Ask AwraIQ about features, pricing, onboarding, login, integrations, security, demos, mobile apps, automation, reports, or support.
Price what it costs you every year to keep stock sitting on the shelf.
Inventory looks free once it is paid for. It is not. Capital sits idle in it, warehouse space is consumed by it, a fraction of it expires or walks out of the door, and all of it must be insured. Add the four components up and holding stock typically costs a fifth to a third of its value every year — which is what makes slow-moving inventory so much more expensive than it appears.
Annual carrying cost
—
What this year of holding stock costs you before you sell a single unit.
Your numbers
What the cash tied up in stock would otherwise earn or cost to borrow.
Rent, racking, utilities, warehouse labour.
The formula
Carrying cost = Average inventory value × (Capital + Storage + Risk + Service rates)
Most operations land between 18% and 30% a year once all four components are counted.
What it means
Carrying Cost — full definition
Read in the glossaryCost of capital is the largest component. Use your borrowing rate, or the return the cash would earn elsewhere.
Storage should reflect the space this stock genuinely occupies, including racking and warehouse labour — not just the rent line.
Risk covers obsolescence, expiry, shrinkage and damage. Pull it from last year's write-offs rather than guessing.
A carrying rate below 15% almost always means a component has been left out — usually obsolescence, or the true cost of capital.
The rate you calculate here belongs in the EOQ formula as holding cost per unit per year. Using an invented number there quietly distorts every order quantity you set.
Worked example
125,000 of average inventory at 12% capital, 4% storage, 3% risk and 2% insurance carries a 21% rate — 26,250 a year, or roughly 2,190 a month, to hold stock you have already paid for. Cutting average inventory by a fifth releases 25,000 of cash and saves 5,250 a year in carrying cost on top.
Most businesses land between 18% and 30% a year. Perishable, fashion or fast-obsoleting goods run higher because the risk component dominates.
No. The purchase price is the value being carried; carrying cost is what it costs to keep that value sitting still for a year.
Multiply the excess inventory value by the carrying rate. That annual figure is the recurring saving, and it sits alongside the one-off cash release from selling the stock down.
This calculator works on one set of numbers. AWRA OpsHub keeps inventory carrying cost calculator results current across every item, supplier and location — automatically.
Find the order quantity that minimises ordering plus holding cost.
See how many times you sell through stock — and how many days it sits.
See how many days your cash is trapped between paying suppliers and getting paid.