Inventory Carrying Costs: What It Is & How to Calculate It

Carrying costs are among the top inventory management challenges companies deal with. These expenses arise from keeping products shelved at a ... Company EducationalResources BusinessSolutionsArticles InventoryManagement InventoryCarryingCosts:WhatItIs&HowtoCalculateIt IanMcCue|SeniorAssociateContentManager November6,2020 Businessleaderstendtobelaser-focusedonrevenuegrowth,andunderstandablyso.Butthatfixationmaymeantheyoverlookless-obviouscosts—evenasstealthyexpensesdentprofitability.Amongthepriciestunder-the-radaroutlaysareinventorycarryingcosts,theexpensesthatcomewithholdinginventoryuntilit’ssold. Areyoulosingmoneythisway?Ask:Dowepayeverymonthtostorelotsofunsoldgoods?Arewesometimesshortonworkingcapital?Havewehadtomarkdownitemsbecausetheysattoolonginawarehouse? Ifso,youmayneedtoadoptsomenewstrategiestokeepstockmoving. WhatAreInventoryCarryingCosts? Carryingcostsareamongthetopinventorymanagementchallengescompaniesdealwith.Theseexpensesarisefromkeepingproductsshelvedatawarehouse,distributioncenterorstoreandincludestorage,labor,transportation,handling,insurance,taxes,itemreplacement,shrinkageanddepreciation.Opportunitycost—theinvestmentpossibilitiesacompanymustdeclinebecauseitsresourcesaretiedupininventory—isalsoafactor. Typicalholdingcosts,anothernameforinventorycarryingcosts,varybyindustryandbusinesssizeandoftencomprise20%to30%oftotalinventoryvalue,anditincreasesthelongeryoustoreanitembeforesellingit.Thepercentagewillvarybasedonthenumberofitemsabusinesssells,itsinventoryturnoverratio,thelocationofitswarehouseorstoreanditsstoragerequirements. KeyTakeaways Inventorycarryingcosts—thefullamountbusinessesspendtostockandstoreitemsbeforethey’resold—canhaveasignificantimpactonprofitability. Thisexpenseoftentotalsaboutonequarteroftheinventory’stotalvalue.Foramoreprecisecalculation,addupyourcarryingcostsanddividethatnumberbythetotalinventoryvalue. Excessivesafetystock,slow-movinginventory,inadequatetoolsforinventorymanagementandplanning,poorforecastingandflawedinventory/ordermanagementprocessescanallcauseholdingcoststosoar. Toreduceinventorycarryingcosts,keeplessinventoryonhand,purchaseacapablewarehousemanagementsystem,explorewaystoincreaseinventoryturnandevaluatetheeffectivenessofyourwarehouselayouts. InventoryCarryingCostsExplained Inventorycarryingcostsareacrucialmetricthathelpsdeterminewhetheryou’rerunninganefficientoperation.Highcarryingcostscouldmeanyourorganizationhasmoreinventoryonhandthanitneedsbasedondemand,thatyouneedtoadjustthefrequencywithwhichyouplaceorderswithmanufacturersordistributorsorthatyoucoulddobetteratkeepingstockmoving. Inventorycarryingcostscanbesortedintofourcategories:capitalcosts,storagecosts,servicecostsandinventoryriskcosts. Capitalexpendituresaremoniesspentonproductsandanyinterestandfeesincurredifthecompanytookoutaloantopayforthegoods.Storagecostscanbefixed,likeamortgageforastore/warehouse,orvariable,asarelabor,utilityandadministrativeexpenses.Taxes,insuranceandinventorymanagementsoftwareareallexamplesofservicecosts. Inventoryriskincludesshrinkage,depreciationandproductobsolescence. WhyIsCalculatingtheCostofCarryingInventoryImportant? Becauseholdingcostsmaymakeuponequarterofallinventoryspend,theycanaffectabusiness’overallfinancialhealth.Ifanorganizationcan’tquantifythecostofkeepingstockonhand,suchasbyemployinganinventoryorstockcontrolsystem,itmayendupwithcashflowproblems. Acompanycouldalsomissoutonapromisinginvestmentorgrowthopportunitybecauseithastoomuchmoneytiedupininventory—allwithoutleadersevenrealizinghowmuchcarryingcostsareholdingbackthebusiness. Hereareotherreasonsholdingcostsmatter: