Total Inventory Cost is a business term that accounts for the total costs of keeping inventory on hand. This includes elements such as warehousing costs, purchasing costs, stock-outs or lost sales due to shortage, shrinkage and other obsolescence costs. Ultimately, Total Inventory Cost serves as an important metric to help businesses understand their overall inventory expenses and inventory management efficiency so they can make informed decisions regarding stocking levels and other related matters. The goal is to optimize supply chain operations and maintain a healthy balance between expense and returns.