Metrics & KPIsInventory Carrying Rate
Definition
This can best be explained by the example below.... 1. Add up your annual Inventory Costs: Example: $800k = Storage $400k = Handling $600k = Obsolescence $800k = Damage $600k = Administrative $200k = Loss (pilferage etc) $3,400k Total 2. Divide the Inventory Costs by the Average Inventory Value: Example: $3,400k / $34,000k = 10% 3. Add up your: 9% = Opportunity Cost of Capital (the return you could reasonably expect if you used the money elsewhere) 4% =
Tags
tax, capital, inventory, cost, damage, storage