Productionplanning:Onceacompanyunderstandshowmuchitspendstostoreinventory,itmayrethinkitsproductionschedule.Inparticular,ifacertainproductcanbemanufacturedquickly,thebusinessmaywanttokeeponlyasmallquantityinstock.Ontheotherhand,acertainitemmaybeabigsellerandhavealowcarryingcost,soitmakessensetodedicatemorewarehousespacetoit.Amaterialrequirementsplanning(MRP)processcanprovideinsights. Profitabilityofexistinginventory:Bycalculatinginventorycarryingcostsandtrackingthevalueofeachproduct,anorganizationcanbetterestimatehowmuchprofititcanexpecttoearnfromexistinginventory.Carryingcostsareamajorinventoryexpense,sooncethat’sdeducted,it’seasiertomeasureprofitbyitem. Inventoryaccounting:Inventoryisoneofthebiggestexpensesformanycompanies,soit’simportanttoaccuratelycalculatethecostofholdingthatinventory,aswellasthevalueofthoseproducts.Theaccountingteamneedsthisdatatoproduceaccuratefinancialstatements. 10ComponentsofInventoryCarryingCostandHowtoReduceThem Manyexpensesfactorintotheinventorycarryingcostsequation—andtogethertheyadduptoaverycommonwaythatbusinesseswastemoney. Let’sbreakdowneachcomponent: 1.CostofCapital Costofcapital,usuallythebiggestportionofinventorycarryingcosts,includesthepurchasepriceoftheproductsplusanyinterestandotherfeesifthebusinesstookondebttopayforthatinventory.Tyingmoneyupinproductscouldaffectcashflowand,consequently,increasetheneedforandcostofadditionalcapital. Toreducethecostofcapital,investinforecastingthatleadstosmallerormorestrategicpurchases.Youcouldalsonegotiatealowerpurchasepricewithsuppliers. 2.CostofStoringInventory Therealestateitemstakeupinawarehouseorstoreisvaluable:Warehousespacecostsanaverageof$6.53persquarefoot,soeachshelf,binandboxcounts.Ifyouuseathird-partylogistics(3PL)provider,it’seasiertofigureoutthiscost,becausethatpartnermaychargebytheshelf,palletoritem.Acompanycanoftenre-imagineitswarehouselayoutorhowitstoresproductsofdifferentshapes/sizestoreducestoragecosts.Paringdowninventorymayevenallowacompanytomovetoasmallerwarehouse,anotherwaytotrimstoragecosts. 3.EmployeeCost Thisissimplythecostoflaborassociatedwithreceivingandputtingawayproducts,fulfillingordersandothertouchpoints.Businessescanoftenrearrangetheirwarehousestoincreaseemployeeproductivityby,forexample,storingthemostpopularitemsnearpackingstationsorsupplementinghumanworkerswithautomation.Experimentingwithdifferentpickingmethodsandusingsoftwarethatmapsthemostefficientpickpathsforemployeesareworthconsideringiflaborcostsarerising. 4.OpportunityCost Ifyouoverspendoninventory,thattiesupmoneyyoucouldhaveusedformarketing,newhires,realestateandcountlessotherinvestments—manyofthemmorevaluabletotheorganizationthanitemssittingonashelf. 