{"id":3598,"date":"2022-09-14T06:00:00","date_gmt":"2022-09-14T06:00:00","guid":{"rendered":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/"},"modified":"2025-09-18T16:37:21","modified_gmt":"2025-09-18T16:37:21","slug":"inventory-cost","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/","title":{"rendered":"What are Inventory Costs? The Types of Inventory Expenses and How to Calculate Them"},"content":{"rendered":"\n<div class=\"wp-block-shipbob-blocks-single-toc single-toc\" data-controller=\"blog-toc-controller\" data-action=\"scroll@window-&gt;blog-toc-controller#scrollChanged:passive\" id=\"toc-component\"><div class=\"single-toc-overview\"><p>Table of Contents<\/p><div class=\"single-toc-read-time\"><p>** Minutes<\/p><\/div><\/div>\n<p><a href=\"#h-what-are-inventory-costs\">What are inventory costs?<\/a><\/p>\n\n\n\n<p><a href=\"#h-the-three-inventory-cost-categories\">The three inventory cost categories<\/a><\/p>\n\n\n\n<p><a href=\"#h-6-types-of-inventory-costs\">6 types of inventory costs<\/a><\/p>\n\n\n\n<p><a href=\"#h-how-to-calculate-inventory-costs\">How to calculate inventory costs<\/a><\/p>\n\n\n\n<p><a href=\"#h-common-inventory-cost-blunders\">Common inventory cost blunders<\/a><\/p>\n\n\n\n<p><a href=\"#h-3-factors-affecting-your-inventory-costs\">3 factors affecting your inventory costs<\/a><\/p>\n\n\n\n<p><a href=\"#h-3-tips-to-keep-inventory-costs-low\">3 tips to keep inventory costs low<\/a><\/p>\n\n\n\n<p><a href=\"#h-shipbob-s-inventory-management-will-save-your-cash\">ShipBob\u2019s inventory management will save your cash<\/a><\/p>\n\n\n\n<p><a href=\"#h-inventory-costs-faqs\">Inventory costs FAQs<\/a><\/p>\n<\/div>\n\n\n\n<p>As an online business owner, keeping an eye on your biggest asset \u2014 your inventory \u2014 is one of the most important tasks you&#8217;ll take on. <\/p>\n\n\n\n<p>Having an <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-strategy\/\">inventory strategy<\/a> in place can help reduce <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-risk\/\">inventory risk<\/a>, including mitigating high costs. But tracking inventory costs day by day can be challenging because there are multiple components associated with the overall costs. Using a dedicated <a href=\"https:\/\/aspireapp.com\/hk\/blog\/expand-your-business-with-multi-currency-account\" target=\"_blank\" rel=\"noreferrer noopener\">business account<\/a> can simplify this process by ensuring all inventory-related expenses are kept separate from personal finances, improving clarity and organisation.<\/p>\n\n\n\n<p>In this article, we&#8217;ll describe the different types of costs associated with inventory, how to track and calculate them, and what you can do to better manage inventory by understanding common factors that influence costs. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-are-inventory-costs\">What are inventory costs?<\/h2>\n\n\n\n<p>Inventory costs involve the expenses associated with purchasing, storing, and managing inventory throughout the <a href=\"https:\/\/www.shipbob.com\/blog\/ecommerce-supply-chain\/\">ecommerce supply chain<\/a>. <\/p>\n\n\n\n<p>The cost of inventory goes beyond the initial purchase, including storage costs, as well as the costs of holding unsold <a href=\"https:\/\/www.shipbob.com\/blog\/finished-goods-inventory\/\">finished goods<\/a>.  <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-why-are-inventory-costs-important\">Why are inventory costs important?<\/h3>\n\n\n\n<p>Keeping track of inventory costs is one of the most important expenses to track. When too much capital is tied up in inventory, it can negatively impact your bottom line. <\/p>\n\n\n\n<p>Having an accurate idea of how much you\u2019re spending on inventory will help you understand how to manage this important expense more strategically to keep your overall costs low and your profits high.<\/p>\n\n\n\n<p>This can be done in several ways, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Proper <a href=\"https:\/\/www.shipbob.com\/inventory-management\/inventory-forecasting\/\">inventory forecasting<\/a> to optimise <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-levels\/\">inventory levels<\/a><\/li>\n\n\n\n<li>Implementing strategies to save on storage and warehousing costs (e.g., <a href=\"https:\/\/www.shipbob.com\/warehouse-management\/warehouse-slotting\/\">warehouse slotting<\/a>)<\/li>\n\n\n\n<li>Executing consistent <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-valuation-methods\/\">inventory valuation methods<\/a> to track <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-discrepancy\/\">inventory discrepancies<\/a> <\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-three-inventory-cost-categories\">The three inventory cost categories<\/h2>\n\n\n\n<p>There are three primary categories of inventory costs: ordering, carrying, and stockout costs. <\/p>\n\n\n\n<p>Understanding these different types of costs associated with inventory can help you understand the best ways to track, manage, and calculate the total costs of your inventory investment. