Materials Costs

Question 1

Reasons for holding inventory.

Normal production need

Buffer if there is a late delivery

Emergencies & opportunities

Bulk discounts

Seasonality

Hedge against price increase

Answer 1

Cost of holding/ordering inventory

Cost of capital

Deteroration/obsolescence

Rent ect

Staffing

Delivery - scales pof economy

Question 2

Inventory Control

The objectives of inventory control are to make sure that the total of the following costs are minimised:

• Holding costs
• Ordering costs
• Stockout control

Answer 2

Control Level