Client Service Center

Inventory Question Number Three of Seven
Published on by CS3 Technology in Blog Posts


  1. By: Sheri Blaho


I have heard from a few of you on this topic over the years.  There are so many components that can be included in the calculation for carrying-costs.  Ultimately, it is YOUR benchmark for determining improvements or slippage in inventory management.  So don't labor over what to include, but be consistent with the formula.  However, I would suggest that "more is better".  The various costs that are included will yield more opportunities to identify improvements. 



  1. Do I know what my carrying-cost is?


Most experts agree on the average a company’s inventory carrying cost is around 25% of its average annual inventory investment.  Knowing how and consistently measuring   this cost will quickly spotlight problems that are be occurring in your warehouse, inventory stocking levels, and overall management decisions.  Costs that should be included in the calculation are:

    *  inventory risk costs like obsolescence, damages, pilferage, and undocumented usage – the largest component

    *  storage space

    *  labor

    *  material handling equipment

    *  inventory service costs like insurance

    *  taxes


Without this measurement, you can’t properly optimize your inventory management system, which means you can’t make informed decisions about establishing the right inventory levels. 

(877) 496-1600

Logo for CS3 Technology.





This website is owned by CS3 Technology. CS3 Technology is independent from Sage and is not authorized to make any statement, representation, or warranties or grant any license or permission on behalf of Sage regarding any product, service, or website content. Certain materials made available on or through this website are owned by Sage and cannot be used without the prior written permission of Sage.