Inventory carrying cost calculator
Inventory carrying cost is what it costs to hold stock for a year: the cost of the money tied up in it, plus storage, insurance, shrinkage and obsolescence, and handling. Add those yearly costs and divide by your average inventory value for your carrying cost rate. The ASCM Supply Chain Dictionary says such costs “vary from 10 percent to 35 percent annually, depending on type of industry.”
Example values; replace them with yours. The button fills storage with our starting rate for a standard pallet, $34.50 a month; lower rates apply at higher volumes.
$46,900a year
Annual inventory carrying cost.
That is 18.8% of your average inventory value, or $3,908 a month. The largest part is cost of capital, $20,000 a year.
- Cost of capital$20,000
- Storage$10,800
- Insurance$2,500
- Shrinkage and obsolescence$10,000
- Handling$3,600
Where the yearly cost comes from
Three of the costs grow with the value of the stock: the money tied up in it, insuring it, and the share you lose to damage, theft, expiry or products that stop selling. The other two are monthly bills: the space it takes and the work of keeping it counted and in place.
$250,000 × (8% + 1% + 4%) + 12 × ($900 + $300) = $46,900 a year
Divide the total by the inventory value for your carrying cost rate: $46,900 ÷ $250,000 = 18.8%.
| Cost | Per year | Share |
|---|---|---|
| Cost of capital$250,000 × 8% | $20,000 | 43% |
| Storage$900 a month × 12 | $10,800 | 23% |
| Insurance$250,000 × 1% | $2,500 | 5% |
| Shrinkage and obsolescence$250,000 × 4% | $10,000 | 21% |
| Handling$300 a month × 12 | $3,600 | 8% |
| Total | $46,900 | 100% |
How your rate compares
The ASCM Supply Chain Dictionary defines carrying cost as a percentage of inventory value per year, and says: “Such costs vary from 10 percent to 35 percent annually, depending on type of industry.” Your 18.8% is inside that range.
Your rate is also the holding cost the EOQ calculator needs: for a unit that costs $10, H is $1.88 a year. To see how fast the stock behind this cost sells, use the inventory turnover calculator; to size the space it takes, the warehouse space calculator.
Storage is the cost a 3PL changes most directly. At Fulfillment Hub USA it is billed per pallet or bin each month, starting at $34.50 for a standard pallet; see our pricing and our warehouse locations.
| Average inventory | Carrying cost a year | Saving |
|---|---|---|
| $250,000 today | $46,900 | – |
| $225,000 (10% less) | $42,570 | $4,330 |
| $200,000 (20% less) | $38,240 | $8,660 |
| $175,000 (30% less) | $33,910 | $12,990 |
Storage falls with the stock, as it does when you pay by the pallet. Handling stays as entered.
Common questions
What is the inventory carrying cost formula?
Annual carrying cost = average inventory value × (cost of capital + insurance + shrinkage and obsolescence, as yearly percentages) + 12 × (monthly storage + monthly handling). Divide it by the average inventory value for the carrying cost rate. With this page’s example values: $250,000 × 13% + 12 × ($900 + $300) = $32,500 + $14,400 = $46,900 a year, or 18.8% of inventory value.
What is a typical carrying cost percentage?
The ASCM Supply Chain Dictionary (18th edition) defines carrying cost as a percentage of the dollar value of inventory per year and says: “Such costs vary from 10 percent to 35 percent annually, depending on type of industry.” Your own rate depends on what your money costs, what you store and how fast it sells, so work it out from your numbers rather than borrowing a figure.
What cost of capital should I use?
Use what the cash in your stock costs you or could earn elsewhere: the interest rate on the credit line that funds inventory, or the return you expect from other uses of the money. ASCM describes cost of capital as a yearly percentage that may be based on the expected return on alternative investments and the bank rate for borrowing.
How do I include 3PL storage fees?
Enter what you pay for storage each month. If you store by the pallet, multiply your pallet count by the monthly rate. Fulfillment Hub USA’s published storage starts at $34.50 per standard pallet and $41.40 per large pallet a month, with lower rates at higher volumes.
How does carrying cost feed into EOQ?
The EOQ formula needs H, the cost of holding one unit for a year. Multiply your carrying cost rate by the unit cost: at a 20% rate, a unit that costs $12 has H = $2.40 a year.
Are pick fees and shipping part of carrying cost?
No. Pick and pack, packaging and postage are paid per order, so they are costs of selling. Carrying cost covers only holding stock: the money, the space, insurance, losses and the handling that keeping it involves.
Sources
Checked 2026-10-30. Rules change; confirm with the carrier or agency before you rely on a number.
More shipping and inventory tools
Pay for the pallets you store, not a building.
Tell us your SKUs, pallet count and order volume, and we’ll come back with an itemized storage and fulfillment quote.