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Between cost of money, variable storage costs and obsolescence, inventory-carrying costs can range from 15 percent to 25 percent of total inventory value on an annual basis. On a million dollars of inventory, that translates to at least $150,000 of additional expense, potentially wiping out already thin profit margins. In fact, one manager was ordered to reduce inventory by $10m to offset lower sales. The only way that can be successfully done is through razor-sharp supply chain planning and execution. It can be done, though.
Source: Industry Week
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