Inventory costs

Inventory costs are associated with holding inventory of products in stock at various locations throughout the supply chain. These can be direct costs (such as occupancy costs) or indirect costs (such as the cost of capital). To learn more about inventory costs, refer to:

• Cost of capital
• Site inventory costs
• In-transit inventory costs

In addition, there is also occupancy cost, which refers to the costs incurred to hold or store inventory in the warehouse. It is the cost per unit of physical floor or shelf space used up by the products for storage purposes at these warehouses.

Average site inventory

Safety, cycle, and pre-build stock requirements are other ways in which inventory is held at facilities in a given time period.

Average inventory is calculated as the sum of these constituent stock levels:

Average Inventory = Safety Stock + Cycle Stock + Pre-build Stock