Inventory Costs Management?

The 4 inventory costs are:
1) ordering and setup costs
2) inventory-holding costs
3) shortage costs
4) unit costs of the SKUs

I've described all of them as I am supposed to for my assignment but don't know what to write for #4.

Also, I am supposed to discuss a business/retailer that would need to consider each inventory cost when managing inventories.I feel all retailers would need to consider all of these inventory costs, no?

1 year ago - 1 answers

Best Answer

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Yes you are correct; any good retailer will need to consider these all 4 type of inventory cost when operating.

I assume you know what is SKUs?? SKU= store keeping units. It represents each and one of a unique item and size. Example; I am retail selling T-shirts. Now I have standard 3 sizes for all the t-shirt I sell. Small , Medium , Large . now if I sell Blue color t-shirt; with all 3 size. I will have 3 SKUs- because each one is an unqiue item (blue) and size. If I am selling both blue and red I will have 6 SKUs…

So from here you can see the importance of SKUs- and inventory cost relate to this. Especially if you are 7-11, a supermarket or JC penny selling all the jeans and t-shirts. It very common that normal supermarket will have to manage more than 10,000 SKUs per day in their ordering process.

Hope this answer your questions.

1 year ago