What is the term for the cost of holding inventory over a period?

The cost of holding inventory over a period is called carrying cost.

Also known as inventory carrying cost or holding cost, it covers more than warehouse rent. The total can include storage space, utilities, insurance, labor, maintenance, capital tied up in stock, opportunity cost, perishability, damage, shrinkage, and obsolescence. Businesses often express it as an annual percentage of inventory value or as a cost per unit per year.

Carrying cost is a central trade-off in inventory management. Holding more stock can protect against uncertain demand and supplier delays, but it increases storage and capital expenses. Holding too little can create stockouts and lost sales. In the economic order quantity model, average cycle inventory is commonly represented as half the order quantity, and the model balances holding cost against ordering cost.

The alternatives describe different expenses. Shortage cost arises when inventory is unavailable; ordering cost comes from placing and receiving replenishment orders; and setup cost concerns preparing equipment or processes for production. These costs interact in real operations, but the recurring expense of keeping goods in inventory is specifically carrying cost.