How VMI Cuts Carrying Costs and Frees Up Floor Space

Carrying cost is the yearly cost of holding stock. Industry estimates put it at 20% to 30% of average inventory value per year.

• Tied-up cash. Money sitting on a shelf instead of in equipment or payroll. Usually the biggest piece.
• Floor space, racking, and utilities.
• Moving, counting, and re-stacking supplies.
• Damage and waste. Crushed boxes, dusty film, and items you stop using.

1. Usage-based levels. Each item’s minimum and maximum comes from what you actually use.
2. Frequent counts. Weekly or biweekly counts let you hold less, since restock comes sooner.
3. Adjusted as you change. Levels go up for busy season and down when a product line ends.
4. No panic orders. Steady stock replaces the cycle of running out, then overbuying.

1. Estimate the dollar value of packaging on hand today.
2. Multiply by 25% for your yearly carrying cost.
3. Estimate how much stock right-sized levels would remove.

$60,000 of packaging on hand costs about $15,000 a year to carry. Cutting stock by a third saves about $5,000 a year and clears floor space for production.

Send us a rough count of what’s on your shelves, and we’ll suggest levels based on your usage.

S&S Incorporated · Packaging made easy since 1965 21300 St. Clair Avenue, Cleveland, OH 44117 216-383-1880 · info@sspkg.com · www.sspackaging.com Monday–Friday, 7:00 AM–3:30 PM