How do I calculate inventory carrying cost?

Multiply average inventory value by the annual carrying rate. For example, $100,000 of inventory at a 25% rate gives $25,000 of carrying cost per year.

What does carrying cost include?

Four families: capital tied up, storage (space and handling), service (insurance and taxes), and risk (obsolescence, damage, theft).

What carrying rate should I use?

A 20% to 30% rate is typical depending on industry and product type. 25% is a common default when you do not have a precise figure.

Why does carrying cost matter?

Because stock ties up capital and generates ongoing costs. High carrying cost on slow-moving products signals capital that could work harder elsewhere.

Free Tool · Updated June 30, 2026

Inventory Carrying Cost Calculator

Estimate what holding your inventory really costs each year: capital, storage, service, and risk, rolled into one carrying rate. Free, no email.

Average inventory value ($) Average value held at cost

Annual carrying rate (%) Capital, storage, service, risk

Annual carrying cost$25,00025% of $100,000 held

Average inventory value$100,000

Carrying rate25%

Annual carrying cost$25,000

Carrying cost bundles capital, storage, service, and risk. A 20% to 30% annual rate is typical; 25% is a common default.

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Four cost familiesCapital tied up, storage, service, and risk, rolled into one annual carrying rate.
One rate, not four calculationsEnter average inventory value and a carrying rate, often 20% to 30%, to get the annual cost.
Spot dead capitalA high carrying cost on slow-moving stock signals money that could be working harder elsewhere.

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How This Calculator Works

Annual carrying cost is calculated as average inventory value times the annual carrying rate. That rate bundles four cost families: capital (money tied up in stock), storage (space, handling, energy), service (insurance and taxes), and risk (obsolescence, damage, theft). A 20% to 30% rate is typical; 25% is a common default.

How This Maps to Odoo Inventory

Odoo Inventory keeps stock value current through automated valuation, which gives a reliable base for this calculation. Cross that value with turnover and overstock visible in reporting, and you see where carrying cost piles up. Octura configures valuation, reporting, and reordering rules to bring that cost down without creating stockouts.

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How this calculation is made

The Octura Inventory Carrying Cost Calculator is calculated as average inventory value × annual carrying rate, where the carrying rate combines capital, storage, insurance, shrinkage and obsolescence and typically lands between 20 and 30 percent a year.

Backed by real migrations

Numbers like yours, validated on real migrations

These are three engagements where the projection actually turned into operational reality on Odoo, and the full case studies live on the migration service page.

ManufacturingV12 → V17
Industrial Manufacturer, Texas
12custom modules carried over, zero data lost
DistributionV14 → V18
Wholesale Distributor, Quebec
30%faster page loads once the upgrade shipped
Professional ServicesCE → Enterprise
Consulting Firm, Brussels
0hproduction downtime during cutover

Frequently Asked Questions

01
How do I calculate inventory carrying cost?
Multiply average inventory value by the annual carrying rate. For example, $100,000 of inventory at a 25% rate gives $25,000 of carrying cost per year.
02
What does carrying cost include?
Four families: capital tied up, storage (space and handling), service (insurance and taxes), and risk (obsolescence, damage, theft).
03
What carrying rate should I use?
A 20% to 30% rate is typical depending on industry and product type. 25% is a common default when you do not have a precise figure.
04
Why does carrying cost matter?
Because stock ties up capital and generates ongoing costs. High carrying cost on slow-moving products signals capital that could work harder elsewhere.