Holding cost, also known as inventory carrying cost, is an important concept in business that refers to the total cost of storing inventory over a given period of time. This cost includes the cost of storage, insurance, taxes, shrinkage, obsolescence, and any other costs associated with holding inventory. It is important to consider holding cost when managing inventory because it can have a significant impact on a company’s bottom line. Companies must balance the cost of holding inventory against the cost of not having enough inventory on hand to meet customer demand. If a company does not have enough inventory, it may miss out on sales, but if it has too much inventory, it may be paying more in holding costs than necessary. To maximize profits, companies must find the right balance between inventory levels and holding costs.
