What Can be Done to Reduce those Stockholding Costs?

Abstract

Vast sums of money are paid out each year in the UK so that enterprises may hold stocks of materials, fuel, work‐in‐progress and finished goods. The holding costs of UK manufacturing alone for 1979 could well be in the region of £15bn, suffice it to say, an amount of great magnitude running into billions of pounds. There is a tendency on the part of materials management to over‐stock because “Thou shalt not run out of stock” is considered by many to be avoiding a cardinal sin. This means that in addition to carrying stocks which may not be required for some time the firms concerned also have to cover certain holding costs unnecessarily. Stocks kept on one side for “a rainy day” may in actual fact cost more in holding costs than their appreciation in value. Increased stock levels will in addition to increasing holding costs also increase risk, (see Figure 1).

Citation

Chadwick, L. (1982), "What Can be Done to Reduce those Stockholding Costs?", Industrial Management & Data Systems, Vol. 82 No. 1/2, pp. 9-11. https://doi.org/10.1108/eb057228