Inventory Carrying Cost Calculator
Inventory feels like safety. On the books it is cash sitting still, costing you every month it waits. Use your own rates, or start from the defaults and adjust.
The math, in plain view.
Carrying cost is the inventory value multiplied by a carrying rate: the sum of what it costs, per year, to finance, store, handle, insure and lose stock. Annual carrying cost = average inventory × (capital + storage + handling + insurance and taxes + obsolescence).
Cutting inventory pays twice: once in cash released, and every year after in lower carrying cost. The safe way to cut it is to fix the reasons it is there: long or unreliable lead times, batch sizes, forecast error and missing rules for reorder points.
What is a typical carrying rate?
It varies widely by business, cost of money and how perishable or fast-changing the stock is. That is why every component here is editable: use your finance team's numbers.
Should I count all inventory?
Count raw materials, work in progress and finished goods at cost. If you hold consigned stock you don't pay for, leave it out.
How do I reduce inventory without hurting service?
Set stock levels by rule (lead time, variability, service target) instead of habit, then work on the lead times and batch sizes that force you to hold it.
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