Carrying Cost: The cost of holding inventory, including storage, insurance, and interest on capital invested in inventory.
Carrying cost refers to the cost of holding inventory, which includes various expenses associated with storing and managing inventory. These costs are typically expressed as a percentage of the inventory's value and can have a significant impact on a business's profitability.
The primary components of carrying cost include:
Carrying cost is an important consideration in inventory management, as it can have a significant impact on a business's profitability. Businesses must carefully balance the costs of holding inventory with the benefits of having inventory on hand to meet customer demand.
Effective inventory management strategies can help businesses minimize carrying costs by optimizing inventory levels, reducing waste and obsolescence, and improving supply chain efficiency. By reducing carrying costs, businesses can improve their profitability and achieve long-term success in a competitive marketplace.