5.Obsolescence Obsoleteinventory—stockthatcannolongerbesoldbecauseit’sreachedtheendofitslifecycle—canleadtoaspikeininventorycarryingcosts.Productsbecomeobsoleteaftertheydepreciatetothepointofhavingnovalueandmustbewritten-off.Organizationscanminimizeobsoleteinventorybyfindingwaystooffloadstockwhileitstillhassomevalue,perhapsthroughdeepdiscounting,donatingitorbysellingittoaliquidator.Otherwise,you’lllikelypaytodisposeofit. Withoutperformingregularchecks,companiesmaybeholdingobsoleteinventoryinthewarehousethatincursaddedcostsandtiesupspaceinthewarehouse;so,it’simportantthatitemsaredisposedofpromptlybeforetheybecomeobsolete. 6.Insurance/Taxes Manycompaniesinvestinaninsurancepolicytoprotectoneoftheirmostvaluableassets:inventory.Thenifafloodorfiredestroysastoreorwarehouse,allisnotlost.Butthemoreproductinthewarehouse,themorethatinsurancepolicywillcost. Similarly,themoreinventoryyouhold,thehigheryourtaxes.Anorganizationcanparedownbothinsuranceandtaxexpensesbykeepingfewerproductsoronlyitshighest-performinggoodsinthewarehouse. 7.AdministrativeCosts Administrativecostsencompassawidevarietyofexpenses,includingpropertytaxes,facilitymaintenanceandcleaning,transportationandequipmentdepreciation.Generally,ifacompanyholdsmoreinventory,ithashigheradministrativecosts,inpartbecauseitneedsalargerfacility. 8.MaterialHandling Laborandthenumberof“touches”aproductrequires—fromputtingitinawarehousebintoprintingashippinglabel—isabigpartofthemoneyspentonmaterialhandling.Butmachinery,equipmentanddamagetoproductsafteryoutakepossessionarealsopartofthisexpensecategory.Acompanymaynotneedasmuchmachineryorequipment,oritmayusethemlessfrequentlyandreducetheneedformaintenanceandrepair,ifitstoresfeweritemsinitsfacility. 9.Shrinkage Wheninventoryislostafteryourcompanypurchaseditbutbeforeit’ssoldtoacustomer,that’sshrinkage.Sourcesofinventoryshrinkageincludetheft,fraud,damageintransitorrecord-keepingmistakes.Aswithotherinventorycarryingcosts,themorestockabusinessholds,themoremoneyitwillcommonlylosetoshrinkage. Anorganizationcouldidentifyandterminateemployeeswhoarestealing,talktovendorsaboutcommoncausesofdamagedgoodsandperformmorefrequentphysicalinventorycountstoreduceshrinkage. 10.DelayedInnovation Ifacompanyisconstantlyfocusedonmovingexcessstock,it’slikelynotinnovatingandbrainstormingwaysto,forexample,addafeatureornewproductrequestedbycustomers.Businessescanfindthemselvesstuckinthisloopifthey’reconsistentlycarryingtoomuchinventory.Optimizingstocklevelswillfreeupresourcesforresearchanddevelopment. InventoryCarryingCostFormulaandCalculation Companiesneedtoregularlymeasuretheirinventorycarryingcoststofindoutifholdingcostsrepresentadisproportionateamountofinventoryvalue.Thiscalculationwillhelpbusinessesdeterminewhentheyneedtoreevaluatetheirprocessesandpractices. Todetermineinventorycarryingcosts,firstadduptheexpensesoutlinedabove—capital,storage,labor,transportation,insurance,taxes,administrative,depreciation,obsolescence,shrinkage—overoneyear.Thendividethosecarryingcostsbytotalinventoryvalueandmultiplythenumberby100forapercentage. InventoryCarryingCosts=CostofStorage/TotalAnnualInventoryValuex100 Foraquick,roughestimateofcarryingcosts,divideyourtotalannualinventoryvaluebyfour. CarryingCostExample Asfallwindsdown,retailerSeasonalInspirations’twowarehousesarestillfullofwinterclothing.Itwantstobetterunderstandthepriceofhavingsomuchinventoryonitsshelvesasittriestomakeroomforspringapparel. Theretailercalculatesstoragecostsof$10,000,laborexpensesof$2,000,$3,000forshipping,$2,000forinsuranceand$1,000forshrinkageanddepreciation.Thatputstotalinventorycarryingcostsat$18,000,andthatinventoryhasacostofgoodsof$75,000. $18,000/75,000x100=24% Perthatcalculation,SeasonalInspirationshasinventorycarryingcostsof24%. 