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-ordering-costs\">Ordering costs<\/h3>\n\n\n\n<p>When <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-replenishment\/\">replenishing inventory<\/a>, many of the additional costs are often overlooked or dismissed.<\/p>\n\n\n\n<p>Keep in mind that you\u2019re not just paying for the new batch of inventory, you&#8217;re also paying for <a href=\"https:\/\/www.shipbob.com\/blog\/first-mile-delivery\/\">first-mile delivery<\/a>, <a href=\"https:\/\/www.shipbob.com\/warehouse-management\/warehouse-receiving\/\">warehouse receiving<\/a>, and other fees.<\/p>\n\n\n\n<p>These costs can add up, which means it&#8217;s important to not only look at the costs of procurement but also the costs of shipping inventory to your warehouse or fulfilment destination, plus the costs of receiving and storing inventory once its received (which includes labour). <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-carrying-costs\">Carrying costs<\/h3>\n\n\n\n<p><a href=\"https:\/\/www.shipbob.com\/blog\/inventory-carrying-costs\/\">Inventory carrying costs<\/a> refer to all the fees and expenses for keeping items stored before they are sold.<\/p>\n\n\n\n<p>Carrying costs can vary based on the type of product you sell and the costs of storage. This type of costs can include fees such as taxes, insurance, labour wages, and warehouse rent. <\/p>\n\n\n\n<p>In many cases, you may even have to pay for replacing damaged or perished goods, which further adds to your carrying costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-stockout-costs\">Stockout costs<\/h3>\n\n\n\n<p><a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/stockout-costs\/\">Stockout costs<\/a> represent the loss of income and additional expenses resulting from <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-shortage\/\">inventory shortage<\/a>.<\/p>\n\n\n\n<p>Say you run out of stock for a particular item, but the information isn\u2019t updated on time on your store, so orders continue to process. The customer is then notified about the out of stock item later and must be granted a refund.<\/p>\n\n\n\n<p>The business then has to bear the cost of processing a refund and losing out on the sale. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-6-types-of-inventory-costs\">6 types of inventory costs<\/h2>\n\n\n\n<p>When calculating total inventory costs, you&#8217;ll need to track several different expenses to understand how much inventory is costing you in a given period of time. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-storage-costs\">Storage costs<\/h3>\n\n\n\n<p>Storage costs refer to the cost of maintaining <a href=\"https:\/\/www.shipbob.com\/warehouse-operations\/inventory-storage\/\">inventory storage systems<\/a>. This can include recurring costs such as rent, utility, security, and employee wages.<\/p>\n\n\n\n<p>Keep in mind that storage costs can quickly add up if you&#8217;re holding stock for too long, especially if some of the inventory has become unsellable (e.g., expired or obsolete). <\/p>\n\n\n\n<p>For unsellable inventory, until these items have been donated or disposed, holding them for too long can quickly impact your bottom line due to higher costs and less sales.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-capital-costs\">Capital costs<\/h3>\n\n\n\n<p>Your capital costs refer to the one-time lump sum expenses required for physically storing your inventory. <\/p>\n\n\n\n<p>This type of cost can involve buying warehouse space, for example. Capital costs are typically the most expensive inventory-related costs for businesses.<\/p>\n\n\n\n<p>Sometimes, you might run into a lack of warehouse space. Increasing <a href=\"https:\/\/www.shipbob.com\/warehouse-management\/warehouse-capacity\/\">warehouse capacity<\/a> can also be associated with this type of costs, so it&#8217;s important to audit your warehouse space a few times a year. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-theft-and-fraud\">Theft and fraud<\/h3>\n\n\n\n<p>You also have to consider the cost of <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/inventory-shrinkage\/\">inventory shrinkage<\/a> resulting from criminal activities, such as theft and fraud.