What happens to inventory carrying costs as inventory levels increase?

As inventory levels increase, inventory carrying costs also increase. This is due to several factors associated with holding larger quantities of inventory.

Firstly, carrying costs include storage costs, which rise as more space is needed to accommodate additional inventory. More inventory also leads to higher costs related to managing and maintaining stock, such as insurance, security, and handling expenses. Additionally, there are costs related to obsolescence and spoilage that tend to escalate with larger inventory levels. Ultimately, the overall financial burden of maintaining and managing the inventory grows as the quantity increases, leading to a corresponding increase in inventory carrying costs.