Glossary
What is Inventory Carrying Cost?
Last updated July 2026
Inventory carrying cost is the total annual cost of holding stock — capital, storage, insurance, shrinkage, and obsolescence — usually 20–30% of inventory value per year.
Also known as: Holding cost, cost of carrying inventory
Carrying Cost % = (Capital + Storage + Service + Risk) ÷ Average Inventory Value The rule of thumb is that holding a dollar of inventory costs 20–30 cents a year; wholesale distributors often reach 25–40% because of longer holding periods and larger facilities.
Carrying cost is why excess inventory is so expensive: a stagnant $100,000 of dead stock quietly costs about $25,000 every year it sits.
20–30% of value per year (25–40% for wholesale).
Sources: Institute for Supply Management (via NetSuite), Industrial Supply Magazine
Part of Working capital & inventory turns.
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