Inventory management is a challenging task even for enterprises because of the variety of factors that contribute to the costs. Handling, labor, storage, taxes, shrinkage, and insurance are some of the common costs that are associated with holding inventory in the warehouse. Effective inventory management is required to ensure inventory carrying costs are kept to a minimum. According to some studies, inventory carrying costs can go as high as 30% of the total inventory value. Of course, this can vary from business to business and depends on the business size as well. However, inventory carrying costs must not be underestimated by businesses.

➤Components:

1.Opportunity cost

2.Administrative costs

3.Cost of capital

4.Taxes and insurance

5.Cost of employees

6.Innovation issues

7.Cost of storage

8.Handling

9.Obsolete inventory

10.Shrinkage