Inventory Carrying Cost Calculator
Annual cost of holding inventory: storage, insurance, capital.
Carrying cost includes storage (warehouse, rent), insurance, obsolescence, and cost of capital (money tied up in inventory). Typical carrying cost runs 20–30% of inventory value annually. This calculator helps you estimate total carrying cost for better inventory decisions.
Inputs
Results
Annual carrying cost: $9,500
Carrying cost %: 19%
Insights
Formula
Carrying = Inv * (storage% + insurance% + capital%) Total % = storage + insurance + capital
Input Definitions
What does each input mean?
- Avg inventory value
- Average dollar value of inventory held over the year.
- Storage cost %
- Warehouse, rent, handling as % of inventory value. Typical 3–8%.
- Insurance %
- Inventory insurance as % of value. Typical 1–3%.
- Cost of capital %
- Opportunity cost of money tied up. Use your WACC or hurdle rate.
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What It Actually Costs to Hold Inventory
Inventory feels like an asset, but holding it costs money: capital tied up that can’t be deployed elsewhere, storage space, insurance, spoilage or obsolescence risk, and the management overhead of tracking it. Carrying cost is typically 20–30% of inventory value per year, which means a slow-moving product isn’t just not generating revenue — it’s actively costing you. This calculator makes that cost visible.
Use this when you’re deciding how much safety stock to hold, whether a bulk purchase discount justifies higher inventory levels, or when you want to compare the cost of holding inventory against ordering more frequently in smaller batches. Optimizing inventory levels is one of the most overlooked ways to improve cash flow in product-based businesses.