We need to think about the cost of warehousing both as part of the Fixed Costs (either Factory or possibly Sales & Distribution if it is for finished items) and when considering stock holding costs.
Always interesting to see real examples. Here is coverage of the development of warehousing at the Coca Cola plant about 1 mile from my home. A warehouse we can see going up.
£39 million pounds of investment!
We consider the additional stage of dealing with Abandonment Costs at the end of a product Life Cycle. making sure that the company makes enough profit over the life time of a product to be able to cover the costs of closing the product down (laying off staff, decommissioning factories, covering potential liabilities etc.).
Handy if you can get the Government (Taxpayer) to do it for you as in this case where Shell have been given £112m as a contribution to decommissioning the North Sea oil fields.
There were suggestions that paper based books were in the decline phase as purchasers switched to e-books.
It now looks like those predictions may have been premature.
Trends can not only affect overall demand for a product, but demand for the source of a particular product.
Over recent years we have seen a change in the amount of organic vegetables bought as a proportion of all vegetable sales and the rise of gluten free bread.
Here is another example and one that is concerning the big producers. As gin sales go up, they are not necessarily maintaining market share.
With Labour costs being a major element of production costs, improvements in productivity per labour hour are very important. However, over recent years, productivity ahs been falling.
Will developments in technology reverse this?
We’ve discussed how hard it is for human beings to ignore the money they have already spent “We can’t stop now after spending all this money!”, when in reality they should be looking at whether future expenditure brings sufficient benefits.
It is interesting to see an example where a major project is abandoned despite the spending of very large sums.
Here the example is the Garden Bridge.
https://inews.co.uk/essentials/news/health/tap-exam-success-glass-water/
We are used to the idea of indices showing an upward trend, but in calculating we need to be also able to deal with the situation when costs/values fall.
An example would be house prices currently.
Comprehensive discussion of Target Costing.
