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Find out what percentage of your inventory value goes toward storage, capital, and risk costs with this free inventory carrying cost calculator.
Inventory carrying cost
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What is
Inventory carrying cost, or holding cost, is the total expense a business incurs to store unsold inventory over a period of time. It's usually expressed as a percentage of the total inventory value and includes storage, capital, service, and risk costs.
What you need to know about inventory carrying cost:
Carrying cost typically runs 20–30% of a business's total inventory value each year, on average.
Storage, capital, service, and risk costs all factor into a business's total inventory carrying cost each year.
Lowering inventory carrying cost frees up cash flow and reduces the risk of holding unsold or obsolete stock.
How to calculate inventory carrying cost
If you don't already have your average inventory value on hand, work it out first with the average inventory calculator.
Why is calculating inventory carrying cost important?
Improved pricing decisions
Knowing the true cost of holding stock helps a business price products in a way that protects its margins.
Better purchasing choices
A high carrying cost signals that a business may be over-ordering or holding stock for too long.
Stronger cash flow
Capital tied up in unsold inventory can't be used elsewhere. Tracking carrying cost regularly helps a business free up cash for other priorities.
Frequently asked questions
Simplify inventory and order management for your business
- Inventory Control
- Warehouse Management
- Multichannel Selling
- Order Management
- End-to-end tracking
- Mobile app
