Inventory carrying cost calculator
Stock on the shelf costs money even before it sells; this calculator adds up those parts into one rate and a clear amount.
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How to use it
- Enter average inventory value, cost of capital per year, storage and handling per year, insurance and taxes per year and shrinkage and obsolescence per year.
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Carrying rate = capital % + storage % + insurance and tax % + shrinkage and obsolescence %. Annual cost = average inventory value × carrying rate.
Example
Inputs: Average inventory value = 200,000, Cost of capital per year = 8 %, Storage and handling per year = 6 %, Insurance and taxes per year = 2 %, Shrinkage and obsolescence per year = 4 %. Result: Annual carrying cost: 40,000.00; Total carrying rate: 20%; Monthly carrying cost: 3,333.33.
Limits and caveats
- The rates are your own estimates for your business; there is no single correct rate for every company.
- A month is taken as one twelfth of the year.
Questions about this tool
What is the cost of capital?
It is the return you give up because money is tied up in stock, usually estimated from your borrowing rate or another investment return.
What carrying rate is common?
Many references quote 20% to 30% a year, but building the rate from your real costs is more accurate.
How can I lower carrying cost?
Cut dead stock, order smaller quantities more often and clear slow sellers with discounts.