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How Self Storage Can Lower Your Inventory Costs

Admin | April 6, 2025 @ 12:00 AM

Inventory management involves managing the costs associated with maintaining inventory levels as purchasing and selling products, which can be categorized into holding costs and operating costs. Holding costs pertain to the expenses incurred from storing products for a period of time while operational costs encompass the expenses involved in overseeing the inventory process. The expenses linked to inventory management—also known as carrying costs—encompass all the costs associated with storing goods. According to Columbia Business School, these costs include warehousing expenses, insurance, depreciation, obsolescence, and the capital tied up in inventory (Columbia Business School, 2021). Operational costs, on the other hand, can involve not just labor but software and systems needed to track and control inventory efficiently (Shopify, 2023). The prices are influenced by the characteristics of the product and fluctuations in consumer interest, but remain higher than self storage even at low points.

Storing items, in a warehouse or self storage unit, incurs a cost for maintaining space to store your possessions securely and neatly; this expense can vary based on the storage location and size utilized by individuals or companies as well as inventory accumulated over time depending on the products being stored. According to research by Gurtu in 2021, it's important for businesses selling products to consider the space each item occupies when calculating inventory holding expenses; this is because storing items with value but high volume, such as tissue paper, can lead to higher storage costs compared to other expenses (Gurtu, 2021). Essentially, money that could have been utilized for aspects of the company's operations gets tied up in inventory—a concept known as opportunity cost. In fact, the capital invested in inventory is money not available for investment in marketing, product development, or other business growth initiatives (Bonga University, 2021). There is room to explore and invest in business expansion opportunities when a significant amount of capital is not tied up in slow-moving inventory items.

According to research on Economic Order Quantity (EOQ), businesses can cut costs by adjusting order quantities to strike a balance between procurement and storage expenses, which is crucial for managing their inventory as it directly impacts cash flow and profitability (MDPI, 2021). This makes inventory management an ongoing cost that companies must monitor and optimize continuously. Balancing stock levels to meet customer needs is essential; however, if inventory is not managed well it can result in excess costs and financial difficulties. The costs of holding inventory can average 20–30% of total inventory value per year, according to academic studies (MDPI, 2021), which underscores the significance of careful inventory planning.

All things considered, let’s discuss the elements influencing inventory control expenses. We will also talk about the benefits of self storage in inventory management and the perks of partnering with a storage service provider. Accumulating goods raises the chances of them becoming outdated or unsellable due to changing consumer preferences or market requirements. In sectors with fast product turnover or changing customer preferences, like tech industries, being up to date is crucial for success in business today. A new research found that having outdated stock can be a headache for companies, as it results in higher depreciation and financial losses due to tying up capital in unsold goods that could have been used elsewhere profitably (Europe PMC, 2005). This situation also raises the chances of having to discount products or write them off as losses in the records, which is not good news for both owners and managers. For instance, when $10,000 is put into inventory instead of being allocated to marketing, product growth, or enhancing customer service, it may hinder companies from seizing growth opportunities (Bonga University, 2021). Additionally, maintaining the goods in stock comes with storage expenses. Companies often pay fees to safeguard their inventory against destruction, theft, and other risks, which contributes to the cost of keeping inventory (Shopify Retail, 2023).

Businesses often opt for insurance to safeguard their stock against damage or theft and reduce setbacks that may arise as the value of the inventory increases. Along with insurance premiums, expenses rise as inventory grows in value. This situation may necessitate taking preventive measures to secure the items, such as installing security systems or employing security personnel, which increases overall holding costs (Shopify, 2023). Storing items for an extended period heightens the risk of decay or becoming outdated, especially in industries characterized by rapid technological advancements or those with products having short lifespans, like fashion or electronics (Europe PMC, 2005). This could result in missed sales opportunities and the need to offer discounts. Based on studies, durable goods like furniture pose risks for businesses managing them compared to trendy or perishable items, which may incur higher holding costs because they may go out of style over time. The expenses related to keeping inventory are a factor for companies selling a variety of products, as they can greatly impact their profits. For example, the expenses of running a store that offers a range of products may differ based on factors like the size and weight of items and the level of customer demand. Business proprietors who understand how inventory levels can affect their profits might face pricing inaccuracies and decreased earnings when estimating inventory holding costs inaccurately (MDPI, 2021). To secure success and operational efficiency, a company can manage its inventory expenses strategically by utilizing methods such as EOQ (Economic Order Quantity), JIT (Just In Time), and enhancing inventory turnover rates tailored to the unique requirements of the business and its product range (Shopify, 2023).

For medium-sized businesses out there, the idea of renting warehouse space might feel like an extra burden when it comes to unnecessary overhead costs. Instead of committing to lengthy warehouse leases with fixed terms and expenses that may not align with their evolving requirements or financial plans, companies could consider the budget-friendly self storage alternatives (SBA.gov, 2023). Self storage facilities offer businesses the freedom to rent space on a flexible basis, rather than being locked into extended commitments like warehouse agreements that limit their ability to adjust storage capacity as required (Shopify Blog, 2023). This setup is advantageous for companies and individuals with fluctuating needs throughout the year. Moreover, renting self storage units usually comes at a lower cost compared to leasing warehouse space, making it an appealing choice for budget-conscious businesses seeking efficient storage solutions (Shopify Blog, 2023). According to the U.S. Small Business Administration, storage space should be included in any realistic business startup cost calculation, and choosing a scalable self storage option can reduce up-front capital risk.

Businesses have a range of storage solutions to choose from when considering their storage needs. Among these options is Derrel’s Mini Storage, which provides various unit sizes to cater to storage requirements without unnecessary space wastage. Most self storage facilities prioritize security measures such as climate control systems and round-the-clock surveillance to safeguard and maintain the condition of stored items (Shopify Blog, 2023). These storage facilities are commonly situated in areas for access to stored inventory without the need for long journeys. To ensure that items stored are secure and give business owners confidence in protecting their stock from theft or harm, various self storage facilities like Derrel’s Mini Storage incorporate security features such as surveillance cameras and controlled access. Clients are usually comforted by the presence of security measures like alarms for each unit and entry points, like gated entrances and CCTV systems. Businesses might have to consider using storage units with controlled climates for items or materials sensitive to temperature to improve convenience and protect valuable items such as documents or electronic devices (Shopify, 2023). Storing inventory in climate-controlled areas reduces the risk of goods deteriorating or becoming outdated due to storage conditions, providing protection against damage caused by temperature and humidity fluctuations.

Balancing inventory management involves meeting consumer needs while controlling costs that can escalate over time due to expenses and storage fees; moreover, there is the risk of products becoming obsolete with time. Fortunately, self storage provides a financial solution for companies seeking to enhance their inventory management practices. Collaborating with a provider such as Derrel’s Mini Storage allows businesses to cut expenses and enhance oversight of their inventory. This partnership enables businesses to allocate funds for growth initiatives (Shopify, 2023; SBA.gov, 2023).

In summary, using self storage solutions as part of your inventory management strategy can significantly enhance your business’s ability to optimize cash flow, reduce holding and operating costs, and free up resources for future growth. For small and medium businesses, especially, these strategies provide a competitive edge in today’s dynamic market (Shopify, 2023; MDPI, 2021).

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