Inventory Cost Realization

The downturn in the oil and gas sector has caused companies to review the true cost of holding inventory. A major oil company in the US has determined through an external consulting firm that the actual cost to hold inventory is 25% per year of their original product cost.

By way of example, an operator carrying $100 million in cra tubing inventory for a specific project for 8 years has approximately $300 million in total costs of carrying inventory. Add to this the potential alternative use of the funds and the obsolescence of current specifications and threads and the costs and risks of carrying this inventory are excessive.

The need to carry such inventory can be reduced substantially by CRA’s just in time delivery capabilities. By ensuring the operator that they will have the material they need when they need it affords them the ability to save money and to allocate funds in a more aligned fashion to their core business.