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Inventory procurement, storage and management is associated with huge costs associated with each these functions. Inventory costs are basically categorized into three headings:
Current times, the trend is increasingly in favor of outsourcing the inventory management to third party service provides. For one thing the organizations find that managing inventory operations requires certain core competencies, which may not be inline with their business competencies. They would rather outsource to a supplier who has the required competency than build them in house. Secondly in case of large-scale warehouse operations, the scale of investments may be too huge in terms of cost of building and material handling equipments etc. Besides the project may span over a longer period of several years, thus blocking capital of the company, which can be utilized into more important areas such as R & D, Expansion etc. than by staying invested into the project. Related ArticlesView All Articles Authorship/Referencing - About the Author(s)The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a target="_blank" href="https://www.managementstudyguide.com/inventory-classification.htm" id="next">next</a> </div> <script src="https://code.jquery.com/jquery-2.1.4.min.js" type="dce9d1ff90fd98be5be4bf04-text/javascript"> <script type="dce9d1ff90fd98be5be4bf04-text/javascript"> What are the types of inventory costs?Categorizing inventory costs
Inventory costs fall into 3 main categories: Ordering costs (also called Setup costs) Carrying costs (also called Holding costs) Stock-out costs (also called Shortage costs).
What are the costs involved in inventory management?7 types of inventory costs to track. Storage space costs. Storage space costs cover recurring payments like rent, security, lighting, heating, upkeep, and other utility fees. ... . Handling costs. ... . Working capital and capital costs. ... . Taxes and insurance. ... . Obsolescence. ... . Investment. ... . Criminal activity.. What are the 4 inventory cost methods?The four main inventory valuation methods are FIFO or First-In, First-Out; LIFO or Last-In, First-Out; Specific Identification; and Weighted Average Cost.
What are the three types of inventory costing systems?The three inventory costing methods include the first in-first out (FIFO), last in-first out (LIFO), and weighted average cost (WAC) methods.
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