Free tool · Inventory
Inventory Cost Calculator
Total the real annual cost of holding stock, not just what you paid for it.
Add up what your inventory actually costs to hold for a year: storage, insurance, shrinkage and obsolescence, handling, and the cost of the capital tied up in it. Most businesses count only the purchase price and are surprised by the total, which typically runs to a fifth or more of the stock value every year.
- Files never leave your device
- Runs entirely in your browser
- Free, no account needed
How to use Inventory Cost Calculator
Three steps, and nothing to install.
Enter your average inventory value
Use the average held over the year, at cost.
Add each cost component
Storage, insurance, shrinkage, obsolescence, handling and cost of capital.
Read the total and the percentage
Use the per-unit figure in your EOQ calculation.
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Open ToolHow much does holding inventory cost per year?
Holding cost is the sum of storage, insurance, shrinkage and obsolescence, and the cost of the capital tied up, applied to average inventory value. It commonly totals 15 to 25% a year, which is why stock sitting still is expensive even when nothing goes wrong.
Inventory Cost Calculator formula
Annual holding cost = Average inventory value x (Storage% + Insurance% + Shrinkage% + Capital%)
Worked example: 50,000 of average inventory at 6% storage, 1.5% insurance, 4% shrinkage and 8% capital is 19.5%, or 9,750 a year, which is 1.95 per unit across 5,000 units.
How this works in your browser
Each cost component is summed into an annual total, then expressed both in currency and as a percentage of average inventory value, with a per-unit figure derived from your unit count. Breaking the components out rather than asking for a single percentage is deliberate: most people materially underestimate the total, and seeing capital cost and obsolescence itemised alongside storage is what makes the real figure credible. The per-unit output feeds directly into the EOQ formula. Computed in your browser.
Who uses Inventory Cost Calculator
Feeding EOQ
Produce the holding cost per unit that order-quantity maths needs.
Justifying clearance
Quantify what slow stock costs you to keep.
Evaluating bulk deals
Weigh a supplier discount against the cost of holding the extra units.
Budgeting
Include a realistic stock-holding cost in your annual plan.
Frequently asked questions
What it can and cannot do, and what happens to your files.
What does holding stock actually cost?
Commonly 20 to 30 percent of the stock's value per year once everything is counted: warehousing, insurance, shrinkage, obsolescence, handling labour and the return you forgo on the cash tied up. Counting storage alone typically understates it by more than half.
Why include the cost of capital?
Because money sitting in stock cannot do anything else, whether that is paying down borrowing or funding growth. Leaving it out makes holding inventory look free, which is precisely the error that leads to overstocked warehouses.
How do I estimate shrinkage and obsolescence?
From your own stock counts and write-offs over the last year rather than an industry figure. Shrinkage varies enormously by what you sell and how it is stored, and obsolescence depends entirely on whether your products date.
What can I do with the number?
Feed it into EOQ as the holding cost per unit, use it to judge whether a bulk discount is genuinely worth taking, and use it to justify clearing slow-moving lines. A clear holding cost turns dead stock from an inconvenience into a quantified loss.
Are my figures stored?
No. Everything is calculated in your browser.
Calculate your true holding cost - free.
Files never leave your device. No upload, no account, and free for unlimited use.
Also see: Average Inventory Calculator, Beginning Inventory Calculator, Finished Goods Inventory Calculator, Inventory Turnover Ratio Calculator