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The Definitive Guide to Modern Supply Chain Management (Collection) by Sara Lewis, Michael Watson, John Bell, Thomas J. Goldsby, Peter Cacioppi, Jay Jayaraman, Chuck Munson, Chad W. Autry, Mark A. Moon

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7. Introducing Facility Fixed and Variable Costs

This chapter discusses the costs of facilities. We will model these costs in two categories: fixed and variable. They can be applied to plants and warehouses.

The fixed costs are a one-time charge independent of the volume. This could be the cost of building the site; expanding the site; adding equipment to the site like extra lines or equipment in plants, additional racking or automation in warehouses; paying taxes; or staffing the location. The fixed cost could be thought of as a one-time capital investment or as an annual fixed operating cost. Capital investments are treated differently than fixed operating costs because they are depreciated over time and you do not necessarily need to justify ...

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