a farther origin. Two origins can quote factory prices USD 0.45 apart and still end with landed costs only USD 0.10 apart, or even reversed, once each origin's own freight distance and duty rate are added. Comparing factory price without landed cost is comparing an unfinished number against another unfinished number.
| What can differ | The shapes you meet | Why it matters |
|---|---|---|
| Export, Make to Order, near origin | Delta Garments' Order A quotation, FOB USD 3.20 per piece, adds USD 0.50 per piece of freight and duty to reach Northline Apparel's own country, landed cost USD 3.70. | A shorter distance usually means a lower, more predictable freight and duty addition, keeping factory price and landed cost close together. |
| Export, Make to Order, far origin | Factory Y's illustrative quotation, factory price USD 2.75 per piece, adds USD 1.05 per piece of freight and duty from its farther region, delivered cost USD 3.80. | A longer distance can add enough freight and duty that a lower factory price still ends in a higher landed or delivered cost. |
| Domestic, Make to Stock | Cedar & Co.'s domestic order from Delta Garments adds only local transport, no import duty at all, so its landed-cost gap against the factory price is far smaller than any export order's own gap. | A domestic sourcing origin removes duty entirely, so the factory price and the buyer's own cost stay much closer together than on any export comparison. |
| Other product families | A denim order such as Order B's jeans, at a higher per-piece factory price than a T-shirt, still adds freight and duty as a percentage of its own value, so a higher-value garment usually adds a higher absolute freight and duty amount even at the same distance. | The same landed-cost method applies to any product family, but the absolute freight and duty amount scales with the garment's own value and weight. |
Sara, the buyer at Northline Apparel, has two quotations in front of her for a second run of Order A's T-shirt: Delta Garments' confirmed figures, and Factory Y's illustrative quotation from her own buying office. Delta Garments quotes FOB USD 3.20 per piece with USD 0.50 per piece of freight and duty to Northline Apparel's own country, landed cost USD 3.70. Factory Y quotes a factory price of USD 2.75 per piece, but its own farther distance adds USD 1.05 per piece of freight and duty, delivered cost USD 3.80. Sara enters both quotations into the Sourcing Origin Decision Guide's Compare sheet before recommending an origin to her own management.
The worked numberThis lesson's worked number calculates each origin's landed cost, then the whole-order difference between them.
A common mistake is stopping the comparison at factory price, treating the lower quotation as the cheaper origin without adding the freight and duty each origin's own distance and destination actually require. As the worked number shows, Factory Y's factory price is USD 0.45 per piece lower than Delta Garments', a comparison that looks decisive until landed cost reverses it.
This trap costs real money on every order it touches, not a one-time mistake. Recommending Factory Y on factory price alone would have cost Northline Apparel USD 1,500 more across Order A's 15,000 pieces, an amount larger than the order's own profit contribution at the factory level, USD 3,900 (15,000 pieces x USD 0.26), showing that a landed-cost comparison is not an extra step but the step that actually decides the recommendation.
The price a factory quotes is not what the goods actually cost once they reach the buyer. Getting goods from a factory to a buyer in another country costs money for shipping, and often a tax for bringing them into that country. A factory farther away can quote a lower price and still end up more expensive once shipping and that tax are added, because farther usually means more shipping cost. The only fair way to compare two factories in two different places is to add shipping and any import tax to each one's price first, then compare those two final numbers, not the two starting prices.
Sara, the buyer at Northline Apparel, is preparing her recommendation on Order A's second production run. The facts in front of her:
The document Sara reads, the Sourcing Origin Decision Guide's own Compare sheet output for this case:
Should Sara tell management Factory Y is cheaper, since its factory price is lower, or correct the summary to landed cost? Decide before you open the answer.
She should correct the summary to landed cost, showing management that Delta Garments is the cheaper origin once freight and duty are added, despite Factory Y's lower factory price.
Two facts decide this. First, the Compare sheet's own landed-cost result shows Delta Garments at USD 3.70 per piece against Factory Y's USD 3.80, a USD 0.10 difference in Delta Garments' favour. Second, that per-piece difference becomes USD 1,500 across the whole 15,000-piece order, a real amount management would act on differently than a factory-price-only summary would have suggested.
Reporting Factory Y as cheaper on factory price alone would have led Northline Apparel to choose the more expensive origin, costing USD 1,500 more than Delta Garments across the order, based on an unfinished number.
This lesson's cost is the gap between what a factory-price-only summary suggests and what landed cost actually shows. A factory-price-only view makes Factory Y look USD 0.45 per piece cheaper, a suggested saving of USD 6,750 across 15,000 pieces. The landed-cost view shows the opposite: Factory Y actually costs USD 0.10 per piece, USD 1,500, more than Delta Garments. The gap between the two views, USD 8,250 across the order, is more than double Order A's own total profit margin of USD 3,900 (15,000 pieces x USD 0.26), showing why a landed-cost comparison, not a factory-price comparison, must be the number a recommendation is built on.
Copy this row into the Sourcing Origin Decision Guide's Compare sheet, using the factory price, freight, and duty for the two origins you are comparing.
| Check point | Spec says | Found (your entry) | Result |
|---|---|---|---|
| Landed-cost comparison of two sourcing origins | Enter factory price, freight, and duty for both origins and record which one has the lower landed cost |
Download the full working sheet, with Delta Garments and Factory Y's landed-cost comparison already filled in, from the link on this course's page.
1. What does landed cost add to a factory's own price, to make two sourcing origins comparable?
2. Factory Y's factory price is USD 0.45 per piece lower than Delta Garments', but its freight and duty are USD 0.55 per piece higher. What does this mean for the landed-cost comparison?
3. A different order of 10,000 pieces has a factory-price gap of USD 0.30 per piece in favour of a farther origin, and a freight-and-duty gap of USD 0.40 per piece against it. What is the whole-order landed-cost difference?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| FOB price | سعر التسليم على ظهر السفينة | Prix FOB | FOB fiyatı | The price the factory charges for the garment, delivered on board the ship at its own port. |
| Landed cost | التكلفة بعد الوصول | Coût rendu | Teslim maliyeti | The FOB price plus shipping and duty once goods reach the buyer's own country, USD 3.70 per piece on Order A. |
| Delivered cost | تكلفة التسليم | Coût rendu | Teslim maliyeti | The buyer's true cost once the goods have reached its own warehouse: the ex-factory price plus delivery, freight, insurance and duty for an imported order, or local transport for a domestic one. |
| Sea freight | الشحن البحري | Fret maritime | Deniz taşımacılığı | Moving goods by ship. Slower and much cheaper per unit of weight than air freight. |
| Air freight | الشحن الجوي | Fret aérien | Hava taşımacılığı | Moving goods by aeroplane. Much faster and much more expensive per unit of weight than sea freight. |
| Freight forwarder | وكيل الشحن | Transitaire | Nakliye acentesi | A company that arranges the shipping and paperwork for moving goods from factory to buyer. |
You now know how to turn two sourcing origins' factory prices into one comparable landed cost. The next lesson looks at what happens when landed cost is close between two origins, and lead time or minimum order quantity ends up deciding the choice instead. Back to the course map