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Inventory carrying cost calculator: the yearly price of holding stock
Enter the value of your stock and the four cost components. You get your carrying cost rate and what that stock costs you per year and per month.
Inventory carrying cost is the sum of capital cost, storage cost, service cost and risk cost, taken as a percent of stock value. At the default inputs the rate is 19.0%, so USD 500,000 of stock costs USD 95,000 a year to hold.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
Holding USD 500,000 of stock costs you USD 95,000 a year, which is USD 7,917 a month. Every USD 100 of stock you remove saves about USD 19 a year.
| Carrying cost rate | 19.0% |
|---|---|
| Cost of holding this stock for a year | USD 95,000 |
| Cost per month | USD 7,917 |
| Yearly cost of holding USD 100 of stock | 19 |
The currency box changes the label only. Enter amounts in the currency you choose.
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How the inventory carrying cost calculator works
The formula
Carrying cost rate = capital cost % + storage % + service % + risk %. Yearly carrying cost = inventory value x carrying cost rate.
Holding stock is not free, but most teams book it nowhere. The cost hides in interest, rent, insurance and write-offs. Adding the four parts gives you a single rate you can plug into order size and reorder decisions.
The rate also tells you what an extra week of stock costs. At 19 percent a year, an item that sits for ten extra weeks adds about 3.6 percent to its cost before it is used.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Set the cost of capital to your borrowing rate or the return your finance team uses for investment decisions.
- Divide your yearly warehouse and handling spend by average stock value to get the storage percent.
- Estimate shrinkage and obsolescence from last year write-offs divided by average stock value.
Mistakes that skew the answer
Counting only the interest cost
Capital is often the smallest part. Storage and obsolescence frequently outweigh it.
Double counting warehouse rent
If rent is in the storage percent, do not add it again as a separate line.
Using book value for stale stock
Slow stock written down on the books still costs space and handling. Count it at the cost you paid.
What to do with the result
Use the rate as the holding cost in the EOQ calculator, multiplying it by unit price to get a cost per unit. Then check the effect of long payment cycles in the cash conversion cycle calculator, and review stock levels against the total cost of ownership of each item.
Questions about the inventory carrying cost calculator
What is a typical inventory carrying cost?
Published ranges often fall between 15 and 30 percent of stock value a year. Your own figure depends on your cost of capital, your warehouse and how much of the stock goes stale.
Is carrying cost the same as holding cost?
Yes. The two terms mean the same thing in most purchasing and finance texts.
Should I include the cost of stock-outs?
No. Stock-out cost is a separate trade-off against carrying cost. The safety stock calculator is where the two meet.
How do I cut carrying cost?
Lower stock levels on slow items, negotiate consignment or vendor-managed stock, and shorten lead times so less safety stock is needed.