Inventory Cost

Inventory Cost refers to all expenses incurred by an enterprise in the process of purchasing, storing, managing, and disposing of inventory goods, typically including procurement cost, ordering cost, holding cost (such as warehousing fees, insurance premiums, interest on tied-up capital, and shrinkage), and stockout cost. In foreign trade, inventory cost directly affects quotations, profits, and cash flow, especially for exporters using trade terms such as FOB and CIF, where delayed delivery or order changes may lead to additional warehousing fees and capital tie-up. Usage scenarios include: allocating inventory cost to unit price when calculating export quotations; weighing inventory cost against production batch size when negotiating MOQ or delivery lot size with customers; evaluating inventory cost when choosing overseas warehouses or bonded warehouses. Notes: Under different trade terms, the party bearing inventory cost differs, e.g., under EXW the buyer bears it, while under DDP the seller bears it; inventory cost is easily confused with logistics cost and procurement cost, so fixed and variable portions need to be distinguished. Compared with 'holding cost,' inventory cost has a broader scope and also includes ordering cost and stockout cost.