Inventory

Larger volumes usually result in larger discounts.

• Get discount and reduce ordering cost

• Get discount and reducing handling cost

• to ensure the security of the goods

• Seasonal stocks

Seasonality can apply in the supply of raw materials, the demand for finished goods, or both.

• Batching economies or cycle stocks

• Uncertainty and safety stocks

• In-transit or work-in-process stock:

• Seasonal stocks

The goods are not finish product and yet to be ready to be sold

• Batching economies or cycle stocks

• Uncertainty and safety stocks

• In-transit or work-in-process stock:

• Seasonal stocks

As a buyer, it is difficult to accurately forecast customer demand. As a seller, it is impossible to assume suppliers will always delivery materials on time. How to solve it?

• Batching economies or cycle stocks

• Uncertainty and safety stocks

• In-transit or work-in-process stock:

• Seasonal stocks

This is when a company forecast that an unusual event might happen that will negatively impact the source of supply. This can be strikes, significant price increase, supply shortage, political unrest, or weather changes.

• Seasonal stocks

• Anticipatory stocks

• work-in-process stock

• cycles stock

It is a lost opportunity from investing in capital elsewhere. Many large organizations borrow money to fund operations, accumulating loan interest over time.

• Inventory service cost

• In-transit inventory carrying cost

• Capital cost: Sometimes called interest or opportunity cost,

• Storage space cost

Handling costs associated with moving products into and out of inventory as well as storage costs such as rent, heating, and lighting. Raw materials might require less costs, while finished goods inventories typically require more sophisticated storage facilities

• Inventory service cost

• In-transit inventory carrying cost

• Capital cost: Sometimes called interest or opportunity cost,

• Storage space cost

An organization selling its products free-on-board (FOB) destination is responsible for transporting the products to its customers since title does not pass until the products reach the customer’s facility. Financially, the product remains under the ownership of the shipper until it is unloaded from the transportation vehicle at the customer’s location.

• Inventory service cost

• In-transit inventory carrying cost

• Capital cost: Sometimes called interest or opportunity cost,

• Storage space cost

Real possibility that inventory dollar value might decline for reasons beyond an organization’s control. For example, goods held in storage for long periods of time might become obsolete and thus decrease in value.

• Inventory service cost

• Inventory risk cost

• Capital cost: Sometimes called interest or opportunity cost,

• Storage space cost

•Insurance and taxes that comes along with the inventory. Depending on the type of product and its value, the risk of loss or damage may incur high insurance premiums. Most governments also incur a tax on total inventory value.

• Inventory service cost

• Inventory risk cost

• Capital cost: Sometimes called interest or opportunity cost,

• Storage space cost