Reorder point
Know when to reorder, with a buffer for uncertainty.
InventoryINVENTORY
Inventory Carrying & Holding Cost Calculator
Estimate annual, monthly, and daily inventory carrying costs from average inventory value and your entered annual rates.
Inventory carrying cost calculator
Estimate annual, monthly, and daily inventory carrying costs from average inventory value and your entered annual rates.
YOUR RESULT LIVE CALCULATION
Estimated annual carrying cost
$60,000/ year
24% COMBINED ANNUAL RATECapitalStorageServiceRisk
- Monthly allocation
- $5,000
- Daily allocation (365 days)
- $164.38
- Capital cost / year
- $30,000
- Storage cost / year
- $12,500
- Service cost / year
- $7,500
- Risk cost / year
- $10,000
All rates are entered assumptions on one average inventory cost base. Allocated cost is not guaranteed cash savings.
BEHIND THE NUMBER
How the calculation works
Enter each cost as an annual percentage of the same average inventory value at cost. Service can include insurance and other inventory-related services; risk can include expected shrinkage and obsolescence. Avoid overlap between categories and do not count costs already included in another rate. Monthly and daily figures divide the annual estimate by 12 and 365. All example rates are assumptions, not market benchmarks.
Annual carrying cost = average inventory value × (capital + storage + service + risk rates) / 100
When this calculation helps
Use a representative average inventory value at cost and annual rates calculated against that same base. Separate capital, storage, service, and inventory-risk assumptions so overlaps can be found.
Check the interpretation
An allocated holding-cost reduction is not necessarily avoidable cash savings. A warehouse lease or fixed team may stay unchanged when stock falls. Identify which costs actually respond to a proposed inventory reduction before using the estimate in a business case.
This is a simple planning allocation, not an accounting valuation or financing recommendation. Fixed warehouse costs may not fall in proportion to stock reductions. Use representative average inventory and costs that match your planning period.
Oracle carrying cost percentage modelWorked example: Returns Cost: Separate Processing, Recovery, and Lost Inventory Value
Good to know
Should I use sales value or inventory cost?
Use average inventory value at cost and rates calculated against that same base. Sales value would mix incompatible cost bases.
Does lower inventory guarantee these savings?
No. This estimates an allocated carrying cost. Actual avoidable savings depend on which costs change when inventory changes. Capital, storage contracts, and fixed staffing can behave differently.