Break down the true cost of holding inventory — including storage, insurance, depreciation, and opportunity cost — to find savings opportunities.
Inventory Value = Average value of inventory on hand ($)
Total Carrying Cost % = Sum of all cost component percentages (storage, insurance, depreciation, opportunity cost, etc.)
Total Carrying Cost
19.0%
Combined percentage of all cost categories
Annual Carrying Cost
$0.00
Total yearly cost of holding inventory
Monthly Carrying Cost
$0.00
Average monthly holding expense
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Inventory carrying cost (also called holding cost) is the total expense of storing unsold goods. It includes warehousing, insurance, depreciation, shrinkage, opportunity cost of capital, and other miscellaneous costs. It is typically expressed as a percentage of total inventory value.
Industry averages range from 15% to 30% of inventory value per year. Perishable goods or fast-moving tech products may have higher rates due to obsolescence risk, while durable goods tend toward the lower end.
Opportunity cost represents the return you could have earned by investing the capital tied up in inventory elsewhere. If your inventory is worth $100,000 and your expected return on capital is 8%, the opportunity cost is $8,000 per year.
Reduce carrying cost by improving demand forecasting, implementing just-in-time ordering, negotiating better warehousing rates, reducing safety stock where possible, and liquidating slow-moving or obsolete inventory.
No. Carrying cost only includes the costs of holding inventory, not the purchase price. It covers storage, insurance, capital opportunity cost, depreciation, shrinkage, and handling, all expressed as a percentage of the inventory's value.