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Supply Chain Logistics_Week 1 Discussion 2

Supply Chain Logistics_Week 1 Discussion 2

Q What are ordering costs, and what is the trade-off between inventory carrying costs and ordering costs?

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Costs of ordering can be regarded as the costs related to ordering inventory like costs of set up and costs of order. Costs of order consist of the costs of an order being received (for instance, the person’s wages by whom orders are taken via telephone); verifying availability of inventory; invoices preparation; credit check conduction; getting the orders inside the system; and payment receivable but aren’t restricted to this. Costs of ordering can be regarded as the costs related to the ordering inventory.