Inventory carring cost is the cost incurred because we decide to carry inventory

Elements of icc
Capital cost
Deteriorations cost
Obsolescence cost
Storage cost
Insurance cost

Procurement cost: it’s the cost incurred in placing the order

Machinery cost

Stock out cost it is the cost opposite to inventory cost inventory cost is the cost
because we decide to carry inventory but stock out cost is the cost bcoz we decide not
to carry any inventory

Procedure to design inventory control system

ABC analysis
Calculate eoq (economic order quantity)
Modify eoq to overcome constraints
Replenishment system
(20% of total variety of items that we carry as inventory is responsible
for 80% of annual purchase bill)