<\/p>\n\n\n\n<p>Dishonest employees and malicious consumers could pose a serious threat to your inventory costs, making it crucial to ramp up your investment in security solutions to protect against these threats.&nbsp;Implementing a thorough <a href=\"https:\/\/seon.io\/resources\/kyc-checklist\/\">KYC checklist for banks<\/a> can further bolster your security measures, ensuring comprehensive vetting processes and minimising the risk of fraudulent activities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-fees-tax-amp-insurance\">Fees (tax &amp; insurance)<\/h3>\n\n\n\n<p>Businesses must also consider the cost of paying for taxes and insurance. Avoiding these costs could have serious implications for your business further down the line. <\/p>\n\n\n\n<p>Since the actual costs and requirements may vary for each industry, we recommend seeking professional guidance on this topic. For example, <a href=\"https:\/\/www.tailorbrands.com\/blog\/llc-business-bank-account\" target=\"_blank\" rel=\"noreferrer noopener\">opening a separate business bank account<\/a> is essential for LLC owners to maintain clear financial separation between personal and business expenses. This distinction not only ensures accurate accounting but also safeguards the limited liability protection that the LLC structure offers. It simplifies tax reporting, demonstrates a commitment to professionalism, and can help in the event of an IRS audit or legal matters, protecting personal assets from business liabilities<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-damage-amp-obsolescence\">Damage &amp; obsolescence<\/h3>\n\n\n\n<p>Inventory can get damaged in storage, which comes with additional costs on its own. <\/p>\n\n\n\n<p>Moreover, there\u2019s the risk of <a href=\"https:\/\/www.shipbob.com\/blog\/obsolete-inventory\/\">inventory becoming obsolete<\/a>, which can occur when you have too much unsold inventory that\u2019s reached the end of its lifecycle. <\/p>\n\n\n\n<p>Businesses end up losing a lot of money on these items since they still need to pay for the cost to procure and carry these items.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-poor-investment-budgeting\">Poor investment budgeting<\/h3>\n\n\n\n<p>When you deploy inventory investment without a proper plan or budget in place, you could risk losing a lot of money. <\/p>\n\n\n\n<p>For example, if you buy inventory without planning how much stock you need, you could risk buying inventory you don\u2019t actually need. This will later add to your carrying costs if it ends up being unsold. <\/p>\n\n\n\n<p>Tracking historical order data and having a system in place to track <a href=\"https:\/\/www.shipbob.com\/inventory-management\/real-time\/\">inventory in real time<\/a> can help improve <a href=\"https:\/\/www.shipbob.com\/blog\/demand-forecasting\/\">demand forecasting<\/a>, so you&#8217;re not overpaying in inventory.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-calculate-inventory-costs\">How to calculate inventory costs<\/h2>\n\n\n\n<p>Your inventory costs have a direct impact on your profits, which is why it&#8217;s important to  accurately calculate your inventory costs, so you can have a clear idea of how much you\u2019re spending on inventory. <\/p>\n\n\n\n<p>Here is a high level overview of how to calculate inventory costs. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-inventory-cost-formula-with-example\">Inventory cost formula (with example)<\/h3>\n\n\n\n<p>Your inventory cost can be calculated using the formula below:<\/p>\n\n\n\n<p><strong>Inventory Cost = (<a href=\"https:\/\/www.shipbob.com\/blog\/beginning-inventory\/\">Beginning Inventory<\/a> + Inventory Purchases) \u2013 <a href=\"https:\/\/www.shipbob.com\/blog\/ending-inventory\/\">Ending Inventory<\/a><\/strong><\/p>\n\n\n\n<p>So, let\u2019s say you start out with $50,000 worth of inventory at the beginning of the year. Over the next 12 months, you end up buying $150,000 worth of inventory. By the end of the year, you have $75,000 worth of inventory remaining. In that case, your inventory costs would be as follows:<\/p>\n\n\n\n<p><strong>Inventory Cost = (50,000 + 150,000) \u2013 75,000 = $125,000&nbsp;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-use-online-inventory-cost-calculators\">Use online inventory cost calculators<\/h3>\n\n\n\n<p>To simplify the process, you can also opt for online inventory cost calculators. These will automate the calculation for you, helping you save time and improve <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/inventory-accuracy\/\">inventory accuracy<\/a>. <\/p>\n\n\n\n<p>You just need to enter the necessary data on your beginning inventory, ending inventory, and inventory purchases throughout the year. <\/p>\n\n\n\n<p>The tool will then automatically make the calculation for you and make the job much more efficient.