Hi there, and welcome to inefficiency number two of our five-part series. In this episode, we will look at carrying costs.
Now, obviously, you have to keep some inventory on-site, but storing more than necessary could cost more than you think.
Inventory carrying cost can be up to about twenty-five percent of the overall value of the inventory, but this can be much higher without proper management.
Let’s look at the four main carrying costs: capital, storage space, inventory services and risks.
Capital cost represents the cost of money and the lost investment opportunity. Storage space includes the lease, utilities, insurance and taxes. Inventory services may include taxes, physical labor and software, and depreciation, obsolescence and shrinkage are potential risks. Also consider the amount of inventory space that could be allocated to other areas of production.
Carrying excess inventory can quickly drive all of these costs up, but finding ways to reduce how much you store on hand will help improve your budget.
Come back Falcon Fastening’s blog soon to watch the third supply inefficiency, buying direct.
Falcon’s Reliable Stock™ lean VMI program delivers 100% production uptime efficiency and reduces your lead times, while lowering your overall inventory investment in class C production components and fastening supplies. Talk to us today and find out how you could be saving time and money.
Michelle is the Marketing Manager at Falcon Fastening Solutions, Inc. She is focused in communicating value to Falcon's customers, contacts and audiences by sharing the company's unique approach to fastening and class C production component supply.
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SCMEP and Falcon Fastening Solutions are partnering to bring you Value Engineering Fundamentals. A 50% discount is offered to qualified attendees. SC manufacturers please call 864-288-5687 to find out if you qualify. If you are located outside of SC, please call 1-800-438-0332. Related Posts:10 Signs of a Good VMI Program March 31, 2014 How to Calculate Overall Equipment Effectiveness (OEE) March 4, 2015 How Vendor Consolidation Can Improve Inventory Management April 30, 2015 Read more →