Inventory planning
Inventory Carrying Cost Calculator
Find the annual cost of holding stock, its percentage of average inventory value, and a monthly equivalent. Then compare a smaller inventory without assuming that fixed warehouse costs disappear.
Your annual holding costs
Example values are editable. Use one currency and one year. Enter 0 for a cost that does not apply; an empty field is incomplete.
Each category accepts one amount or rate, never both. A mode change reinterprets the entered number. Do not repeat the same rent, insurance or loss in another category. If a category mixes fixed and variable costs, leave it fixed for a conservative scenario or calculate its avoidable portion separately.
Cost of carrying your inventory
Annual carrying cost
USD 22,000.00
22.00% of average inventory value per year
Monthly equivalent: USD 1,833.33. This is annual cost divided by 12, not a forecast of monthly invoices.
- Capital cost
- USD 10,000.00
- Storage cost
- USD 7,200.00
- Service cost
- USD 1,800.00
- Risk and obsolescence cost
- USD 3,000.00
If average inventory falls by 20%
- New average inventory
- USD 80,000.00
- Estimated annual carrying cost
- USD 19,040.00
- Modeled annual saving
- USD 2,960.00
Only checked categories scale down. This is a proportional cost scenario, not guaranteed cash savings or a recommendation to reduce safety stock.
Formula and worked example
Annual carrying cost = capital + storage + service + risk costs. Carrying rate = annual carrying cost ÷ average inventory value × 100. Convert monthly amounts to annual amounts by multiplying by 12; convert annual percentages to amounts by multiplying average inventory value by the rate ÷ 100.
For average inventory of 100,000, capital at 10% costs 10,000, storage at 600 per month costs 7,200, annual service costs 1,800 and risk at 3% costs 3,000. The total is 22,000 per year, 22.00%, or 1,833.33 per month. With a 20% inventory reduction and storage fixed, annual cost becomes 19,040: a 2,960 saving, not 4,400.
Choose a consistent basis
Use average inventory valued at acquisition cost. Beginning plus ending inventory divided by two is a simple approximation; monthly snapshots better reflect seasonal stock. This planning worksheet includes opportunity cost, so its total is not necessarily an expense line in your accounts. At zero average inventory, fixed overhead can still exist, but the carrying percentage is undefined.
Calculations retain precision until display; amounts are shown to two decimals. Very small costs may display as 0.00. Annual rates above 100% can be valid when overhead is large relative to inventory. The input limit is a numerical safeguard, not a benchmark.
Reference: NetSuite’s inventory carrying cost components and formula. Use your own ledger and assumptions; no industry rate is automatically selected.
Continue your cost analysis
- Allocate freight and duty into landed cost per unit before valuing imported inventory.
- Check gross margin against the correct product cost.
- Review working capital to see inventory in the wider balance sheet.
About This Calculator
Calculate annual inventory carrying cost, holding cost rate and monthly equivalent. Compare a lower-inventory scenario while keeping fixed costs unchanged.
Frequently Asked Questions
What is the difference between carrying cost and inventory value?
Inventory value is the acquisition cost of stock held. Carrying cost is the cost of keeping it over time. Do not add the purchase principal again as an annual capital charge.
Can I enter monthly costs and annual percentages together?
Yes, in different categories. Each category accepts only one basis. Monthly amounts multiply by 12; annual percentages apply to average inventory value. Enter the same expense in only one category.
What happens when average inventory is zero?
Annual fixed costs can still be calculated, but the carrying cost percentage is undefined and displays N/A. The calculator does not divide by zero.
Does reducing inventory guarantee the displayed savings?
No. Only categories you mark as scaling with inventory decrease in the scenario. Fixed rent and other unchanged costs remain. The result is a proportional planning estimate, not a cash savings guarantee.
The SuperCalc Editorial Team maintains calculator interfaces, formula notes, examples, and supporting explanations. Methods, assumptions, source links, and review depth vary by calculator and are documented on the relevant page where available.