Stock related costs

Stock Related Costs

There are three main types of costs are related to stocks i.e ordering cost , purchase cost and holding cost . As stock involve a number of cost therefore a proper control must be in place to control and minimize those cost.

There are different methods and formula are available to minimize the cost. Those method primarily focus the ordering and holding cost of the stock.

1.Ordering cost

These cost include the telecommunication cost involved in ordering , cost of ordering team , cost of goods confirmation team and processes.Ordering cost and quantity order has inverse relationship. The unit ordering cost  decreases with the increase of quantity ordered.

2.Purchase Cost

The purchase cost include the purchase invoice , transportation cost and goods handling cost.

3.Holding Cost

 Holding cost includes the warehouse rent cost ,insurance cost and deterioration of cost. The holding cost has a direct relationship with ordered quantity. The holding cost increase with the increase of quantity ordered.