Supply Chain KPI Examples | Carrying Cost of Inventory

Carrying Cost of Inventory

Measure how much it costs to carry inventory.

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Formula

Inventory carrying rate * Average inventory value

Services

HubSpot Dashboard | HubSpot logo PipelineDeals Dashboard | PipelineDeals logo Recurly Dashboard | Recurly Logo Salesforce Dashboard | Salesforce logo Smartsheet Dashboard | Smartsheet logo

Role

C-Level, VP / Director

Overview

The Carrying Cost of Inventory metric measures how much it costs your organization to store inventory over a given period of time. Use the following formula when calculating carrying cost of inventory.

Inventory carrying rate * Average inventory value

Every piece of inventory that you purchase and store in your inventory has some sort of cost associated with it, such as labour, risk/insurance, storage, and freight. This metric is used to figure out how much profit can be made on your current inventory, and it may also be used to help your suppliers map out their production cycles.

Success indicators

  • Low costs and high inventory turnover rates.

Monitoring Supply Chain KPIs on a Dashboard

Once you have established benchmarks and targets for Carrying Cost of Inventory, you’ll want to establish processes for monitoring this and other supply chain KPIs. Dashboards can be critical in this regard. Read more.