Inventory is the lifeblood of any business that deals with the buying, selling, or production of goods. It represents the stock of goods a company holds to meet customer demand and fulfill its operational needs. Accurate inventory management is vital for maintaining a smooth supply chain, meeting customer expectations, and ensuring financial stability. To achieve these objectives, businesses must comprehend the concept of inventory cost and how it influences their financial statements and decision-making processes.
What is Inventory Cost?
Inventory cost, also known as carrying cost or holding cost, refers to the expenses incurred by a business to acquire, store, and maintain its inventory until it is sold or used in production. It encompasses various components that directly or indirectly impact the overall value of inventory. Understanding these costs is crucial for businesses to make informed decisions regarding their inventory levels, pricing strategies, and financial health.
Steven J. Weil, Ph.D., a seasoned industry expert and President at RMS Accounting, delves into the practical aspects of inventory costing and inventory tracking in real-world scenarios. According to him,
“The best way to track shrinkage is still regular physical inventories, to check that what the system is saying is correct.”
“We typically want to cost the stock by departments. Setting similar margins in each department is easier to track. These similar margins show us when there is shrinkage and how much that product is bringing in (and what it could be bringing in).”
Read Also: What is Landed Cost and How to Calculate It
Cost of Goods Sold vs. Inventory
COGS refers to the direct costs incurred by a company to produce or purchase the goods that it sells during a specific period. It includes the cost of raw materials, labor, and manufacturing overhead directly involved in the production process. COGS does not include indirect expenses such as marketing, sales, or administrative costs. Instead, it focuses solely on the costs directly associated with the production of goods.
COGS is a key component of the income statement and is subtracted from the total revenue to calculate gross profit. Gross profit represents the profit a company makes from its core operations before considering other expenses.
Cost of Goods Sold (COGS):
COGS refers to the direct costs incurred by a company to produce or purchase the goods that it sells during a specific period. It includes the cost of raw materials, labor, and manufacturing overhead directly involved in the production process. COGS does not include indirect expenses such as marketing, sales, or administrative costs. Instead, it focuses solely on the costs directly associated with the production of goods.
COGS is a key component of the income statement and is subtracted from the total revenue to calculate gross profit. Gross profit represents the profit a company makes from its core operations before considering other expenses.
Inventory:
Inventory, on the other hand, represents the goods a company holds for the purpose of resale or production. It includes both finished goods ready for sale and raw materials used in the production process. Inventory can be in various stages of completion, such as work-in-progress or finished goods ready for distribution.
Inventory is an asset on the balance sheet, and its value is recorded at its cost or net realizable value, whichever is lower. When goods are sold, the cost of those goods is transferred to COGS, and the value of the remaining inventory is adjusted accordingly.
The Relationship Between COGS and Inventory:
COGS and inventory are interconnected. The cost of goods sold directly impacts the value of the inventory. As goods are sold, their cost is transferred from inventory to COGS. Consequently, a decrease in inventory value corresponds to an increase in COGS, and vice versa.
It’s essential for businesses to manage their inventory effectively to optimize COGS and overall profitability. Maintaining excessive inventory levels can tie up capital and lead to increased holding costs, while insufficient inventory can result in stockouts and lost sales.
Importance of Accurate COGS and Inventory Management:
Accurate calculation of COGS is crucial for determining a company’s gross profit margin, which is an important indicator of operational efficiency. Proper inventory management ensures that goods are available when needed, reducing the risk of stockouts and ensuring customer satisfaction.
Efficient inventory management can also help prevent overstocking and reduce carrying costs. By understanding the relationship between COGS and inventory, businesses can make informed decisions to improve their financial performance and maintain a healthy balance between profitability and liquidity.
Components of Inventory Cost
Inventory cost consists of various components that contribute to the overall expenses associated with acquiring, storing, and managing inventory. These components are essential for calculating the total cost of inventory and understanding its financial impact on a business. The main components of inventory cost include:
1. Purchase Cost
This is the direct cost of acquiring goods from suppliers or manufacturers. It includes the purchase price of the inventory items, as well as any additional costs related to the acquisition, such as shipping fees, customs duties, and taxes.
2. Holding Cost
Holding cost refers to the expenses incurred to store and maintain inventory until it is sold or used in production. This includes costs associated with renting or owning warehouse or storage space, insurance, security, utilities, and inventory management systems.