5ReasonsaCompanyHoldsInventory Strikinganidealinventorybalanceisnosimpletask.Manycompaniesthinkit’sbettertohavetoomanyitemsthanrunoutandloseasaleandpotentiallydamageacustomerrelationship.Hereareafewotherreasonsorganizationsholdontotoomuchstock,pushinguptheircarryingcosts: 1.SafetyStock Stockingjustenoughproducttocoverexpectedneedcanbeariskyproposition.That’swhymostcompaniescarrysomesafetystock,orextrainventorytocoverunpredictableeventslikeasurgeindemand,anunexpectedsupplierdelayoradamagedshipment.It’sgenerallyagoodideatohavesafetystockforpopularitems,butbejudiciousbecauseexcesssafetystockwillleadtounnecessarilyhighholdingcosts. 2.CyclicalorSeasonalDemands Certainbusinesses—retailersinparticular—earnmostoftheirannualrevenueinjustafewmonths,makingretailinventorymanagementparticularlyimportant.Anelectronicsretailermayseeasurgeinordervolumeinthemonthsleadinguptothewinterholidays,whileamanufacturerofinflatablepooltoysmaydomostofitsbusinessinthespringandearlysummer.Inanefforttobereadyforthatcrucialstretch,thesecompaniesmaybuilduplargeinventoryreservesbeforethebusyseasonstarts. 3.CycleInventory Aftercreatingsalesforecasts,acompanypurchasescycleinventory.Thisisthestockrequiredtofulfillanticipateddemandforvariousproducts;it’snotmeanttocovertheunexpected,likesafetystock.Everyproducts-basedbusinessmusthavecycleinventory,orworkingstock,tokeepupwithcustomerdemandandgeneratesales.Accurateforecastsandcyclecountingarecrucialtostockingtherightamountofcycleinventory. 4.In-transitInventory In-transitinventoryreferstoproductsacompanyhaspurchasedbutnotyetreceived.Dependingonwhereasupplierislocatedandthetypeofproduct,leadtimescanbeseveralmonths,soinventorycouldbeintransitforalongtime.Businessesneedtoaccountforthesegoodsintransitastheyplanfuturepurchasing—yettheycanbeeasytooverlookbecausethey’renotyetinthewarehouse.Thisisespeciallytrueifyoudon’tuseaninventorymanagementsystemthatshowsthestatusofallpurchaseorders. 5.DeadInventory “Deadinventory”isanothertermforobsoleteinventory.Thesearegoodsacompanynolongerbelievesitcansellandthatareoftenwritten-offasaloss.Deadinventorymaylingerinadistributioncenterorthebackroom,quietlyandcontinuallyraisinginventorycarryingcostswithoutleadersevenrealizingit. 5WaysCompaniesFailtoReduceCarryingCosts Thereareafewcommoncausesofunnecessarilyhighholdingcosts;anyofthemcanmakeitdifficultforbusinessestolowerthisexpense.Ifyourinventorycostsseemexcessiveandyou’renotsurewhy,lookintothesepotentialissues: 1.UsingExcelandObsoleteMethods Businessesoutgrowspreadsheetsquicklybecauseoftheirlimitedfunctionalityandlackofautomation.WithExcelspreadsheets,paperrecordsorotherlegacytrackingmethods,acompany’sinventoryreportsareofteninaccurateandcan’tupdateinrealtime. Andwhenabusinessdoesn’tknowwhatitalreadyhas,it’smuchmorelikelytoover-purchaseorbuythewrongitems.Decisionsareguidedbyfeelorbestguessesratherthanstrategyanddata. 