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One element of holding costs is risk. Risk costs are the risk that is assumed when inventory is acquired. In addition to this risk costs refer to loss of inventory value. This is often referred to as the shrinkage that occurs within inventory.
Storage costs are another important element of your holding costs. When you think of storage costs you should think of any of the resources that you use to handle and store your inventory. These costs may be direct or indirect money spent on the storage of your goods. Storage costs can include costs for warehousing, warehouse equipment, space, rent, electricity, software, depreciation and warehouse personnel.
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