Next Article in Journal
Fine Art Insurance Policies and Risk Perceptions: The Case of Malta
Previous Article in Journal
Small and Medium-Sized Enterprises, Business Demography and European Socio-Economic Model: Does the Paradigm Really Converge?
Article

Optimization of Inventory Holding Cost Due to Price, Weight, and Volume of Items

Austin E. Cofrin School of Business, University of Wisconsin-Green Bay, Green Bay, WI 54311, USA
An earlier version was presented at the 2019 Decision Sciences Institute Annual Conference, New Orleans, LA, USA.
Academic Editors: Thanasis Stengos and Shigeyuki Hamori
J. Risk Financial Manag. 2021, 14(2), 65; https://doi.org/10.3390/jrfm14020065
Received: 11 December 2020 / Revised: 22 January 2021 / Accepted: 28 January 2021 / Published: 4 February 2021
(This article belongs to the Section Mathematics and Finance)
The inventory carrying cost has been assumed uniform for all products in an organization or a warehouse. This assumption is not valid for a diversified range of items in an organization or warehouse. This paper tested this hypothesis of variations in inventory holding costs in a warehouse in two industries based on the physical nature and the price of products. It is found that organizations with a wide variety of products need to calculate the inventory holding cost for each item (SKU) rather than using an average percentage cost of inventory. Inventory holding costs of items in two different organizations were calculated based on the various factors, including the actual cost of space due to the voluminous nature of the items with their existing inventory policies. A variation in inventory holding costs for each item was observed. The variation was small for an organization with homogeneous input costs, and it was large for a multi-product organization. The overall savings in the inventory holding cost due to adjusting the inventory policies through this methodology was found to be about 3%, which is significant for a big organization. This analysis will affect the decision the determining inventory carrying cost, inventory policies (e.g., stocking levels), and pricing policies (e.g., quantity discounts) for retail organizations. View Full-Text
Keywords: inventory; logistics; transportation; optimization; pricing; revenue management inventory; logistics; transportation; optimization; pricing; revenue management
Show Figures

Figure 1

MDPI and ACS Style

Gurtu, A. Optimization of Inventory Holding Cost Due to Price, Weight, and Volume of Items . J. Risk Financial Manag. 2021, 14, 65. https://doi.org/10.3390/jrfm14020065

AMA Style

Gurtu A. Optimization of Inventory Holding Cost Due to Price, Weight, and Volume of Items . Journal of Risk and Financial Management. 2021; 14(2):65. https://doi.org/10.3390/jrfm14020065

Chicago/Turabian Style

Gurtu, Amulya. 2021. "Optimization of Inventory Holding Cost Due to Price, Weight, and Volume of Items " J. Risk Financial Manag. 14, no. 2: 65. https://doi.org/10.3390/jrfm14020065

Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Search more from Scilit
 
Search
Back to TopTop