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Inventory costs

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Keeping products in inventory costs money. If you’re borrowing money from the bank to pay for that inventory (which is often the case), your inventory costs you whatever interest rate you’re paying to the bank. Other costs include paying for a building to keep the inventory safe and paying people to move the inventory around inside the building. You also run the risk that products could be lost, damaged, or stolen. This problem, often called shrinkage, also creates a cost to your company. Finally, products can expire, deteriorate, evaporate, or become obsolete if they sit in a warehouse or a retail store for too long.

Supply Chain Management For Dummies

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