Inventory Holding Cost Calculator

What this tool estimates

Holding cost is the price of keeping stock on the shelf: the cash tied up in it, the space and handling it needs, the insurance and taxes on it, and the value lost to obsolescence and shrinkage. The tool applies your annual holding rate to average inventory value: annual holding cost = average inventory value × holding rate.

Inputs to verify

Value stock at cost, not selling price. If capital is your own cash, the cost of capital is what that money could otherwise earn or repay. Storage should include the warehouse share, utilities, and handling labor that scale with inventory.

Component rates

Building the rate from components keeps the estimate auditable: capital, storage, insurance and taxes, and obsolescence and shrinkage. Their sum is the effective annual rate the tool applies.

Important assumptions

A blended rate assumes holding cost grows in proportion to inventory value. In practice some costs are fixed (a warehouse lease) and some are product-specific (perishable goods, trending items). Use the EOQ Calculator with per-unit holding cost for order-size decisions.

When not to rely on the result alone

Review seasonal swings, aged stock, expiry dates, and insurance terms before acting. A single blended rate can hide a slow-moving SKU that costs far more to hold than the average.

Use the rate in an EOQ check, size a purchase order, or read the planning basics.