GlossaryEN1 min readUpdated: Jun 24, 2026
Holding Cost
Inventory managers and procurement teams treat holding costs as a core input in supply chain calculations: they represent all costs incurred simply by keeping stock on hand, regardless of whether goods are moving.
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Source: https://www.investopedia.com/terms/h/holding-cost.asp
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Inventory managers and procurement teams treat holding costs as a core input in supply chain calculations: they represent all costs incurred simply by keeping stock on hand, regardless of whether goods are moving. Components typically include warehouse rent or depreciation, insurance on stored goods, the opportunity cost of capital tied up in inventory, and write-downs for perishable or obsolete items. A widely cited benchmark is 20–30 percent of average inventory value per year, though the figure varies considerably by industry and product type. Holding costs are central to economic order quantity (EOQ) models and safety stock sizing – excess stock ties up working capital, while too little jeopardises service levels. Unlike ordering costs, which are triggered each time a purchase order is placed, holding costs accumulate continuously in proportion to the volume of stock carried.
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