What is the term for the cost associated with placing an order for inventory?

The cost associated with placing an order for inventory is called the ordering cost.

Ordering cost is a usually fixed expense incurred each time a business replenishes stock. It can include preparing and approving a purchase order, communicating with a supplier, arranging transportation, receiving goods, inspecting them, and processing the related paperwork. The cost generally applies to the order itself rather than to each individual unit.

Ordering cost is one of the two central costs in the classic economic order quantity model. If a company places many small orders, its annual ordering cost tends to rise because more orders must be processed. If it places fewer, larger orders, ordering cost falls, but the average inventory level increases and so does holding or carrying cost.

“Setup cost” can be a close term in production environments, where it refers to preparing machinery for a run. “Carrying cost” and “holding cost” instead describe the expense of keeping inventory in storage. These costs are related in inventory planning, but they are not the cost of placing an order.