Free tool
Inventory carrying cost calculator
Find out what holding your stock really costs each year, per month and as a percent of inventory value.
The carrying cost formula
Example: $40,000 of average inventory at 10% cost of capital ($4,000), $4,800 storage, $600 insurance, 2% shrinkage ($800) and 5% obsolescence ($2,000) costs $12,200 a year, or 30.5% of inventory value.
Use it for better reorder decisions
Your carrying cost % is the holding cost input for the EOQ calculator. It's also the honest answer to "should I just order more to be safe?" Every extra unit costs you its share of this number for as long as it sits. Read how to free up cash tied up in inventory.
FAQ
What is a typical inventory carrying cost?
Commonly cited estimates run from about 20% to 30% of inventory value per year, once you add the cost of capital, storage, insurance, shrinkage and obsolescence. Small stores storing at home pay less for space but often more in tied-up cash.
What goes into carrying cost?
Capital cost (what that cash could earn or the interest you pay), storage and 3PL fees, insurance, shrinkage and damage, and obsolescence (stock that never sells).
How do I lower carrying costs?
Hold less stock per SKU by ordering closer to real demand: smaller, more frequent orders for steady sellers, and no reorders for slow ones.
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