3. Ordering Cost
Ordering cost comprises the expenses associated with placing and processing orders for new inventory. These costs can include administrative expenses, communication costs, and any other costs incurred during the procurement process.
4. Carrying Cost
Carrying cost is the cost of holding inventory over a specific period. It includes costs such as the opportunity cost of tying up capital in inventory, interest on loans used to finance inventory, and storage costs.
5. Obsolescence Cost
Obsolescence cost arises when inventory becomes outdated, expired, or technologically obsolete. Businesses may incur losses if they are unable to sell or use such inventory, resulting in a write-off of the inventory’s value.
6. Shrinkage and Pilferage Cost
Shrinkage cost refers to the loss of inventory due to theft, damage, or spoilage. Pilferage cost includes losses from employee theft or dishonesty, leading to a decrease in the inventory’s value.
7. Stockout Cost
Stockout cost is the cost incurred when inventory levels are insufficient to meet customer demand. This can result in lost sales, customer dissatisfaction, and potential damage to the company’s reputation.
8. Holding and Warehousing Costs
These costs include rent or mortgage payments for warehouse facilities, utilities, insurance, and maintenance expenses.
9. Handling and Transportation Costs
These costs include expenses associated with moving, loading, and unloading inventory, as well as transportation costs from suppliers to the warehouse and from the warehouse to customers.
10. Quality Control Costs
These costs include expenses related to inspecting, testing, and ensuring the quality of inventory items to meet customer expectations and avoid potential returns or recalls.
11. Taxes and Duties
Inventory may be subject to various taxes and import duties, which add to the overall cost of inventory.
12. Technology and Inventory Management System Costs
The cost of implementing and maintaining inventory management systems, barcode scanners, RFID technology, or other tracking methods is included in this category.
Each of these components contributes to the total inventory cost and can vary based on the nature of the business, industry, and overall supply chain management practices. Understanding these components is crucial for effective inventory management, cost control, and making informed decisions to optimize inventory-related expenses and maximize profitability.
Importance of Inventory Cost
Inventory cost is of paramount importance for businesses across various industries. It directly impacts the financial health, profitability, and operational efficiency of a company. Understanding and managing it effectively can yield numerous benefits and contribute to the overall success of a business. Here are the key reasons why is it crucial:
1. Financial Reporting
Accurate valuation of inventory is essential for presenting a true and fair view of a company’s financial position. Inventory cost directly affects the balance sheet, income statement, and cash flow statement, providing stakeholders with valuable insights into the company’s performance.
2. Cost of Goods Sold (COGS)
Inventory cost is a critical component in calculating the COGS, which is essential for determining the gross profit margin. Accurate COGS allows businesses to assess the profitability of their products and make informed pricing decisions.
3. Profitability Analysis
Managing inventory cost effectively enables businesses to improve their overall profitability. By optimizing costs associated with procurement, storage, and distribution, companies can maximize their profit margins.
4. Working Capital Management
Inventory represents a significant portion of a company’s working capital. By controlling inventory levels and associated costs, businesses can optimize working capital and enhance cash flow, ensuring sufficient liquidity for day-to-day operations.
5. Pricing Strategies
It plays a vital role in setting product prices. Understanding the cost of inventory allows businesses to set competitive prices that cover expenses and generate profits, while remaining attractive to customers.
6. Inventory Turnover
Inventory cost influences inventory turnover, a key performance metric that measures how quickly inventory is sold or used. Higher inventory turnover indicates efficient inventory management and reduces carrying costs.
7. Demand Forecasting
Accurate inventory cost data helps in forecasting demand and planning production or procurement activities. Businesses can avoid stockouts or excess inventory by aligning inventory levels with anticipated demand.
8. Operational Efficiency
Efficient inventory cost management streamlines supply chain operations, reducing overheads and increasing overall efficiency. It allows businesses to optimize inventory levels to meet customer demand without unnecessary stockpiling.
9. Tax Liability
It affects tax liability, especially in scenarios where tax regulations require specific inventory valuation methods. Accurate inventory cost calculation ensures compliance with tax laws and avoids potential penalties.
10. Decision Making
Access to precise inventory cost data enables businesses to make informed decisions regarding inventory management, procurement, production, and sales strategies. Data-driven decisions can lead to improved performance and competitiveness.
