What features do trading companies need in ERP?

Key features: multi‑currency support, landed cost calculation, letter of credit tracking, supplier management, purchase orders, sales orders, inventory across warehouses, and distribution management.

What is landed cost in trading?

Landed cost is the total cost of a product delivered to the buyer's door – including purchase price, freight, insurance, customs duties, and other charges. ERP calculates landed cost to determine true profitability.

ERP for trading companies

Q: What is ERP for trading companies?

ERP for trading companies is designed for businesses that buy and sell goods – often across borders. It handles import/export logistics, multi‑currency transactions, letter of credit, inventory tracking, and distribution – all integrated with financials.

From ERPEDIA, the independent ERP knowledge base

ERP for trading companies is designed for businesses that buy and sell goods – often across borders. It handles import/export logistics, multi‑currency transactions, landed cost calculation, inventory across warehouses, and distribution – all integrated with financials. This article covers key features and links to related topics like procurement, inventory, and multi‑currency.

Contents

1. Why trading companies need ERP
2. Core features
3. Import/export management
4. Landed cost
5. Multi‑currency & banking
6. Letter of credit (LC)
7. Inventory & warehousing
8. Distribution & sales

1. Why trading companies need ERP

Trading companies face unique challenges: sourcing from global suppliers, managing complex logistics, and selling to diverse customers. Without integrated ERP, common problems include:

Inaccurate product costs (missing freight, duties).
Currency losses from poor exchange rate tracking.
Delayed shipments and customer dissatisfaction.
Difficulty tracking inventory in transit.
Manual letter of credit processing.

Stat: Trading companies using ERP report 20‑30% improvement in inventory turnover and 15‑25% reduction in landed costs (Aberdeen Group).

2. Core features

Sourcing → Purchase → Import → Inventory → Sales → Distribution

Module	Key functions
Supplier management	Vendor evaluation, contracts, purchase orders.
Import/export	Shipment tracking, customs, documentation.
Landed cost	Freight, insurance, duties – allocate to product cost.
Multi‑currency	Exchange rates, revaluation, gains/losses.
Letter of credit	LC tracking, bank documentation, reconciliation.
Inventory	Multi‑warehouse, in‑transit, lot/serial tracking.
Distribution	Sales orders, pricing, commissions, shipping.

3. Import/export management

Managing international shipments involves many steps:

Purchase orders: Place orders with overseas suppliers.
Shipment tracking: Monitor containers, ETAs, in‑transit status.
Customs documentation: Commercial invoices, packing lists, certificates of origin.
Compliance: Restricted parties, tariff codes (HS).

4. Landed cost

Landed cost is the total cost to get goods to your warehouse. ERP calculates:

Product cost: Supplier invoice amount.
Freight: Ocean/air freight, inland trucking.
Insurance: Cargo insurance premiums.
Duties & taxes: Customs duties, import VAT.
Other charges: Broker fees, port handling.

Landed cost allocation:
Product cost: $10,000
Freight: $1,200
Insurance: $200
Duties: $800
Total landed: $12,200 for 1,000 units → cost per unit: $12.20

See procurement for purchase integration.

5. Multi‑currency & banking

Trading companies deal in multiple currencies. ERP must handle:

Exchange rates: Daily rates, rate types (spot, forward).
Revaluation: Unrealized gains/losses on payables/receivables.
Bank reconciliation: Multi‑currency bank accounts.
Currency gains/losses: Realized when paid/received.

See finance for accounting.

6. Letter of credit (LC)

Letters of credit are common in international trade. ERP tracks:

LC creation: Record LC details (issuing bank, amount, expiry).
Shipments against LC: Link purchase orders to LC.
Documentation: Track documents required (bill of lading, invoice).
Drawing: Record payments received under LC.

7. Inventory & warehousing

Key inventory features for trading companies:

Multi‑warehouse: Track stock across multiple locations (bonded, regional, central).
In‑transit inventory: Goods not yet received but owned.
Lot/serial tracking: For traceability and recalls.
Consignment stock: Goods held at customer location but still owned.

See inventory module.

8. Distribution & sales

Selling to customers (wholesale, retail, e‑commerce):

Sales orders: Quotes, orders, contracts.
Pricing: Customer‑specific pricing, volume discounts.
Commissions: Sales rep commissions tracking.
Shipping: Integration with carriers, tracking numbers.
Invoicing: Multi‑currency invoices, credit notes.

See sales & distribution.

Key Takeaways

Trading ERP integrates sourcing, import/export, landed cost, multi‑currency, and distribution.
Landed cost calculation ensures accurate product profitability.
Multi‑currency and letter of credit features are essential for international trade.
In‑transit inventory tracking provides visibility.
Integration with sales and distribution completes the cycle.

What is the difference between trading and distribution? Trading focuses on buying and selling, often internationally. Distribution focuses on warehousing and delivering to customers. Many trading companies also distribute.

Can ERP handle drop shipping? Yes, many ERPs support drop shipping – orders sent directly from supplier to customer.

What is an HS code? Harmonized System code – used to classify goods for customs duties.

Continue Reading in ERPEDIA

ERPEDIA is maintained by Professionals Lobby as an independent ERP knowledge initiative focused on reducing ERP implementation risk in the UAE and GCC.
For structured, vendor‑neutral ERP advisory → Speak with an independent ERP advisor.