Inventory caused by lot sizes

The second and last cause of the required capital tie-up in inventory of parts attributable to operations are the lot sizes (Fig. 51). 

We had already determined that the lot sizes cannot be calculated on the basis of machine hour rates and statistical non-recurring costs for external orders. This would result in unjustifiably high capital tie-up. 

Let us take the time to remind ourselves that, in addition to the non-recurring costs, the lot sizes are defined by a second influencing factor you determine, namely, the storage cost. 

The storage cost is expressed as a percentage. A storage cost rate of 25% means that 25% of the capital tie-up per year occurs in inventory in order to finance, manage, store, etc. said inventory. 

Interest makes up a relatively large percentage of the storage costs. You have the advantage that every entrepreneur is free to set this interest rate on his own and to change it, depending on how important additional liquidity currently is to him. 

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