Second, the true cost of inventory simply entails many elements and goes far beyond the cost of goods sold or raw materials. Managing and maintenance expenses immediately come to mind, but it doesn't stop here. Add to this insurances, interests, shrinkage, etc. The list is actually long. In this article we endeavor to produce a clear typology of these costs to help managers get a better understanding of where they should start looking for when determining their inventory costs.
While we might try to give rule of thumb estimates for some of these, the reader has to keep in mind that each of these costs is extremely business specific and depends on policies and management decisions (ex: the decision to use third party services providers, or to apply a just-in-time inventory policy, etc.).