Inventory holding costs measurement: a multi-case study

Abstract

Purpose – Logisticians in the worldwide industry are frequently faced with the problem of measuring the total cost of holding inventories with simple and easy-to-use methodologies. The purpose of this paper is to look at the problem, and in particular illustrate the inventory holding cost rate computation, when different kind of warehousing systems are applied. Design/methodology/approach – A multiple case study analysis is here developed and supported by a methodological framework directly derived from the working group discussions and brainstorming activities. Two different field of application are considered: one related to five companies with manual warehousing systems operating with traditional fork lift trucks; the other is among five companies operating with automated storage/retrieval systems (AS/RS) to store inventories. Findings – The multi-case study helps to understand how the holding cost parameter is currently computed by industrial managers and how much the difference between manual and automated/automatic warehousing systems impacts on the inventory cost structure definition. The insights from the ten case studies provide evidence that the kind of storage system adopted inside the factory can impact on the holding cost rate computation and permit to derive important considerations. Practical implications – The final aim of this work is to help industrial engineers and logisticians in correctly understanding the inventory costs involved in their systems and their cost structure. In addition, the multi-case analysis leads to considerations, to be applied in different industrial contexts. As other industrial applications are identified, they may be analyzed by using the presented methodology, and with aid from the data from this paper. Originality/value – The relevance of this work is to help industrial engineers and logisticians in understanding correctly the inventory costs involved in their logistics systems and their cost structure. In addition, the multi-case analysis lead to interesting final considerations, easily to be applied in different industrial contexts. As other industrial applications are identified, they may be analyzed by using the methodology and extrapolating the data from this paper.