Inventory glossary

What is FOB shipping?

FOB shipping (Free On Board) is a shipping term that sets the point where ownership and risk of goods pass from the supplier to the store owner, usually when the goods are loaded onto the shipping vessel or truck at the origin port.

For a small Shopify store, FOB terms decide who pays for freight, insurance and customs after the goods leave the factory, and who is on the hook if something breaks or goes missing in transit. If you buy FOB, you own the goods from the loading dock onward, which means you need your own freight forwarder and insurance, and your landed cost is higher than the unit price on the invoice.

Knowing your FOB point also matters for timing. The supplier's lead time usually ends when goods are loaded FOB, not when they arrive at your warehouse, so you need to add transit time and customs clearance on top of the supplier's quoted lead time when you plan reorders.

Example

A candle supplier in Vietnam quotes $3.00 per unit FOB Ho Chi Minh City. The store orders 2,000 units for $6,000. The store then pays $900 for ocean freight and $300 for customs clearance to get the candles to its US warehouse. Total landed cost is $7,200, or $3.60 per unit, even though the invoice said $3.00.

Common mistakes

  • Treating the FOB unit price as the full cost per unit and ignoring freight, insurance and duties.
  • Assuming the supplier's lead time includes ocean or air transit time, when it usually ends at the FOB loading point.
  • Confusing FOB with DDP, where the supplier handles shipping and duties all the way to your door.

FOB shipping and SteadyShelf

SteadyShelf uses each supplier's lead time to calculate order-by dates, so if your terms are FOB you should add your own transit and customs time on top of the supplier lead time you enter.

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Related terms

Lead time · Incoterms · Transit time · Landed cost · EXW shipping

Full inventory glossary

FAQ

Does FOB mean the supplier pays for shipping?

No. FOB means the supplier covers costs only until the goods are loaded at the origin port. After that, the store owner pays for freight, insurance and customs.

Is FOB lead time the same as total delivery time?

No. FOB lead time usually covers production and loading only. You need to add ocean or air transit time and customs clearance to get the real delivery date.

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