Warehousing total supply chain costs

Total supply chain cost is the sum of inventory, transport, warehousing, and routing costs. This cost is affected by the structure of the chain, capacity of transportation, required coordination between locations for managing consistent operation, and competitiveness of the mode used, which will affect costs and the competitiveness of the business environment, thereby affecting the desired service required. 

Large warehousing cost When facility costs are high for the warehouses, they form a larger share of the total supply chain costs. 

The medical supply manufacturer asked a consulting firm to identify the total costs as the product moved through the supply chain. The right side of Figure 1.11 shows the costs added due to warehousing, transportation, inventory, and administration as the product moves through the supply chain. The data showed that about 45% of the costs were added after the product left the manufacturer. 

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