How much does holding inventory cost?
Put a number on the hidden cost of holding inventory, from storage to capital. The carrying rate translates inventory on your balance sheet into an annual operating burden. Compare the savings from smaller orders against extra ordering and freight costs.
The formula, explained.
Simple annual cost = average inventory × annual carrying rate Detailed annual cost = capital + storage + insurance + shrinkage + obsolescence + administration Carrying rate = annual cost ÷ average inventory
A worked example
How to interpret your result
The carrying rate translates inventory on your balance sheet into an annual operating burden. Compare the savings from smaller orders against extra ordering and freight costs.
Common mistakes to avoid
Enter annual costs in detailed mode. Do not add the inventory purchase value itself as a carrying cost, and avoid counting warehouse labor twice.
Frequently asked questions
What does this result include?
The result includes the inputs shown above and any advanced costs you enter. Fixed overhead and income taxes are excluded unless explicitly allocated in other costs. Check the formula and cost breakdown for the exact scope.
Can I change the assumptions?
Yes. All inputs can be edited, and advanced assumptions are available below the main inputs. Use values from the same period and currency. Changing display currency changes the symbol, not the underlying amount.
Are my financial numbers saved?
No. Calculations happen locally in your browser. Sharing creates a link containing the inputs, and exporting saves a CSV report to your device. You choose whether to share those artifacts.
Learn more about our calculation methodology and estimate limitations.