Inventory Holding Cost (also known as ‘Carrying Cost’) is an important concept for businesses to understand; it helps them accurately gauge the costs of storing goods or products in their warehouses. The formula for calculating inventory holding cost is relatively straightforward: Holding Cost = (Average Inventory * Carrying Cost Percentage) * Number of Days. In other words, you multiply the average number of goods stored at a given time by the percentage associated with those goods, and then you multiply this total by the number of days those goods are held in the warehouse. Knowing your inventory holding cost can help optimize storage solutions and increase efficiency, resulting in significant cost savings.