Holding costs are all of the expenses a company incurs to hold inventory items over a period of time before they are used to fill orders. Generally speaking, Inventory carrying/holding costs are the costs you incur as a result of holding inventory. It is most often described as a percentage of your inventory value. The percentage is often unique to organizations and includes the amount of capital invested in inventory as well as depreciation, space occupied, insurance and opportunity costs. Inventory carrying or holding costs generally account for 15-30% of a business’s total inventory value.
Inventory Carrying Costs Template
This makes it all the more important to watch your holding costs. Inventory holding costs are directly related to the volume of inventory you hold. There are three different elements of inventory holding costs, which are:
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