{"id":6624,"date":"2022-08-24T08:03:37","date_gmt":"2022-08-24T07:03:37","guid":{"rendered":"https:\/\/www.aloer.fr\/glossary\/inventory-holding-cost-definition\/"},"modified":"2023-10-20T12:38:48","modified_gmt":"2023-10-20T10:38:48","slug":"inventory-holding-cost-definition","status":"publish","type":"glossary","link":"https:\/\/www.aloer.fr\/en\/glossary\/inventory-holding-cost-definition\/","title":{"rendered":"Inventory Holding Cost \u2014 Definition"},"content":{"rendered":"\"Inventory<\/strong>\n

Inventory Holding Cost : no inventory, no costs?<\/h2>\n

If you have no inven­to­ry<\/strong>, you have no costs<\/strong>. Con­verse­ly, the more you increase your inven­to­ry, the more your car­ry­ing cost will increase. <\/p>

As you can see, inven­to­ry car­ry­ing costs are the costs asso­ci­at­ed with stor­ing and main­tain­ing inven­to­ry for a cer­tain peri­od of time. <\/p>

Gen­er­al­ly, they are defined as a per­cent­age of the val­ue of the inven­to­ry and they vary great­ly depend­ing on the field of activ­i­ty of the com­pa­nies. It is com­mon­ly accept­ed that stor­age costs rep­re­sent up to 25% of the val­ue of the avail­able stock. <\/p>

Stock definition<\/h2>\n

Stock is any item or prod­uct held by a com­pa­ny, which is the result of the dif­fer­ence between the inflow of items and their outflow. <\/p>

 \n\nThe out­put flow<\/strong> cor­re­sponds to the con­sump­tion of cus­tomers for fin­ished prod­ucts and the con­sump­tion by pro­duc­tion for raw mate­ri­als. The orders and\/or fore­casts will define the stock require­ments to meet the cus­tomer’s demand in time, qual­i­ty and quan­ti­ty.\n\nThis flow cor­re­sponds to the orders is not “con­trol­lable” by the com­pa­ny<\/strong>. It can fluc­tu­ate sig­nif­i­cant­ly from month to month.\n\nThe input flow<\/strong> cor­re­sponds to the orders placed by the pro­cure­ment and inven­to­ry man­age­ment teams. This is the only flow that any com­pa­ny can real­ly con­trol<\/strong>.\n\n<\/p>

The com­pa­ny there­fore has only one lever to reg­u­late its stock. Indeed, if it con­trols the incom­ing flow cor­rect­ly, it avoids the risk of cre­at­ing either over­stock or stock-outs. <\/p>

About the need to have a stock ?<\/h2>\n

The exis­tence of the stock could be sum­ma­rized as fol­lows: the fact that the com­pa­ny wants to sat­is­fy the cus­tomer demand. <\/p>

Thus, the stock allows the com­pa­ny to con­tin­ue to sat­is­fy cus­tomer demand<\/strong> even if there is a gap between the incom­ing flow (sup­plies) and the out­go­ing flow (cus­tomer orders). Indeed, it can often be seen that the time to obtain mate­ri­als and pro­duc­tion is greater than the time to process the cus­tomer’s order. But that’s not the only rea­son why a com­pa­ny builds up inventory. <\/p>

Stocks and functions<\/h3>\n