Duration: 8M 28S Likes: 6 DisLikes: 0 Rating: 10 / 10
Views: 1394 Description: This video outlines the high costs associated with inventory shortages, stock outs, and or out-of-stock (OOS) situations. Most companies assume that inventory only costs money when it’s held for too long without sufficient sales. However, it’s just as costly when you don’t have inventory.
The costs of an inventory shortage can be measured by several cost drivers. First, expediting orders from vendors to restock shelves involves high freight costs and vendor surcharges for rush deliveries. Second, inventory shortages mean overtime in manufacturing, shipping, receiving, labeling and repackaging. Third, it’s common for companies to cover the cost of freight out to their customers to make up for a shortage of inventory. In this case, it’s about keeping the customer happy given the fact that the customer expected inventory and it wasn’t available.
Companies can track these costs by tracking the number of times they rush shipments in and out of their facility to make up for shortages. They can also track the number of lost orders and lost customers. These two can be measured by gross profit on sales and revenue. Ultimately, there are several costs to not having inventory and this video outlines them all.
http://www.driveyoursuccess.com Video defines costs of inventory stock outs
Additional Sources: http://www.driveyoursuccess.com/2012/05/inventory-carrying-costs-versus-higher-volume-purchases.html - Inventory Carrying Costs Versus Higher Volume Purchases....