GlossaryEN1 min readUpdated: Jun 25, 2026

Inventory Carrying Cost Calculations

Inventory carrying cost calculations quantify all expenses a company incurs by holding stock over a defined period.

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Last updated: 25 June 2026Published: 19 June 2025

Source: https://www.investopedia.com/terms/i/inventory-carrying-cost.asp

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Definition & Explanation

Inventory carrying cost calculations quantify all expenses a company incurs by holding stock over a defined period. The four main components are capital costs (the opportunity cost of money tied up in inventory), storage and handling costs (facility rent, labor, equipment), service costs (insurance, applicable taxes), and risk costs covering obsolescence, shrinkage, and damage. Supply chain managers and buyers rely on this figure to determine economically sound order quantities and to evaluate whether stock should be held in-house or at a supplier's location. Carrying costs are broader than warehouse space costs alone: they always include the financial cost of capital locked in inventory and the risk component.

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Inventory Carrying Cost Calculations

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Related Terms

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