Trading/Investing Thread - Page 149

On September 26 2025 01:10 Uldridge wrote:
Okay, can anyone help me out here?
Today I got into an discussion with a colleague who claimed that putting too much stock of a raw material in the warehouse (to be used in a product), was at the very least suboptimal and even losing capital. I posited that, even if the stock for this product (fixed price btw), had a guarantee use, that this wouldn't be too much of a problem because the turnover is guaranteed. He also threw a number around that putting a product on stock costs like a fixed sum per pallet or something (which I don't really understand and I assume this is where the devaluation of the raw materials is coming from). If my company owns all the items and the warehouse included, how is it losing money to stock an item for an unforseeable time when this item will 100% be used at a point in time?

I see 3 issues that could become a problem when putting too much stock:
1) hampering warehouse efficiency. Putting too much causes too little space for literally fitting everything and because turnover rate is high for many items this causes a fixed % of the warehouse being unusable and basically hampering your flexibility.
But, we have enough space.
2) buying the materials up front and the market value then decreasing subsequently. This leaves you with an overpriced material that you'll have to sell at a loss.
But this item has a fixed price.
3) buying too much of the material anticipating a turnover that just doesn't happen. This leaves you with a raw material that becomes dead weight for you and so this is a loss for when you sell to a third party with a big discount.
But, this product will sell and the expiry date is very long.

So am I missing something here? Why is there an opex for assets that we literally own? Or is this just accounting just so you can drive business or something (i.e. Things have to mooooooooove).

On September 26 2025 06:50 KwarK wrote:
Charging someone for an answer that has already been provided by another is a classic consultant play.

On September 26 2025 04:19 Acrofales wrote:

In addition to the opportunity cost, I have to quibble with point (1): you have space. Space costs money. You rent a warehouse (or have bought a warehouse). That's a cost you want to minimise. At absolutely perfect efficiency you need no warehouse at all: the product comes in and is already needed in production. This is the dropshipping way, and is great if your supply is always guaranteed with known delivery times. But recent "hiccups" have shown this isn't necessarily the best option: the accident in the Suez canal, COVID, Yemeni rebels, tariffs, etc. all caused delays and/or uncertainty in international supply lines. So relying on prompt and reliable delivery is risky and having storage provides some slack in delivery, at the cost of having to store materials. That IS a cost. Even if you "have the space", because you could be doing something else with that space. There's also the risk of breakage or spoilage, even if they have a long expiry date: rats, humidity, moths, etc.etc. could ruin a batch, so you have to invest in things to keep your warehouse clean, dry, etc. and the more storage space you have the greater that cost.