There are a number of costs that an advanced inventory management solution will help you calculate. Here are two of the big ones, along with all of the costs that they are made up of:
Carrying costs (also known as holding costs and inventory costs) are the sum of all of the money that companies must spend to store their parts and products. All of the things that make up carrying costs include:
- How much the inventory depreciates during a certain period of time.
- Warehouse employees’ salaries.
- Essential insurance premiums.
- Security systems and personnel.
- Upkeep, such as storage space, heating, leases, and other bits of maintenance.
- Applicable taxes.
Also known as the true cost, the landed cost of parts and products is made up of everything that goes into obtaining products and getting them to their final destination inside a warehouse. Landed costs are made up of:
- Taxes, including customs, tariffs, duties, harbor fees, and currency conversion.
- Shipping costs, including crating, packing, freight, and handling.
- Operating expenses, including employee compensation, due diligence, and brokerage and logistical fees.
- Risk management, including insurance, regulation compliance, quality checks, and buffer stock.
Robert Lockard is a copywriter with Fishbowl. He writes for several blogs about inventory management, manufacturing, QuickBooks, and small business. Fishbowl is the #1-requested manufacturing and warehouse management software for QuickBooks users. Robert enjoys running, reading, writing, spending time with his wife and children, and watching movies.