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-common-inventory-cost-blunders\">Common inventory cost blunders<\/h2>\n\n\n\n<p>Inventory cost calculation doesn\u2019t necessarily create complications for your business. <\/p>\n\n\n\n<p>However, if neglected, it can cause serious issues in different aspects of your <a href=\"https:\/\/www.shipbob.com\/inventory-management\/\">inventory management<\/a>. <\/p>\n\n\n\n<p>Here are some of the inventory cost blunders you should avoid making.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-managing-inventory-post-product-launch\">Managing inventory post-product launch<\/h3>\n\n\n\n<p>It\u2019s a common misconception that you should manage your inventory only after the product launches. <\/p>\n\n\n\n<p>This could put you at risk of having to deal with the expensive cost of disorganized inventory and supply issues. <\/p>\n\n\n\n<p>For example, you might end up selling out soon after launch, so if you didn\u2019t anticipate this beforehand, it might take several months to produce and restock. That means you could risk losing potential customers during the long waiting period.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-neglecting-to-include-inventory-management-when-forecasting\">Neglecting to include inventory management when forecasting<\/h3>\n\n\n\n<p>While previous sales data is often used when forecasting future sales, this data isn\u2019t enough to make accurate predictions. <\/p>\n\n\n\n<p>Many companies underestimate the importance of <a href=\"https:\/\/www.shipbob.com\/inventory-management\/software\/\">inventory management software<\/a> during forecasting, which provides you with important insights to maintain optimal inventory levels at your warehouse. <\/p>\n\n\n\n<p>The right <a href=\"https:\/\/www.shipbob.com\/inventory-management\/inventory-tracking\/\">inventory tracking<\/a> system can help you track SKU performance, average lead times to receive new inventory, <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/inventory-turnover-ratio\/\">inventory turnover rate<\/a>, and more, so you can make accurate predictions on when and how much to restock and when.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-siloing-inventory-management-processes\">Siloing inventory management processes<\/h3>\n\n\n\n<p>Many businesses make the mistake of leaving their inventory management processes to the \u201cpros.\u201d When only a handful of employees can handle your inventory tracking and ordering, it limits <a href=\"https:\/\/www.shipbob.com\/blog\/supply-chain-visibility\/\">supply chain visibility<\/a>. <\/p>\n\n\n\n<p>As a result, you\u2019re more likely to experience bottlenecks that cause delays in stock availability, which ultimately adds to your inventory costs. <\/p>\n\n\n\n<p>Using the right inventory software that\u2019s usable by everyone will ensure better visibility and coordination between team members as they can enjoy improved inventory tracking capabilities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-always-buying-in-bulk\">Always buying in bulk<\/h3>\n\n\n\n<p>Bulk purchases often save you money, but it\u2019s not necessarily the best idea if you don\u2019t use or sell the items before their expiration date. <\/p>\n\n\n\n<p>You\u2019ll only end up losing money on unsold items that either become obsolete or expired.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-understocking\">Understocking<\/h3>\n\n\n\n<p>On the contrary, some businesses may also try to save money by limiting the amount of stock they have. <\/p>\n\n\n\n<p>However, it\u2019s still better to be overstocked than understocked. If your products are consistently out of stock due to an underestimation in demand, you\u2019ll frustrate customers and lose them to the competition.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-underestimating-the-need-for-inventory-management-software\">Underestimating the need for inventory management software<\/h3>\n\n\n\n<p>Inventory management is an intricate process. It&#8217;s  not enough to rely on spreadsheets and manual processes, which can be inefficient and prone to mistakes. <\/p>\n\n\n\n<p>Strategic&nbsp;<a href=\"https:\/\/www.shipbob.com\/ecommerce-inventory\/\">inventory solutions<\/a>&nbsp;can help you get out of these sticky situations.