Inventory Carrying Cost Calculator
Add up the real cost of holding stock — storage, capital, insurance and shrinkage — as an annual dollar figure and a percentage of inventory value.
How it works
Carrying cost rate = storage% + cost of capital% + risk% · Annual carrying cost = average inventory value × rate
Carrying cost is the total price of keeping inventory on the shelf, expressed as a percentage of the average inventory value. It bundles the visible cost of storage and handling with the often-overlooked cost of capital tied up in stock, plus insurance, shrinkage and obsolescence. Many businesses find the true rate lands between 20% and 30% a year — a strong argument for leaner inventory.
Worked example
On $100,000 of average inventory, an 8% storage rate, a 10% cost of capital and 6% for insurance and shrinkage sum to a 24% carrying rate. That is $24,000 a year, or $2,000 a month, spent simply to hold the stock.
Frequently asked questions
What counts as a carrying cost?
Warehousing and handling, the cost of capital tied up in stock, insurance, taxes, and the risk costs of shrinkage, damage and obsolescence. It excludes the purchase price of the goods themselves — this is the cost of holding them, not buying them.
What is a typical carrying cost rate?
A common rule of thumb is 20% to 30% of inventory value per year, though it varies with the type of goods — perishable or fast-obsoleting items carry far higher risk costs than shelf-stable ones.
Why include cost of capital?
Money invested in inventory can’t earn a return elsewhere. That forgone return is a real economic cost of holding stock, even though it never shows up as a line item on an invoice.
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Educational estimate, not financial advice.