Consumers have bought into the notion that One Day shipping is what’s best for them, and Amazon has done just as well selling the notion that this can all get done simply because they have the scale, the logistics assets and distribution model in place to successfully deliver to you in One Day.
What isn’t in any of this press or talked about on TV is the extra costs of this model. Yes, this all costs more.
The biggest piece missing in all this is a simple business finance line called Inventory Carrying Cost. For decades supply chains have worked on Just in Time distribution models to help mitigate or sometimes eliminate Inventory Carrying Costs for a company.
Inventory carrying cost is the sum of the cost to “hold” Inventory. Some of thes…