11. Customer Satisfaction
Effective inventory cost management allows businesses to ensure product availability and timely order fulfillment, leading to increased customer satisfaction and loyalty.
12. Risk Mitigation
By identifying and managing inventory cost factors such as obsolescence, spoilage, and shrinkage, businesses can mitigate potential risks and losses.
Read Also: What Is Wholesale Distribution? Benefits, Examples & Tips
Types of Inventory Costing Methods
Inventory costing methods are used to determine how the cost of inventory is assigned and how it affects the financial statements of a business. There are several types of this methods, each with its own approach to valuing inventory. The main types of inventory costing methods are:
First-In, First-Out (FIFO)
The FIFO method assumes that the first items purchased or produced are the first ones sold. In other words, the oldest inventory is considered sold first. Under FIFO, the cost of goods sold (COGS) is based on the cost of the oldest inventory, while the ending inventory is valued at the cost of the most recent purchases or production.
Advantages of FIFO:
- Reflects the actual flow of inventory in many situations.
- Generally results in a more accurate cost of goods sold during periods of inflation.
Disadvantages of FIFO:
- May not accurately reflect the actual flow of inventory in certain industries or circumstances.
- Can lead to higher taxable income during periods of inflation, as the cost of older, lower-priced inventory is matched against current higher prices.
Example
Consider a retail store that sells mobile phones. The store purchased 100 mobile phones at $300 each in January and another 100 at $320 each in March. By the end of April, the store sold 150 mobile phones. Under FIFO, the cost of goods sold would be calculated as follows:
- 100 units at $300 each (January purchase) = $30,000
- 50 units at $320 each (March purchase) = $16,000 Total COGS = $30,000 + $16,000 = $46,000
The value of ending inventory would be calculated based on the remaining 50 units from the March purchase at $320 each:
- 50 units at $320 each = $16,000
Last-In, First-Out (LIFO)
The LIFO method assumes that the last items purchased or produced are the first ones sold. It implies that the most recent inventory is considered sold first. Under LIFO, the cost of goods sold (COGS) is based on the cost of the most recent purchases or production, while the ending inventory is valued at the cost of the oldest inventory.
Advantages of LIFO:
- Matches the most recent costs with current revenues, which may be more reflective of market conditions.
- May result in lower taxable income during periods of inflation, as the cost of recent higher-priced inventory is matched against current higher prices.
Disadvantages of LIFO:
- May not reflect the actual flow of inventory in certain industries or circumstances.
- Can lead to distorted financial statements, especially during periods of inflation, as the ending inventory may be undervalued.
Example
Using the same scenario as FIFO above, under the LIFO method, the cost of goods sold would be calculated as follows:
- 100 units at $320 each (March purchase) = $32,000
- 50 units at $300 each (January purchase) = $15,000 Total COGS = $32,000 + $15,000 = $47,000
The value of ending inventory would be calculated based on the remaining 50 units from the January purchase at $300 each:
- 50 units at $300 each = $15,000
Weighted Average Cost
The weighted average cost method calculates the average cost of all units of inventory available for sale during a specific period. The total cost of goods available for sale is divided by the total number of units to determine the average cost per unit. This average cost is then used to calculate the cost of goods sold and the value of the ending inventory.
Advantages of Weighted Average Cost:
- Simple to calculate and understand.
- Smoothes out fluctuations in costs over time.
Disadvantages of Weighted Average Cost:
- May not accurately reflect the actual cost of specific units of inventory.
- Can result in a distorted ending inventory value if there are significant fluctuations in purchase prices.
Example
Consider a manufacturing company that produces chairs. In January, it purchased 200 units of wood at $5 each and 300 units in February at $6 each. The weighted average cost per unit would be calculated as follows:
- Total cost of goods available for sale = (200 units × $5) + (300 units × $6) = $1,500 + $1,800 = $3,300
- Total number of units available for sale = 200 units + 300 units = 500 units
- Weighted average cost per unit = $3,300 ÷ 500 units = $6.60
If the company sold 400 chairs by the end of March, the cost of goods sold would be:
- 400 units × $6.60 = $2,640
The value of ending inventory would be based on the remaining 100 units at the weighted average cost of $6.60 each:
- 100 units × $6.60 = $660
Specific Identification
The specific identification method individually identifies the cost of each unit of inventory. It is commonly used for high-value or unique items where each unit has a distinct cost.
