Inventory Carrying Cost Calculator
Calculate the annual cost of holding items in your warehouse. Includes storage, insurance, capital costs, and obsolescence. Typically 20% to 30% of inventory value.
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Formula
Adds up the percentage impact of four categories: cost of money, warehouse space, taxes/insurance, and potential spoilage or obsolescence.
Worked Example
The Hidden Cost of Sitting Stock
- Slow moving stock acts like a "tax" on your business cash flow.
- Obsolescence is the highest risk for electronics and fashion items.
- Warehouse utilities and labor are major components of the storage percentage.
A lean inventory is often a more profitable inventory.
You can also calculate changes using our Working Capital Impact Calculator.
Frequently Asked Questions
What is a typical carrying cost?
Most businesses spend between 20% and 30% of their total inventory value on holding costs annually.
What is the "capital cost"?
The interest rate you pay on the money used to buy the stock, or the profit you could have made if you invested that money elsewhere.
How do I reduce my carrying costs?
Improve demand forecasting to reduce overstocking, and consider vendor-managed inventory programs.
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