Major Logistics Costs For Large Number Of Manufacture And Retail Companies

1470 Words Sep 26th, 2015 6 Pages
Inventory Cost
Are the one of the major logistics costs for large number of manufacture and retail companies, and they can represent a significant element of the total cost of logistics. There major cost trade –offs that can made with all the other key logistics components. It is important to be able to understand what the key cost relationships are within a company.
There are four principal elements of inventory holding costs are:
1. Capital Cost :The cost of the physical stock it also a financial charge that is the current cost of capital to a company or the opportunity costs of tying up a capital that might otherwise be producing a better return if invested elsewhere.
2. Service Cost: The cost of stock management and insurance.
3. Storage Cost: The cost of space, handling and association warehouse costs involve with the actual storage of the product.
4. Risk Cost: This occurs as a consequence of pilferage, determination of stock, damage and stock obsolesce

The other important cost that needs to be understood is the reorder or the set –up cost for an order with a company for the product in question. This cost applies regardless of the size of the order. Include the cost of raising and communicating an order as well as the cost of delivery and order receipt. The setup cost refer to the additional cost that may be uncured if the goods are produced specifically for the company. Here the larger order, the longer the production run and the lower the production unit cost…

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