Advantages of Specific Identification:
- Provides precise inventory cost information for each unit.
- Accurate for tracking inventory with high variability in cost.
Disadvantages of Specific Identification:
- Time-consuming and may not be practical for businesses with large inventories.
- Requires meticulous record-keeping for individual inventory units.
Example
A high-end jewelry store sells unique pieces of jewelry with distinct costs. If a customer purchases a diamond necklace for $10,000, the cost of goods sold would be directly identified as $10,000.
Each of this method has its advantages and disadvantages, and the choice of method depends on factors such as the nature of the business, inventory turnover, industry practices, and applicable tax regulations. The method selected can significantly impact a company’s financial statements and tax liability, making it essential for businesses to carefully evaluate and choose the most appropriate inventory costing method for their specific needs and circumstances.
How to Choose an Inventory Cost Accounting Method
Choosing the right inventory cost accounting method is a critical decision for any business as it can significantly impact financial statements, tax liabilities, and overall profitability. There are three primary this accounting methods: First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and Weighted Average Cost. Each method has its advantages and considerations, so businesses need to carefully evaluate their specific needs and circumstances to make an informed choice. Here are some steps to guide you in choosing the right this accounting method:
Understand Each Method
Familiarize yourself with the characteristics of each inventory cost accounting method. FIFO assumes that the first items purchased are the first ones sold, LIFO assumes that the last items purchased are the first ones sold, and the weighted average cost method calculates the average cost of all units in stock.
Analyze Inventory Flow
Examine your inventory flow and sales patterns. If your business operates in a way that mirrors the FIFO method, such as selling perishable goods or experiencing inflationary conditions, FIFO may be a suitable choice. On the other hand, if your inventory turnover and sales mimic LIFO, it might be more appropriate.
Consider Tax Implications
Different inventory cost accounting methods may have varying effects on your tax liabilities. For instance, LIFO can result in lower taxable income during periods of rising costs, while FIFO may have the opposite effect. Consult with a tax professional to understand the tax implications of each method.
Analyze Cost Fluctuations
Analyze historical data and forecast potential cost fluctuations in the future. If your industry regularly experiences price fluctuations, the LIFO method could be useful in reducing taxable income during periods of rising costs. On the other hand, FIFO might be advantageous in times of deflation.
Consistency and Comparability
Choose a method that aligns with industry standards and allows for consistent and comparable financial reporting over time. Consistency in this accounting ensures that financial statements are more accurate and easier to compare across periods.
Inventory Control and Management
Consider the impact of each method on inventory control and management. FIFO can help in better inventory tracking and monitoring, while LIFO might lead to the accumulation of older inventory.
Financial Statement Presentation
Assess how each method affects financial statement presentation. FIFO might result in higher inventory value on the balance sheet during inflationary periods, while LIFO could result in lower inventory values.
Business Goals and Strategy
Align your choice with your business’s goals and long-term strategy. Consider factors like cash flow needs, profitability objectives, and inventory turnover targets.
Industry and Regulatory Requirements
Be aware of any industry-specific regulations or requirements that might influence your inventory cost accounting method. Some industries may have specific guidelines on which method to use.
Seek Professional Advice
If you are unsure about which of these accounting method is best for your business, seek advice from your accountant or financial advisor. They can provide valuable insights tailored to your specific situation.
Choosing the most appropriate inventory cost accounting method is a decision that should not be taken lightly. Careful consideration of your business’s unique circumstances, financial goals, and industry dynamics will help you make the right choice to optimize your financial reporting and overall business performance.
Inventoriable Costs
Inventoriable costs, also known as product costs, are the direct and indirect expenses incurred during the production of goods or services that a company intends to sell. These costs are considered assets and are initially recorded in inventory accounts on the balance sheet. Once the goods are sold, the inventoriable costs are then transferred to the cost of goods sold (COGS) account on the income statement.
There are three main types of inventoriable costs:
Direct Materials
Direct materials are the raw materials and components that are directly used in the production of goods. These costs can include items like wood, steel, plastic, and any other material that forms a part of the final product.
