Inventory Holding & Carrying Cost Calculator
See what it really costs each year to keep stock on your shelves, from storage to cost of capital.
How the Inventory Carrying Cost Calculator Works
Inventory feels like an asset, but every unit on the shelf also costs money. You pay for the space, insure it, pay taxes on it, and accept that some of it will be damaged, lost, or go out of date. On top of that, the cash locked in stock cannot be used for ads, new products, or paying down debt.
Enter your average inventory value, your annual storage cost, and the yearly percentages for insurance and taxes, depreciation and shrinkage, and cost of capital. The tool adds them into one annual carrying cost, shows it as a percentage of inventory value, and breaks it down by month and by day. The card is green at 20% or less, blue between 20% and 30%, and red above 30%.
Key Formulas Behind This Tool
- Cost of Capital: Average Inventory Value x Cost of Capital %
- Insurance and Taxes: Average Inventory Value x Insurance and Taxes %
- Depreciation and Shrinkage: Average Inventory Value x Depreciation, Obsolescence, and Shrinkage %
- Total Annual Carrying Cost: Annual Storage Cost + Cost of Capital + Insurance and Taxes + Depreciation and Shrinkage
- Carrying Cost %: (Total Annual Carrying Cost / Average Inventory Value) x 100
- Monthly Holding Cost: Total Annual Carrying Cost / 12
- Daily Cost of Dead Stock: Total Annual Carrying Cost / 365
Frequently Asked Questions (FAQ)
What is inventory carrying cost?
It is the total cost of holding unsold inventory for a period. It includes storage space, insurance and taxes, loss from damage, theft, or obsolescence, and the return you give up by tying money up in stock instead of using it elsewhere.
What is a typical carrying cost percentage?
Many businesses fall somewhere between about 15% and 30% of inventory value per year, and fast-moving or perishable goods can be higher. This tool shows green at 20% or less, blue up to 30%, and red above 30% as simple rules of thumb, not hard limits.
What should I enter as cost of capital?
Use the interest rate on the money that funds your inventory, such as a business loan or credit line. If you use your own cash, use the return you could earn by investing it elsewhere. Do not leave it at zero, because tied-up cash is a real cost.
What does the daily cost of dead stock mean?
It is your total annual carrying cost divided by 365. It shows what the inventory you entered costs you for each day it sits unsold, which helps you decide when a discount or liquidation beats holding on.
How can I reduce carrying costs?
Order closer to your reorder point, stop reordering slow movers, run clearance on aging stock, negotiate shorter supplier lead times, and review storage fees for space you do not need. The Inventory Reorder Calculator helps you set the right order timing.