Inventory Cost | Concept

Ole Ersoy
Sep - 20  -  1 min

The Inventory Cost is the cost incurred by carrying the respective average inventory level for the part.

Firefly Semantics Analytical Tools usually calculate the cost spanning the lead time for the part.


Suppose the average inventory levelis 5 units for a part with a purchase cost of $20,000, a lead time of 700 days, and the cost of capital is 12%.

The inventory cost is 5*$20,000*700/365*0.12 or $23,013.70 over 700 days.