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Storage Costs 1

Meaning of Storage Costs Part I

Posted on May 7, 2021May 9, 2021 by ablogtophone

Most companies incur storage costs. They inevitably arise when storage capacity is required. In addition to the storage costs actually incurred, the cost component also includes missing interest profits, which arise from the capital tied up in the stored goods. Storage costs mainly amount to material costs . The proportion of personnel costs is rather low.

What are storage costs?

According to foodezine, the term storage costs summarizes all costs that can be directly associated with the storage of goods or raw and auxiliary materials. The amount of this cost category depends on the number and size of the storage rooms and the progress of the rationalization process in the company.

A rough distinction is made between the following cost blocks:

  • Storage costs = storage costs without taking interest into account
  • Interest costs = interest on the capital tied up in the stock

In order to determine the optimal order quantity , it is necessary to know the storage and ordering costs , which can be determined with the help of lot size formulas.

Why are there storage costs?

Most companies have storage facilities. Goods and raw materials have to be stored in order to enable a smooth production process and a sound sales policy . You therefore incur the costs of storing operating materials as well as storing the finished goods that are waiting for their customers.

Sufficient materials and raw materials must be available in order to prevent idling in ongoing production. The means of transport used in the warehouse and the warehouse staff who operate and repair them also cause costs . In the warehouse there are still costs for heating , lighting or cooling .

Components of the storage costs

The storage costs can be divided into different cost groups:

Cost type Cost component
Personnel costs
  • Wages
  • wages
  • Training costs
  • Social security contributions
Space costs
  • Rental costs
  • Lease costs
  • Depreciation
  • maintenance
  • Energy costs
  • Cleaning costs
  • Insurance
Cost of goods
  • Interest for capital tied up in the stock
  • insurance
material costs
  • Office supplies
  • packing material
Risk costs
  • Obsolescence
  • damage
  • Shrinkage
  • Spoilage
  • Price fluctuations
  • Inventory differences

A rough breakdown can be made into fixed and variable storage costs . You are constantly charged with fixed costs and remain about the same. Variable costs can fluctuate and are based on the intensity of warehouse utilization.

Fixed storage costs Variable storage costs
Depreciation Energy costs
Personnel costs Transport costs in the company
Insurance Risk costs
Rental costs External storage
lease Rework
IT costs for hardware and licenses

Warehousing tasks

A warehouse can fulfill various functions. The names of the corresponding camp are derived from the different storage functions . We speak of procurement warehouses , production warehouses or distribution warehouses .

The following functions can be distinguished:

  • Backup function: In order to ensure production even when there are bottlenecks at the suppliers, the stocks in the interim storage facility are used. There, material is stored in large quantities and, if necessary, fed to the various production stages.
  • Refinement function: Not every product is immediately available for sale in the desired quality after its manufacture. Some products require a certain time to mature. Cheese or wine must first be stored so that the taste can develop. The finishing function also relates, for example, to a wood store, which is necessary to dry the material.
  • Speculative function: If price increases have been announced for certain goods, larger quantities are purchased and stored. In this way, companies protect themselves from being overcharged and at the same time benefit from volume discounts or special conditions for bulk buyers.
  • Presentation function: The presentation function is primarily a common variable in retail. The customer can inspect the goods directly in the warehouse. Selling via a sales warehouse is particularly common in the furniture industry
  • Environmental protection function: The environmental protection function comes into effect when companies meet their take-back obligations. Examples of this are returnable packaging or the return and disposal of old batteries, printer cartridges or electrical devices. The relevant regulations can be found in the Packaging Act, which was reissued in 2019.

Storage costs calculation

Storage costs are usually determined using the annual cost center accounting . A determination is also possible from the profit and loss account . The billing takes place on a pro rata basis. If different stores are kept, the determination is necessary separately.

If there is no cost center accounting, the storage costs are to be determined as follows.

Example:

Cost type Cost in euros
Rental costs 15,000
Personnel costs 30,000
Depreciation 10,000
Insurance costs 6,000
Proportional administration costs 4,000
Proportionate IT costs 3,000
Energy costs 2,000
total cost 70,000

The storage costs in the company are 70,000 euros. Proportional offsetting of the items in stock is possible using the storage cost rate .

Storage Costs 1

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