Lean Strategies International
Menu

Glossary

Would you like to add a term to the community? Click Here!

Ordering Cost

1/12/2023

0 Comments

 
Ordering Costs
Click on the Photo to Learn More About Item Level Inventory!
  Order Cost is defined as; a direct labor cost that is incurred when an order is placed.  Ordering costs are different from the “Order Costs”. 
Click Here to Subscribe to Our YouTube Channel.
  The ordering costs are all the costs associated with the purchase order and any labor involved in inspecting the goods when received, any labor associated with stocking the received items, invoicing suppliers and issuing payments.  Ordering costs can typically vary tremendously between orders.  
Examples of Ordering Costs
  • Some examples of ordering costs might include the administrative tasks that are associated with generating a purchase order.  Such as computer work, communication, analysis as well as tracking orders and ensuring that vendors receive there payments.
  • Another example of ordering costs that are often overlooked are the costs associated with receiving orders in, inspecting or checking the orders and ensuring that the order is handled in an appropriate way.
  • Lastly, ordering costs can also occur internally within a manufacturing plant.  For example there may be time taken to set up your order or tear down your order.  These costs can in some organizations be attributed to ordering costs as well.  It is important to note that when setup and teardown times are excessive, a company loses capacity and that also means they are not producing value.
Building a Template for Ordering Costs
Click Here to Subscribe to Our YouTube Channel.
Summary
  You now know what ordering costs are.  In short, ordering costs are the costs that increase as the number of orders placed increases.  In other words ordering costs are directly related to the number of orders placed and not the volume of order.  This includes costs that may be related to different types of clerical work, like, preparing, releasing, monitoring and receiving orders; It can also include the physical handling of goods; inspections and setup costs.
Click Here to Subscribe to Our YouTube Channel.
Challenge:
  • Now let's stretch our minds with this new knowledge.  You can share your answer in the comments section, community or upcoming assignments section.  What are some examples of ordering costs that you are aware of at your place of work?
Click here to purchase your template
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.


    Glossary


    Subscribe below and receive lean, six sigma, operations, supply chain, logistics, distribution and business terms in your mailbox.

    CLICK HERE TO SUBSCRIBE

    Categories

    All
    #
    01. Add A Term
    3D
    3PL
    3P's
    5 Principles
    5S
    5 Why's
    6σ
    8 Wastes
    A
    B
    C
    D
    E
    F
    G
    H
    I
    J
    K
    L
    M
    N
    O
    P
    Q
    R
    S
    T
    U
    V
    VSM Shapes
    W
    X
    Y
    Z

    Archives

    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    May 2020
    April 2020
    March 2020
    November 2019
    October 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    March 2018
    February 2018
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    November 2015

Lean Strategies International LLC.
Follow Us on YouTube or Our Other Channels Below.
             ©2015-2021 Lean Strategies International LLC.  
  • Home Page
  • Services
    • Training >
      • Waste Training
      • Introduction to Lean
      • Lean Champions >
        • Lean Six Sigma White Belt
        • Lean Six Sigma Yellow Belt
      • Lean Tools You Can Use Series! >
        • The 5S System
        • The ©Gemba Methodology
        • The FISH Methodology
        • The CURE Methodology
        • Quick Changeover with REDUCE
        • Mistake Proofing and the Poka Yoke System
        • The Just in Time System
  • Lean Resources
    • Listen to The Gemba
    • Glossary
    • Lean and Six Sigma Quotes
    • Recommended Reading
    • Events
    • Masters of Lean and Six Sigma
    • Career /Jobs
  • Store
    • Workspace
  • Home Page
  • Services
    • Training >
      • Waste Training
      • Introduction to Lean
      • Lean Champions >
        • Lean Six Sigma White Belt
        • Lean Six Sigma Yellow Belt
      • Lean Tools You Can Use Series! >
        • The 5S System
        • The ©Gemba Methodology
        • The FISH Methodology
        • The CURE Methodology
        • Quick Changeover with REDUCE
        • Mistake Proofing and the Poka Yoke System
        • The Just in Time System
  • Lean Resources
    • Listen to The Gemba
    • Glossary
    • Lean and Six Sigma Quotes
    • Recommended Reading
    • Events
    • Masters of Lean and Six Sigma
    • Career /Jobs
  • Store
    • Workspace