Cost of warehousing

Within the logistics process there are a lots of cost that you may not think about. The largest cost is of course the inventory. If all the costs incurred in connection to stock was calculated the estimated inventory cost is around 25% of total inventory value. The reason why this figure is so high is because many elements is to be included in the inventory cost. The biggest cost of holding stock is the capital, the cost of borrowing money may be low but the expectations of shareholders who invest money can be high. The total cost of holding stocks is as follows.

■- Investment cost
■- Warehouse
■- Inventory management
■- Obsolescence
■- Shrinkage
■- Damage of goods
■- Insurance
■- Handling cost
As you notice there are a lot of element costs to be incluceded in the total inventory cost.