Holding Costs

Determining Inventory Holding Costs

CATEGORY

Housing costs (building rent or depreciation, operating costs, taxes, insurance) 6% (3 - 10%)

Material handling costs (equipment lease or depreciation, power, operating cost) 3% (1 - 3.5%)

Labor cost (receiving, warehousing, security) 3% (3 - 5%)

Investment costs (borrowing costs, taxes, and insurance on inventory) 11% (6 - 24%)

Pilferage, space, and obsolescence (much higher in industries undergoing rapid change

like PCs and cell phones) 3% (2 - 5%)

Overall carrying cost 26%