From the course: Excel Supply Chain Analysis: Solving Inventory Problems

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Compare setup costs and holding costs

Compare setup costs and holding costs - Microsoft Excel Tutorial

From the course: Excel Supply Chain Analysis: Solving Inventory Problems

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Compare setup costs and holding costs

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- [Instructor] When you place orders to get new inventory you are interested in finding and minimizing your total costs. So what goes into these calculations? Your two cost components are the cost of placing an order, it just seems like you tell people to place an order and they do but their time that is their salary costs you money while they're doing it. Also holding inventory costs money. You tend not to think of inventory as a cost. It's easy to forget that holding onto inventory cost money because the space in your warehouse or store room could be used for something else. So how do you find the lowest total cost? Well, you can do it graphically by creating a chart or you can do an analytically using formulas in Excel or another spreadsheet. So let's take a look calculating total cost and visualizing them on a chart. In this case, I need to know three different pieces of information, the amount it costs for each order,…

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