2.FlawedDemandForecasting Poorinventorydemandforecastingisacommondriverofhighholdingcosts.Ifacompanyusesflaweddatatocreateforecasts,itmayexpectaspikeindemandforacertainSKUandloaduponinventory,onlytoseesalesfallfarshort.Oritmayfalselyassumethatbecauseaspecificproductwasatopsellerlastquarter,thatitemwillcontinuetoflyofftheshelvesforthenexttwoquarters.Ineithersituation,thecompanyendsupwithalotofexcessinventorythat’sconsumingvaluablespaceandtyingupcashthatwould’vebeenbetterspentelsewhere.See:opportunitycost. 3.FailuretoUnderstandTrends Accurateinventoryandproductionplanningisbuiltonnotonlyaccuratedata,butpeoplewhocaneffectivelyanalyzeandinterpretthatdata.Employeesmustbeabletospottrendsinthenumbersandinterprettheimpact.Ifapurchasingmanagerfailstorealizethatsalesforseveralproductstaperedoffforthelastmonthofthethirdquarter,forexample,hemightplaceabigorderforthefourthquarterthatcreatesobsoleteinventory.Leadersmustalsoaccountforhowindustrytrendsorbroadereconomicshiftscouldaffectdemandforitsitems. 4.OverstuffingandLowInventoryTurnoverRatio Inventoryturnoverratioisacriticalmetricthatshowshowoftencertainproductsaresoldandrestockedoveroneyear.Thisratioinformspurchasingdecisions.Alowturnoverratiofortoomanyproductsleavesanorganizationwithhighinventorycarryingcostsand,eventually,obsoleteinventory.Thatcreatesanoverstuffedwarehousepackedtothebrimwithstockthatisneithermovingquicklynorasvaluableasitoncewas. 5.FlawedInventoryManagement/OrderFulfillmentProcesses MuchlikeorganizationsthatuseExcelorotherlegacymethods,thosewithoutadetailedinventorymanagementstrategywillover-ordertoprotectthemselves.It’sunavoidablewithoutasolutionthatlistsreorderpointsbasedonleadtimesandcurrentdemandandprovidesreal-timevisibilitydowntotheSKUlevel. Similarly,inefficientfulfillmentmethodscanincreaselaborcosts,whilepoorwarehousedesignorstoragetechniquescanraisestoragecostsandmakeiteasiertooverlookexistinginventory.Thatleadstoobsoleteinventory,depreciationandhigherinsurance,taxandadministrationcosts. 5WaystoReduceInventoryCarryingCosts Thereareanumberofwayscompaniescancutinventorycarryingcosts,andsomerequireminimaltimeandeffort.Smartstrategiestospendlessmoneykeepingitemsinstockinclude: 1.MinimizeInventoryOnHand Althoughthecoronaviruspandemichaslaidbaretherisksofajust-in-timeinventorystrategy,companiesstilloftenholdtoomuchstockorthewrongproducts.Startbytrackingaslateofinventorykeyperformanceindicators(KPIs)thatwillhelpyouevaluateeachSKUtodetermineifitdeservesaplaceinthestoreorwarehouse,andthenhelpdecidetheappropriatequantitytokeeponhand. Whileaccurateforecastingiscritical,soissoftwarethatalertspurchaserswhenit’stimetoreorderandsuggestshowmuchtobuy.Itwilltaketimeandexperimentationtostriketherightbalance,butit’sworthit—optimizedinventorylevelssavealotofmoney. 2.SpeedUpInventoryTurnoverTimes Increasingyoursell-throughrateisanotherpowerfulwaytolowerinventoryholdingcosts,becauseitmeansitemsspendlesstimeonyourshelves.Calculateyoursell-throughrateusingthisformula: Sell-throughrate=(#ofunitssoldduringperiod/#ofunitsreceivedatstartofperiod)x100 Reviewtheperformanceofallproductseverymonthtoseeifthey’resellingattheexpectedrate.Ifturnoverishigherorlowerthanexpected,adjustaccordingly.Onceagain,accurateforecastswillminimizeexcessinventorythatsitsaroundandlosesvalue. Anabilitytointerpretbusiness-andmarket-specifictrendswillalsoimproveyourinventoryturnoverratio.Whencompaniesdofindthemselvesmovingthroughinventorytooslowly,promotionsandbundlingmayhelpclearitout. 