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Are there are reports on the cost of Inventory in various industries and the cost breakdown
Most companies guess at their cost of inventory, usually the cost of capital and do not include warehouse, labor, obsolescence, spoilage etc Is there any good study on the actual cost of Inventory?
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6 Answers
We get this question alot by entrepreneurs starting new businesses.
The best place to go for this a trade association for the industry in which you seek information.
Best place to find your local trade association - the public library.
They'll give you a print out of all the locations and websites you can handle...for free.
Not very helpful. I asked for specifics please - if anyone knows them
Prof Williams
You are asking for specifics on a very general question. For what industry do you seek information? All industry? Just one segment-like manufacturing, or more particular like auto manufacturing or fireplace manufacturing?
There are close to 10,000 trade associations in the US, each covering a different segment of industry. If you can be more specific with a particular industry I might be able to point you to a pdf or white paper.
Your question reads "most companies" which may be true of small business, but I can tell you from experience that larger companies, such as the Fortune 500, have the cost of their inventory on any given day down to a penny. However, that information is rarely published in public places, except in year-end summaries for investors and shareholders. Again, for a specific industry you might consider picking one of the larger companies in that field, browsing to their site, and viewing its year end report which might contain the numbers you seek.
Another idea you might seek is to call the investment bank or accounting firm which handles the industry account. For instance, Price Waterhouse does inventory and cost accounting for most of the Gaming industry. They audit many of the casinos on a monthly basis and publish briefs to the gaming commission and Las Vegas trade associations.
Ask a specific question and get a specific answer. Ask a general questions and..well you get it.
Point taken. How about Manufacturing? Within Manufacturing Pharmaceuticals? Hope that is specific enough
We have had different experiences. I have found that large Fortune 100 companies do not know the cost of their inventory - just a vague %, principally the cost of money. Hence my question, if there are any benchmark studies as to what the cost of inventory is and how it is comprised?
This is a classic Lean process application question which has been studied, at length, by the Lean Enterprise Institute. Sox has made companies rethink, and re-calculate their inventory costs. It's also the reason companies have bigger accounting departments than engineering departments. From their standpoint, it's not just cost, it's actually waste, and the pure cost of inventory will change with fluctuations in the market value of the product being inventoried.
It's worth checking out the Lean institute at www.lean.org. They are amazingly helpful and may be able to give you a white paper from a pharma co.
If you find something you need but can't get access send me a note. We are members and might be able to download something for you.
Back to generalities. Let us drop the question please
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