Inventory has a financial value, as in the purchase price of the inventory obtained. However there are additional costs associated with inventory, namely holding costs. These holding costs are essentially the money that it costs an organisation to:
- Receive inventory;
- Locate inventory;
- Pick inventory;
- Despatch inventory;
- Count inventory; and
- Manage inventory.
There are two main types of costs associated with the control and storage of inventory:
- Fixed Costs; and
- Variable costs.