3.RedesignYourWarehouse Businessesoftendon’tmakethemostofthespacetheyhave.Youmaybesurprisedbyhowdramaticallyphysicalchangestoawarehouseorstorecanreduceholdingcosts.Tweakscouldincludeusingcontainersformoreefficientstorage,addingshelvingtoincreaseverticalspaceorputtingpopularitemsinacentrallocation.Allofthesemethodscandrivedownlaborandstoragecosts. Additionally,redesigningamanufacturingplantorwarehousecouldmakeitlesslikelythatavailableinventorygoesunnoticed,loweringcapital,depreciation,obsolescence,insuranceandtaxcosts. 4.PurchaseanInventory/WarehouseManagementSystem Technologyplaysacentralroleingivingsupplychainleaderstheinventoryvisibilitytheyneedtomakesmartdecisions.Aperpetualinventorysystem,thatis,onethatupdatesinrealtime,isidealbecauseitprovidesatrulyreal-timepictureofinventorylevels—notwhattheywerelastnightorfourhoursago.Thevisibilityaninventorymanagementsolutionoffersmakesitamuchmorerealisticpropositiontostrikeanidealbalancewithstockbecauseithelpsemployeesbettertimenewordersandtrackmetricslikeinventoryturnandsalesvolume. Awarehousemanagementsystem(WMS)iscomplementaryandcanmakefulfillmentandshippingfasterandmorecosteffective. 5.RenegotiatewithSuppliers/Customers Anothermethodforholdingdownholdingcostsistorenegotiateagreementswithyoursuppliersand/orcustomers.Makesureyou’renotbearingthebulkofunavoidablerisksandcostsbeforecustomersbuytheseitems.Forexample,structurecontractswithsupplierssotheyareresponsiblefordamage,theftoradministrativecostswhilegoodsareintheirpossession. Manufacturersanddistributorsshouldexplorewaystoavoidpayingexcessivecarryingcosts.Forexample,specifyamaximumholdingtimeforinventoryintheagreement,andtackonfeesforeachdaybeyondthatperiodtorecoupsomeofthosecarryingcosts.Retailersshouldconsiderdoingthesame:There’snoreasontotakepossessionofashipmentofmeltableHalloweencandyinJune. AwardWinningCloudInventory FreeProductTour ReducingInventoryCarryingCostswithInventoryManagementSoftware Onepowerfulstepbusinessescantaketoreduceinventorycarryingcostsistoinvestinaninventorymanagementsolution.Thissoftwareoffersamultitudeofwaystooptimizeinventorylevels,whichinturncutsdownonalltheexpensesoutlinedabove. Thevisibilityaninventorymanagementsystemoffersisatremendousassetforanyproductscompany,becauseitempowerspurchasing,operationsandsupplychainprofessionalstomakebetterdecisions.Thesolutioncantracknotonlycurrentstocklevelsbutthestatusofalloutstandingpurchaseandcustomerorders. Nomore“forgetting”aboutstockinashippingcontaineronitswaytoyourwarehouse. Thistechnologywillalsoestablishconsistentreceiving,putawayandfulfillmentprocessesthatensureeachitemistraceablefromthetimeitentersyourwarehousetowhenthecustomerreceivesit.Inventorymanagementsoftwareempowerscompaniestobeproactive—theycanadjustpurchaseorders,salesstrategies,warehouselayoutsandmoretoaddressproblemsearlyon,beforecostspileup. Thereportingtoolswithinaninventorymanagementsolutionarealsoinvaluable.Forexample,abusinesscanviewitsinventoryturnorsalesnumbersforaproductcategoryorspecificSKUoveranyperiodoftime.Itcanmonitorthemoneylosttodepreciationorspentontaxesandinsuranceinaquarteroryear. Thisdatagivesdecision-makerstheinsightstheyneedtocontrolinventorycarryingcosts.Apurchasingmanagermightcheckthesell-throughrateforthelastmonthanddecidetocancelanupcomingorderforafewproducts,reallocatingthatmoneytowardarushshipmentforanitemthat’sseensalestripleinthelasttwoweeks.Thisinformationalsohelpsfinanceandoperationsmanagersbuildmoreaccurateforecasts. Leadersshouldbeveryselectiveabouttheproducts,andthequantities,theykeepintheirstoresandwarehouses.Ultimately,themorestrategicanorganizationcanbewiththeinventoryitstores,theloweritsholdingcostswillbe. Bottomline,dodgingbothout-of-stockandoverstocksituationsisaconstantbalancingact. Evenwithbest-in-classforecastingcapabilities,it’salmostimpossibletogetinventoryplanningexactlyright.Butaninventorymanagementsystemthat’stiedtoalargerERPplatformisacriticalstepingettingholdingcostsundercontrolbecauseitenablesbetterforecastinganddeliversthereal-timevisibilityeveryproducts-basedbusinessneedstomakeintelligentinventorydecisions. InventoryCarryingCostsFAQs Whatareexamplesofcarryingcosts? Numerousexpensescontributetoinventorycarryingcosts:Theproductsthemselves(capitalcosts),storage,depreciation,labor,insuranceandtaxes,obsoleteinventoryandopportunitycost,alongwithadministrativeexpenses.Thatlistdemonstrateswhyholdingcostscandramaticallyimpactacompany’sbottomline. Howdoyoucalculateinventorycarryingcost? Inventorycarryingcostisaprettysimplecalculationonceyou’vefiguredoutalltheexpensesthatgointohavingthesegoodsonhand.Addallthosenumberstogetherforthetotalcarryingcosts,thendivideitbythetotalvalueoftheinventoryandmultiplytheresultby100togetapercentage. InThisArticle WhatAreInventoryCarryingCosts? KeyTakeaways InventoryCarryingCostsExplained WhyIsCalculatingtheCostofCarryingInventoryImportant? 10ComponentsofInventoryCarryingCostandHowtoReduceThem InventoryCarryingCostFormulaandCalculation CarryingCostExample 5ReasonsaCompanyHoldsInventory 5WaysCompaniesFailtoReduceCarryingCosts 5WaystoReduceInventoryCarryingCosts ReducingInventoryCarryingCostswithInventoryManagementSoftware InventoryCarryingCostsFAQs AwardWinningCloudInventory FreeProductTour TrendingArticles WhatisInventoryManagement?Benefits,Types,&Techniques InventoryControlvs.InventoryManagement:What’stheDifference? InventoryAnalysis:Tips,MethodsandKPIs InventoryManagement InventoryWrite-Offs:Definition,Steps,&FAQs Whenitcomestoinventory,eventslikespoilage,damageorobsolescence,alongwiththeftandlossofmarketvaluecanreduceor… MoreOnThis Just-in-TimeInventory(JIT)Explained:AGuide StockKeepingUnit(SKU)Explained ObsoleteInventoryGuide:HowtoIdentify,Manage&AvoidIt TrendingArticles WhatisInventoryManagement?Benefits,Types,&Techniques InventoryControlvs.InventoryManagement:What’stheDifference? InventoryAnalysis:Tips,MethodsandKPIs Must-HaveInventoryManagementSystemFeatures,Requirements&Modules EducationalResources BusinessSolutionsGlossaryofTerms   Chat SalesChat Howisyourbusinessadaptingtochange? Startchat Top × Beforeyougo... Discovertheproductsthat29,000+customersdependontofueltheirgrowth. FreeProductTour