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.shipbob.com\/inventory-management\/inventory-tracking\/\">Tracking inventory<\/a>&nbsp;over time and having contingency plans in place for potential inventory problems will prepare you for situations that would otherwise seriously impact your business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-factors-affecting-your-inventory-costs\">3 factors affecting your inventory costs<\/h2>\n\n\n\n<p>Beyond the predictable costs such as taxes, insurance, and storage costs, there are also other unexpected factors that may affect your inventory costs.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-transit-delays\">1. Transit delays<\/h3>\n\n\n\n<p>Inclement weather and other unforeseen disruptions can cause transit delays in getting inventory to your warehouses. <\/p>\n\n\n\n<p>Recently, the impact of the pandemic on freight and shipping has been monumental. Many companies were affected by congested supply chains due to transit delays, which resulted in expensive stockouts and loss of business.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-sudden-change-in-demand\">2. Sudden change in demand<\/h3>\n\n\n\n<p>Every business can experience a sudden change in demand owing to a number of factors. Bad press could lead to a drastic drop in demand, while an influencer\u2019s raving review could have the opposite effect. <\/p>\n\n\n\n<p>Additionally, geopolitical issues and other factors could also result in unexpected demand changes, which will subsequently affect your inventory costs.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-low-warehouse-vacancy-rates\">3. Low warehouse vacancy rates<\/h3>\n\n\n\n<p>When there\u2019s limited warehouse vacancy, it becomes challenging to offload goods and make room for more seasonal products. <\/p>\n\n\n\n<p>As a result, retailers have to resort to solutions that impact their inventory costs. For instance, the cost of renting new space or getting rid of old stock can have an impact on total inventory costs.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-tips-to-keep-inventory-costs-low\">3 tips to keep inventory costs low<\/h2>\n\n\n\n<p>Despite all these factors and challenges, there are measures you can take to keep your inventory costs low.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-reorder-stock-appropriately\">Reorder stock appropriately<\/h3>\n\n\n\n<p>Using different inventory metrics, you can get better at restocking inventory in the appropriate amounts. You want to make sure you\u2019re not ordering too much or too little stock to avoid the high cost of stockouts and overstocking. <\/p>\n\n\n\n<p>ShipBob, for instance, will use forecasting and analytics to ensure that you\u2019re maintaining optimal inventory levels at all times. <\/p>\n\n\n\n<p>By setting accurate <a href=\"https:\/\/www.shipbob.com\/blog\/reorder-point-formula\/\">reorder points<\/a> and timely reorder notifications, you can <a href=\"https:\/\/www.shipbob.com\/blog\/auto-replenishment\/\">efficiently replenish<\/a> your stock.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p>&#8220;ShipBob lets you manage your inventory while providing important data in a very digestible way. Another ShipBob integration I love is <a href=\"https:\/\/www.shipbob.com\/partners\/inventoryplanner\/\">Inventory Planner<\/a>. It saves me hours every week in Excel spreadsheets, and I can raise a PO in minutes when it used to take me hours. <\/p>\n\n\n\n<p>For every order I placed for years, I was ordering too much or not enough. Between inventory forecasting tools and the ability to auto-create WROs, we don\u2019t have stockouts much anymore. I sleep better at night.&#8221;<\/p>\n<cite>Wes Brown, Head of Operations at <a href=\"https:\/\/www.shipbob.com\/blog\/black-claw\/\">Black Claw LLC<\/a><\/cite><\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-remove-dead-stock\">Remove dead stock<\/h3>\n\n\n\n<p>As much as you want to turn unsold inventory into revenue, the cost of carrying can quickly eat away at your profits if inventory sits on shelves for too long.<\/p>\n\n\n\n<p>Be sure to proactively track and get rid of <a href=\"https:\/\/www.shipbob.com\/inventory-kpis\/dead-stock\/\">dead stock<\/a> accumulation to free up valuable storage space for more high-selling items.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-be-wary-of-deals-when-managing-inventory\">Be wary of deals when managing inventory<\/h3>\n\n\n\n<p>Some suppliers may offer \u201cbuy one, get one free\u201d deals to get rid of unwanted stock. <\/p>\n\n\n\n<p>While this may seem appealing at first, it can also add to your inventory costs since your carrying costs will increase. <\/p>\n\n\n\n<p>Make sure to avoid overstocking simply because you got a great deal. Instead, stick to your original inventory management strategy to avoid the high cost of overstocking.