Indian Institute of Technology Kanpur
Whether corporate organization or service organization, all have to be cost conscious. They must spend in inventories very wisely. Consider the fact that the typical manufacturing firm spends, on average, 56 percent of revenue to cover the direct cost of purchased goods, with this percentage figure being even higher for the typical wholesaler or retailer. Add to this figure the indirect cost of having to manage inventory of purchased goods (which has been estimated to be 30-35 percent of the value of purchased goods) and the total cost of purchased goods inventory can be quite alarming.