What does the storage cost rate say?
A warehouse generates costs. So that these remain manageable and can be optimized, entrepreneurs need to know about them. The storage cost rate represents the inventory in relation to the storage costs incurred.
Formula: storage cost rate = storage cost ÷ Ø storage value x 100%
Storage costs of 70,000 euros were determined for the company . The average warehouse value is estimated at 500,000 euros . Now it is important to determine the storage cost rate.
Storage cost rate = 70,000 euros ÷ 500,000 euros x 100% = 14%
The storage cost is therefore 14 percent.
Calculating the storage costs per piece:
We are assuming the storage cost rate just determined of 14 percent. The aim now is to determine which storage costs are caused by material no. 3876 . The stock value of the material is 130 euros per piece.
To determine the storage costs for material no.3876, proceed as follows:
The stock value is set in relation to the storage cost rate.
Storage costs per piece = 14% of 130 euros = 18.20 euros.
Material no. 3876 causes storage costs of 18.20 euros per year.
What is the camp intensity?
According to fun-wiki, the storage costs also include the capital tied up in the stored goods. The storage intensity provides information on how high this capital commitment is .
The calculation of the storage intensity
The values for inventories and total assets determined in the annual financial statements serve as the basis for determining this key figure .
Formula: Inventory ÷ total assets x 100
If the inventory is 5,000 euros and you have total assets of 40,000 euros, the storage intensity is 12.5 percent.
If this figure exceeds 20 percent, a significant storage risk can be assumed. Full warehouses are subject to obsolescence, spoilage or falling prices.
How can you reduce inventory costs?
Storage costs can be reduced through several options. The inventory has the greatest influence on a possible decrease. First of all, it is important that all the key figures described are determined and put into a relationship that is customary in the industry. Determining the required data manually is time-consuming and uneconomical.
Actively reduce storage costs:
- Clean up the warehouse: A look into the warehouse shows which products are being kept in stock. It is necessary to remove spoiled goods. Obsolete products can be sold as part of a special sale.
- Optimizing inventory management: Optimizing inventory management involves storing as little inventory as possible and still having all the necessary goods and materials in stock as needed. When using modern systems for warehouse management , a necessary analysis of the warehouse stocks is supported.
- Adjust inventory management: It is important to determine the optimal inventory. In larger warehouses, this is only possible through the use of software solutions. The optimum stock is determined by setting factors such as minimum and maximum stock and the necessary replenishment time in relation to one another. ERP systems determine the key figures automatically at certain intervals.
In this way, storage costs can be reduced
Once all the necessary key figures have been determined, the optimization of storage costs can begin.
The following checklist can help:
- Determination of the key figures
- Comparison of the key figures
- Disposal from stockpiles
- Organize inventory management as required
- Reduction of high-priced stock items
- Optimization of the order quantity
- Improvement of the purchasing conditions
- Optimization of logistics and warehouse management
If the key figures are compared with previous years and comparative values in the industry, it becomes clear whether there is a need for action and the warehouse is causing excessive costs. The disposal of the warehouses causes depreciation in the short term , but is a necessary factor in order to increase the profit in the medium term.
The ABC analysis can be used to classify the items remaining in the warehouse:
|Items||Share of inventory in%||Consumption value measured on the total stock in%|
|A item||10 to 20||70 to 80|
|B item||30 to 35||15 to 25|
|C item||40 to 50||5 to 10|
If the stocks of high-priced items are reduced, you can save enormous costs. The optimization of the order quantity is preceded by a somewhat complex calculation. Andler’s formula forms the basis for this .
After doubling, the order costs are multiplied by the annual requirement. The result is to be divided by the calculated storage cost rate and the purchase price per piece. The root is taken from this value. The ideal value determined in this way cannot always be implemented in practice. You can use this as a guide for future orders.
In the end, internal processes also play a role in optimizing storage costs. If the warehouse is structured accordingly, walking distances and transport routes can be shortened. This means that employees can be saved in the long term and personnel costs are reduced. The administrative effort can be reduced through the use of efficient merchandise management systems .
Storage costs are incurred for the safekeeping of materials. This can be material, intermediate products or the finished product. Storage costs include fixed and variable cost centers . In addition to the costs of renting space, depreciation, energy or personnel, the lost interest profit from the capital tied up in the warehouse also plays a role. By determining the storage cost rate, the storage intensity and other relevant key figures, an optimization of the storage costs can be achieved.