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-shipbob-s-inventory-management-will-save-your-cash\">ShipBob\u2019s inventory management will save your cash<\/h2>\n\n\n\n<p>ShipBob\u2019s fulfilment platform comes with built-in inventory management tools, so you can easily track inventory in real time across multiple fulfilment locations and sales channels with ease.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p>&#8220;We utilise ShipBob\u2019s Inventory API, which allows us to programmatically retrieve real-time data on how many units of each product are currently stored at ShipBob\u2019s warehouses. We currently use this API to generate custom reports to tie this inventory data into our accounting platforms.&#8221;<\/p>\n<cite><a href=\"https:\/\/www.shipbob.com\/blog\/waveform-lighting\/\">Waveform Lighting Team<\/a><\/cite><\/blockquote>\n\n\n\n<p>ShipBob allows you to expand your business without losing sight into the day to day with access to tools that lets you <a href=\"https:\/\/www.shipbob.com\/blog\/sku-management\/\">manage SKUs<\/a>, forecast demand using historical data, set up notifications for inventory replenishment, and more.<\/p>\n\n\n\n<p>Along with managing inventory, you can track costs including storage and <a href=\"https:\/\/www.shipbob.com\/ecommerce-fulfillment\/fulfillment-costs\/\">fulfilment costs <\/a>throughout your entire network. Understanding logistics costs in real time can help you make better decisions and <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-adjustments\/\">adjust inventory levels<\/a> and reorder accordingly.<\/p>\n\n\n\n<p>To learn more about ShipBob&#8217;s <a href=\"https:\/\/www.shipbob.com\/product\/omnichannel-fulfillment\/\">omnichannel fulfilment<\/a> solution, click the button below to receive more information. <\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.shipbob.com\/quote\/\">Request Fulfilment Pricing<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-inventory-costs-faqs\">Inventory costs FAQs<\/h2>\n\n\n\n<p>Here are answers to the top questions about inventory costs.<\/p>\n\n\n\n<div class=\"wp-block-shipbob-blocks-single-faq single-faq direction-col\" data-controller=\"faq-controller\" data-faq-controller-open-value=\"true\"><div class=\"single-faq-title-contianer\"><h4 class=\"single-faq-title\">What are the major components of inventory costs?<\/h4><div class=\"single-faq-expand\" data-faq-controller-target=\"expand\"><img decoding=\"async\" src=\"\/wp-content\/themes\/shipbob-2022\/resources\/svg\/plus-solid.svg\"><\/div><\/div><div class=\"single-faq-childs\" data-faq-controller-target=\"answer\"><div>\n\n<p>There are three primary components that make up inventory costs: ordering costs, carrying costs, and stockout costs. These costs take into account procurement, storage and warehousing fees, and the costs associated to not having enough inventory to meet demand.<\/p>\n\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-shipbob-blocks-single-faq single-faq direction-col\" data-controller=\"faq-controller\" data-faq-controller-open-value=\"true\"><div class=\"single-faq-title-contianer\"><h4 class=\"single-faq-title\">What is not considered part of inventory costs?<\/h4><div class=\"single-faq-expand\" data-faq-controller-target=\"expand\"><img decoding=\"async\" src=\"\/wp-content\/themes\/shipbob-2022\/resources\/svg\/plus-solid.svg\"><\/div><\/div><div class=\"single-faq-childs\" data-faq-controller-target=\"answer\"><div>\n\n<p>Every business is different, but in most cases costs such as production labour, selling, and distribution are not taken into account of overall inventory costs.<\/p>\n\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-shipbob-blocks-single-faq single-faq direction-col\" data-controller=\"faq-controller\" data-faq-controller-open-value=\"true\"><div class=\"single-faq-title-contianer\"><h4 class=\"single-faq-title\">What are the types of inventories?<\/h4><div class=\"single-faq-expand\" data-faq-controller-target=\"expand\"><img decoding=\"async\" src=\"\/wp-content\/themes\/shipbob-2022\/resources\/svg\/plus-solid.svg\"><\/div><\/div><div class=\"single-faq-childs\" data-faq-controller-target=\"answer\"><div>\n\n<p>Types of inventory includes <a href=\"https:\/\/www.shipbob.com\/blog\/raw-materials-inventory\/\">raw materials inventory<\/a>, <a href=\"https:\/\/www.shipbob.com\/blog\/work-in-process-inventory\/\">work in progress inventory<\/a>, and finished goods. Unless your business sells raw materials to other businesses or handcrafted goods to customers, most ecommerce businesses only manage finished goods once they are received from the supplier. <\/p>\n\n<\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Learn the different factors that influence inventory costs, plus how you can calculate and better track inventory to improve your bottom line.