Kapitalbindung (EN)

Capital binding in the warehouse context

Capital binding refers to the financial resources that are invested in a company's inventory and are therefore not available for other investments. Typically, capital binding causes the highest warehousing costs, as the tied-up capital incurs interest costs and cannot be used for profitable activities. An optimal inventory policy aims to minimize capital binding without jeopardizing delivery capability and customer satisfaction.

Visualization of capital binding

flowchart TD     A[Purchase] --> B[Inventory]     B --> C[Production]     B --> D[Sales]     C --> E[Finished products]     E --> D     D --> F[Sales revenue]     B --> G[Capital binding]     G --> H[Interest costs]     G --> I[Opportunity costs] 

In context

• Typically used together with inventory turnover, safety stock, and reorder point
• Related to: Warehousing costs, Working capital, Liquidity
• Example use: A company with 500,000 € inventory at 5% interest has annual interest costs of 25,000 €