What is inventory carrying cost?

Inventory carrying cost is the annual cost of holding goods in a warehouse. It includes the cost of capital (interest or opportunity cost), storage space rent, insurance, taxes, obsolescence, and shrinkage. It typically runs 20% to 30% of the inventory value annually.

💰 Product Costing

Inventory Carrying Cost Calculator for Importers

Use our inventory carrying cost calculator to calculate the annual cost of holding imported inventory. Includes capital cost, storage, insurance, obsolescence risk, and opportunity cost.

Updated: 2026-04-13

Planning Reference

Inputs Last Reviewed April 2026

Reference Basis

Built from current calculator assumptions plus typical import cost benchmarks used by China sourcing teams.

Planning Note

Use this to pressure-test margin and landed cost. Final profitability still depends on your freight quote, duty classification, and downstream selling costs.

Primary opportunity

inventory carrying cost calculator
Medium SERP difficulty

Average Inventory Value USD Average value of inventory on hand (units × landed cost). Use a 3-month average if seasonal.

Annual Carrying Cost Rate % Total annual cost to hold inventory as % of value. Includes capital cost, warehouse, insurance, obsolescence. Industry standard: 20–30%.

Monthly Warehouse / Storage Cost USD Monthly rent for your warehouse space attributable to this inventory.

Inventory Insurance Rate % Annual insurance premium as % of inventory value. Typical: 0.3–0.8%.

Shrinkage / Obsolescence Rate % Annual % lost to damage, theft, or obsolete/dead stock. Typical: 1–3%.

The Hidden Cost of Holding Inventory

When importing from China by sea, the long lead times often force importers to buy 3 to 6 months of inventory at once. While this lowers the per-unit freight and factory price, it radically increases the Inventory Carrying Cost.

Holding $100,000 of inventory with a 25% carrying cost equals $25,000 per year in holding expenses. Optimizing reorder points and considering faster (air) freight for smaller, more frequent shipments can sometimes be cheaper than paying warehouse fees for massive safety stocks.

Tips for China Importers

Never compare suppliers by FOB price alone. A supplier $0.50 cheaper on FOB can easily be more expensive once freight, duty, and compliance differences are factored in. Always compare landed cost.
Include platform fees in your landed cost model. Amazon FBA referral + fulfillment fees total 30–40% of your selling price. If that's your channel, it must be in your cost calculation from day one.
Add a 15% cost contingency for your first import. First-time importers consistently underestimate costs — unexpected charges like detention fees, inspection costs, or currency moves routinely add 10–20%.
Calculate break-even units before ordering. Know exactly how many units you must sell to cover your landed cost and fixed overheads. If break-even is more than 60% of your order, the risk is too high.
Recalculate on every reorder. Freight rates, duty rates, and supplier prices all change. A cost model from 6 months ago can be meaningfully wrong. Always recalculate before committing to a new order.