<\/p>\n","protected":false},"author":193,"featured_media":3599,"parent":0,"template":"","meta":{"content-type":"","inline_featured_image":false,"footnotes":""},"blogcategories":[8,14],"class_list":["post-3598","blog","type-blog","status-publish","has-post-thumbnail","hentry","blogcategories-inventory","blogcategories-supply-chain"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.5 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Inventory Costs: Inventory Expenses Formula And Guide<\/title>\n<meta name=\"description\" content=\"Learn the different factors that influence inventory costs, plus how you can calculate and better track inventory to improve your bottom line.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What are Inventory Costs? The Types of Inventory Expenses and How to Calculate Them\" \/>\n<meta property=\"og:description\" content=\"Learn the different factors that influence inventory costs, plus how you can calculate and better track inventory to improve your bottom line.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/\" \/>\n<meta property=\"og:site_name\" content=\"ShipBob Australia\" \/>\n<meta property=\"article:modified_time\" content=\"2025-09-18T16:37:21+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.shipbob.com\/au\/wp-content\/uploads\/sites\/33\/2022\/09\/inventory-costs.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1400\" \/>\n\t<meta property=\"og:image:height\" content=\"560\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"12 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/\",\"url\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/\",\"name\":\"Inventory Costs: Inventory Expenses Formula And Guide\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/wp-content\\\/uploads\\\/sites\\\/33\\\/2022\\\/09\\\/inventory-costs.jpg\",\"datePublished\":\"2022-09-14T06:00:00+00:00\",\"dateModified\":\"2025-09-18T16:37:21+00:00\",\"description\":\"Learn the different factors that influence inventory costs, plus how you can calculate and better track inventory to improve your bottom line.\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/#breadcrumb\"},\"inLanguage\":\"en-AU\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-AU\",\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/#primaryimage\",\"url\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/wp-content\\\/uploads\\\/sites\\\/33\\\/2022\\\/09\\\/inventory-costs.jpg\",\"contentUrl\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/wp-content\\\/uploads\\\/sites\\\/33\\\/2022\\\/09\\\/inventory-costs.jpg\",\"width\":1400,\"height\":560,\"caption\":\"inventory costs\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Blog\",\"item\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"What are Inventory Costs? The Types of Inventory Expenses and How to Calculate Them\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/#website\",\"url\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/\",\"name\":\"ShipBob Australia\",\"description\":\"Just another ShipBob Network site\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-AU\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Inventory Costs: Inventory Expenses Formula And Guide","description":"Learn the different factors that influence inventory costs, plus how you can calculate and better track inventory to improve your bottom line.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/","og_locale":"en_US","og_type":"article","og_title":"What are Inventory Costs? The Types of Inventory Expenses and How to Calculate Them","og_description":"Learn the different factors that influence inventory costs, plus how you can calculate and better track inventory to improve your bottom line.","og_url":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/","og_site_name":"ShipBob Australia","article_modified_time":"2025-09-18T16:37:21+00:00","og_image":[{"width":1400,"height":560,"url":"https:\/\/www.shipbob.com\/au\/wp-content\/uploads\/sites\/33\/2022\/09\/inventory-costs.