Direct Labor
Direct labor costs are the wages and benefits paid to the workers who are directly involved in the manufacturing process. These workers are responsible for transforming the raw materials into finished goods. Direct labor costs can be traced to specific products, as they are directly related to the labor hours spent on the production of each item.
Manufacturing Overhead
Manufacturing overhead includes all other indirect costs associated with the production process. These costs cannot be directly traced to specific products but are necessary for the overall manufacturing operation. Examples of manufacturing overhead costs include factory rent, utilities, equipment maintenance, supervision, and other indirect labor costs.
Inventoriable costs are a crucial aspect of inventory management and cost accounting. Accurately tracking and managing these costs is essential for determining the true cost of producing each item and calculating the cost of goods sold when the products are sold.
By understanding the inventoriable costs, businesses can make informed decisions about pricing, production levels, and overall profitability. Additionally, proper this methods accounting enables businesses to evaluate the efficiency of their production processes and identify areas where cost-saving measures can be implemented.
It is important to note that inventoriable costs should not be confused with period costs. Period costs are expenses that are not directly related to the production process but are incurred over a specific period, such as selling, general, and administrative expenses (SG&A). Period costs are expensed immediately in the period in which they are incurred and do not become part of the inventory.
Inventory Holding Cost
Inventory holding cost, also known as carrying cost, refers to the expenses associated with storing and holding inventory over a specific period. It is a significant component of the total cost of inventory management and represents the financial burden that a company incurs for maintaining a certain level of inventory.
The inventory holding cost includes several cost elements, such as:
Storage Costs
These are the expenses related to the physical storage of inventory, including rent or depreciation of warehouse space, shelving, racks, and other storage equipment. The size and location of the warehouse can also impact storage costs.
Insurance
Insurance costs are incurred to protect the inventory from theft, damage, or other unforeseen events while in storage. The insurance premiums are influenced by the value and nature of the inventory.
Inventory Handling
This includes the labor and equipment costs associated with receiving, inspecting, organizing, and picking inventory items. It also covers the expenses of moving inventory within the warehouse.
Inventory Shrinkage
Shrinkage refers to the loss of inventory due to theft, spoilage, or obsolescence. The cost of inventory shrinkage is an important consideration when calculating holding costs.
Opportunity Cost
Holding inventory ties up a company’s capital, which could be used for other investments or operational needs. The opportunity cost represents the potential earnings or savings the company could have if the capital were utilized elsewhere.
Taxes
In some jurisdictions, inventory is subject to property taxes, which add to the overall holding cost.
Interest
If a company finances its inventory with loans or credit, it incurs interest expenses on the borrowed funds, adding to the holding cost.
Obsolescence and Depreciation
Some inventory items may become obsolete or lose value over time, leading to depreciation costs.
Inventory Carrying Cost Formula
The inventory carrying cost, also known as the holding cost, can be calculated using the following formula:
Inventory Carrying Cost = (Average Inventory Level) x (Inventory Carrying Rate)
Where:
- Average Inventory Level: The average quantity of inventory held during a specific period. It is typically calculated by taking the sum of the beginning and ending inventory levels and dividing it by 2.
- Inventory Carrying Rate: The cost of carrying one unit of inventory for a specific period. This rate is usually expressed as a percentage of the inventory value.
The formula calculates the cost incurred by a company to hold and store its inventory over a certain period. The carrying cost includes expenses such as warehousing, insurance, obsolescence, and other costs related to holding inventory.
It is important to note that the inventory carrying cost can vary depending on the industry, the nature of the inventory, and the specific costs involved in holding the inventory. Different companies may use different methods to calculate the carrying cost based on their unique inventory management practices.
The inventory carrying cost is a significant factor in determining the overall cost of inventory management for a business. By accurately calculating and monitoring this cost, companies can make informed decisions about inventory levels, ordering quantities, and other aspects of inventory management to optimize their operations and financial performance.
Inventory Carrying Cost Formula
The inventory carrying cost, also known as the holding cost, can be calculated using the following formula:
Inventory Carrying Cost = (Average Inventory Level) x (Inventory Carrying Rate)
Where:
- Average Inventory Level: The average quantity of inventory held during a specific period. It is typically calculated by taking the sum of the beginning and ending inventory levels and dividing it by 2.
- Inventory Carrying Rate: The cost of carrying one unit of inventory for a specific period. This rate is usually expressed as a percentage of the inventory value.
