Shorten the data provided below includes bullet points with short explanation "Types of Inventory Costs

Inventory costs are the expenses associated with ordering, holding, and managing inventory. They are critical to inventory control and affect the overall profitability of a business. The main types of inventory costs are:

$1.$ Ordering Costs

Definition: Costs incurred in placing and receiving orders for inventory.

Components:

Administrative expenses for processing purchase orders. Transportation and shipping costs. Inspection and handling of received goods.

Impact: Higher order frequencies increase ordering costs.

$2.$ Holding Costs $($Carrying Costs$)$

Definition: Costs of storing and maintaining inventory over time.

Components:

Storage costs: Rent, utilities, and maintenance of warehouses. Insurance: Protection against risks like theft or damage. Depreciation and obsolescence: Reduction in value due to age or market changes. Opportunity cost: Capital tied up in inventory that could be used elsewhere.

Impact: Higher inventory levels increase holding costs.

$3.$ Shortage Costs $($Stockout Costs$)$

Definition: Costs incurred when inventory is insufficient to meet demand.

Components:

Loss of sales revenue. Customer dissatisfaction or loss of loyalty. Extra costs for expedited orders to replenish stock.

Impact: Frequent stockouts harm customer relationships and disrupt operations.

$4.$ Setup Costs

Definition: Costs incurred when changing production setups to produce different products.

Components:

Machine adjustments and downtime. Labor costs for reconfiguring equipment.

Impact: More frequent changes lead to higher setup costs.

$5.$ Procurement Costs

Definition: Costs related to sourcing and acquiring inventory.

Components:

Vendor selection and contract negotiation. Quality checks and approvals.

Impact: Depends on the complexity of the procurement process.

$6.$ Risk Costs

Definition: Costs associated with risks of holding inventory.

Components:

Damage: Costs due to spoilage or breakage. Theft: Losses from pilferage or shrinkage. Market risks: Costs due to price drops or technological obsolescence.

Impact: Poor inventory management increases risk costs.

$7.$ Transportation Costs

Definition: Costs of moving inventory from suppliers to storage or from storage to customers.

Components:

Freight charges. Fuel and labor for logistics$.$ Costs of managing transportation operations.

Impact: Inefficient logistics increase these costs.

$8.$ Opportunity Costs

Definition: The potential benefits lost when capital is tied up in inventory instead of being invested elsewhere.

Components:

Interest or returns on alternative investments.

Impact: Higher inventory levels exacerbate opportunity costs.