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"12 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/","url":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/","name":"Inventory Costs: Inventory Expenses Formula And Guide","isPartOf":{"@id":"https:\/\/www.shipbob.com\/au\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/#primaryimage"},"image":{"@id":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/#primaryimage"},"thumbnailUrl":"https:\/\/www.shipbob.com\/au\/wp-content\/uploads\/sites\/33\/2022\/09\/inventory-costs.jpg","datePublished":"2022-09-14T06:00:00+00:00","dateModified":"2025-09-18T16:37:21+00:00","description":"Learn the different factors that influence inventory costs, plus how you can calculate and better track inventory to improve your bottom line.","breadcrumb":{"@id":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/#breadcrumb"},"inLanguage":"en-AU","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/"]}]},{"@type":"ImageObject","inLanguage":"en-AU","@id":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/#primaryimage","url":"https:\/\/www.shipbob.com\/au\/wp-content\/uploads\/sites\/33\/2022\/09\/inventory-costs.jpg","contentUrl":"https:\/\/www.shipbob.com\/au\/wp-content\/uploads\/sites\/33\/2022\/09\/inventory-costs.jpg","width":1400,"height":560,"caption":"inventory costs"},{"@type":"BreadcrumbList","@id":"https:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.shipbob.com\/au\/"},{"@type":"ListItem","position":2,"name":"Blog","item":"https:\/\/www.shipbob.com\/au\/blog\/"},{"@type":"ListItem","position":3,"name":"What are Inventory Costs? The Types of Inventory Expenses and How to Calculate Them"}]},{"@type":"WebSite","@id":"https:\/\/www.shipbob.com\/au\/#website","url":"https:\/\/www.shipbob.com\/au\/","name":"ShipBob Australia","description":"Just another ShipBob Network site","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.shipbob.com\/au\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-AU"}]}},"parsely":{"version":"1.1.0","canonical_url":"https:\/\/shipbob.com\/au\/blog\/inventory-cost\/","smart_links":{"inbound":0,"outbound":0},"traffic_boost_suggestions_count":0,"meta":{"@context":"https:\/\/schema.org","@type":"WebPage","headline":"What are Inventory Costs? The Types of Inventory Expenses and How to Calculate Them","url":"http:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/","mainEntityOfPage":{"@type":"WebPage","@id":"http:\/\/www.shipbob.com\/au\/blog\/inventory-cost\/"},"thumbnailUrl":"https:\/\/www.shipbob.com\/au\/wp-content\/uploads\/sites\/33\/2022\/09\/inventory-costs.jpg?w=160","image":{"@type":"ImageObject","url":"https:\/\/www.shipbob.com\/au\/wp-content\/uploads\/sites\/33\/2022\/09\/inventory-costs.jpg"},"articleSection":"Uncategorized","author":[{"@type":"Person","name":"Meredith Flora"}],"creator":["Meredith Flora"],"publisher":{"@type":"Organization","name":"ShipBob Australia","logo":""},"keywords":[],"dateCreated":"2022-09-14T06:00:00Z","datePublished":"2022-09-14T06:00:00Z","dateModified":"2025-09-18T16:37:21Z"},"rendered":"<script type=\"application\/ld+json\" class=\"wp-parsely-metadata\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@type\":\"WebPage\",\"headline\":\"What are Inventory Costs? The Types of Inventory Expenses and How to Calculate Them\",\"url\":\"http:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/\",\"mainEntityOfPage\":{\"@type\":\"WebPage\",\"@id\":\"http:\\\/\\\/www.shipbob.com\\\/au\\\/blog\\\/inventory-cost\\\/\"},\"thumbnailUrl\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/wp-content\\\/uploads\\\/sites\\\/33\\\/2022\\\/09\\\/inventory-costs.jpg?w=160\",\"image\":{\"@type\":\"ImageObject\",\"url\":\"https:\\\/\\\/www.shipbob.com\\\/au\\\/wp-content\\\/uploads\\\/sites\\\/33\\\/2022\\\/09\\\/inventory-costs.jpg\"},\"articleSection\":\"Uncategorized\",\"author\":[{\"@type\":\"Person\",\"name\":\"Meredith Flora\"}],\"creator\":[\"Meredith Flora\"],\"publisher\":{\"@type\":\"Organization\",\"name\":\"ShipBob Australia\",\"logo\":\"\"},\"keywords\":[],\"dateCreated\":\"2022-09-14T06:00:00Z\",\"datePublished\":\"2022-09-14T06:00:00Z\",\"dateModified\":\"2025-09-18T16:37:21Z\"}<\/script>","tracker_url":"https:\/\/cdn.parsely.com\/keys\/shipbob.com\/p.js"},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/blog\/3598","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/blog"}],"about":[{"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/types\/blog"}],"author":[{"embeddable":true,"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/users\/193"}],"version-history":[{"count":3,"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/blog\/3598\/revisions"}],"predecessor-version":[{"id":23094,"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/blog\/3598\/revisions\/23094"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/media\/3599"}],"wp:attachment":[{"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/media?parent=3598"}],"wp:term":[{"taxonomy":"blogcategories","embeddable":true,"href":"https:\/\/www.shipbob.com\/au\/wp-json\/wp\/v2\/blogcategories?post=3598"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}