Definition

  • Fixed cost is a cost that is incurred if there is any flow through a facility or lane.  It is assigned by activity.


Usage

  • Startup cost

  • Non variable costs like management labor or lease rates

  • Inventory Holding Costs for cycle stock

  • Dummy costs to encourage fewer facilities



NOTE

  • When solving for least landed cost, fixed costs have the effect of limiting the number of facilities utilized

  • Example:  It is possible to solve for the best 5 facilities and the solver will return 4 if that truly is the lowest landed cost solution.