Inventory Cost Formula
The inventory cost is the total value of all the inventory items a company holds at a specific point in time. The formula for calculating inventory cost is:
Inventory Cost = (Opening Inventory Value) + (Purchases or Production Cost) – (Closing Inventory Value)
Where:
- Opening Inventory Value: The total value of inventory items at the beginning of the accounting period. This includes the cost of all items in stock.
- Purchases or Production Cost: The total cost of inventory purchased or produced during the accounting period.
- Closing Inventory Value: The total value of inventory items at the end of the accounting period. This includes the cost of all items remaining in stock.
The formula takes into account the inventory that was already in stock at the beginning of the period, the additional inventory purchased or produced during the period, and the inventory remaining at the end of the period. It provides a snapshot of the total value of inventory that a company holds for a specific accounting period.
It is important to accurately calculate inventory cost as it directly impacts a company’s financial statements, such as the balance sheet and the cost of goods sold (COGS) in the income statement. Proper inventory cost calculation helps businesses make informed decisions about inventory management, pricing, and overall financial performance.
Standard Cost Inventory and Formula
Standard cost inventory is an accounting method that uses predetermined standard costs to value the inventory of a business. The standard cost is a pre-established cost per unit for each inventory item, including direct materials, direct labor, and manufacturing overhead. This standard cost is based on historical data, industry benchmarks, or management’s estimates of expected costs.
The formula for calculating the value of standard cost inventory is:
Standard Cost Inventory Value = (Standard Cost per Unit) x (Number of Units in Inventory)
Where:
- Standard Cost per Unit: The predetermined standard cost for each unit of inventory.
- Number of Units in Inventory: The quantity of inventory items held in stock.
To illustrate, let’s consider an example of a manufacturing company that produces widgets. The company has predetermined that the standard cost of producing one widget is $10 for direct materials, $5 for direct labor, and $3 for manufacturing overhead, making the total standard cost per widget $18.
If the company has 1,000 widgets in inventory at the end of the accounting period, the value of the standard cost inventory would be:
Standard Cost Inventory Value = ($18 per widget) x (1,000 widgets) = $18,000
The standard cost inventory value of $18,000 represents the total cost of the widgets based on the predetermined standard cost per unit.
Cost of Ending Inventory and Formula
The cost of ending inventory refers to the total value of the inventory that remains unsold or unused at the end of an accounting period. It is a crucial figure for businesses to determine the value of their remaining inventory and calculate the cost of goods sold accurately. The cost of ending inventory can be calculated using different inventory costing methods, such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), or weighted average cost.
The formula for calculating the cost of ending inventory using the FIFO method is as follows:
Cost of Ending Inventory (FIFO) = Number of Units in Ending Inventory x Cost per Unit of the Most Recent Purchase
In the FIFO method, it is assumed that the oldest inventory is sold first, and the ending inventory consists of the most recently purchased items. Therefore, the cost per unit used for the ending inventory is the cost of the most recent purchase.
The formula for calculating the cost of ending inventory using the LIFO method is slightly different:
Cost of Ending Inventory (LIFO) = Number of Units in Ending Inventory x Cost per Unit of the Oldest Purchase
In the LIFO method, it is assumed that the most recently purchased items are sold first, and the ending inventory consists of the oldest items. Hence, the cost per unit used for the ending inventory is the cost of the oldest purchase.
Lastly, for the weighted average cost method, the formula for calculating the cost of ending inventory is as follows:
Cost of Ending Inventory (Weighted Average) = Weighted Average Cost per Unit x Number of Units in Ending Inventory
The weighted average cost per unit is determined by dividing the total cost of goods available for sale by the total number of units available for sale.
Conclusion
Inventory cost is a critical aspect of business operations that significantly influences a company’s financial health and decision-making processes. Accurate valuation of inventory and cost of goods sold is essential for financial reporting, pricing strategies, and profitability analysis. By understanding the components of inventory cost and employing appropriate inventory costing methods, businesses can optimize their inventory management, improve cash flow, and enhance overall financial performance. Successful inventory cost management requires a careful balance between maintaining adequate stock levels to meet customer demand and minimizing carrying costs to boost profitability. Effective inventory cost management is a key element in achieving sustainable growth and competitiveness in today’s dynamic business environment.
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