The total cost of keeping unsold inventory over a given time period is referred to as holding costs, sometimes called carrying costs. These expenses include the opportunity cost of capital locked up in inventory, depreciation, obsolescence, shrinkage, insurance, and warehousing fees. Because holding costs have a direct effect on the total cost of ownership, they are an essential part of inventory optimization. By using effective inventory control strategies like demand forecasting, inventory turnover analysis, and just-in-time (JIT), businesses aim to reduce holding costs. Increased cash flow and better profitability can result from lower holding costs.
