Business
Inventory Carrying Cost Calculator
Enter average inventory value and annual carrying rate % to see yearly carrying cost.
What is inventory carrying cost?
Inventory carrying cost is the annual price of owning stock that sits on shelves or in a warehouse. Typical inputs fold capital cost, storage space, insurance, shrinkage, handling and obsolescence into one carrying rate percentage of average inventory value. Multiply average stock value by that rate: £85,000 at 25% implies about £21,250 a year just to hold the goods. Lower turns or slow movers inflate the bill even when purchase prices look cheap. Benchmark your rate against finance and ops rather than copying a textbook 20–30% blindly. Relate stock pace to inventory turnover and buffer policy to safety stock.
Worked example
Average inventory £85,000 × 25% carrying rate = £21,250 per year (~£1,771 per month).
Limits and assumptions
One blended rate. Does not split capital vs warehouse lines or model seasonal peaks week by week.
Frequently asked questions
What does carrying cost mean?
Carrying cost (also called holding cost) is what it costs each year to keep inventory — money tied up, space, insurance, spoilage and the risk that stock goes out of date or out of fashion.
What is a typical carrying rate?
Many planning models use roughly 15–30% of inventory value per year, but your warehouse rent and cost of capital may sit outside that band.
Average inventory or peak?
Use a period average so a one-week spike does not dominate the year.
Is this the same as purchase cost?
No — purchase cost is what you paid suppliers; carrying cost is the ongoing cost of holding what you bought.