Inventory carrying cost calculator
What a full warehouse costs you per year, and what share of your inventory that is.
≈ 4 minutes
Work out my carrying cost
MOQ profitability for your supplier
The MOQ is set by your supplier, not by you. What you can decide is whether to accept it, and that takes knowing how much cash it ties up, how many months of inventory it represents, and what survives of the profit after paying to keep those goods waiting. This calculator assesses the impact of a specific MOQ; it does not compute an ideal order quantity.
Every calculation runs in your browser. The figures you type are never sent to a server and are never stored.
Your results will appear here
Enter the supplier's minimum order and the cost per unit delivered to your warehouse.
- Minimum order units and landed cost per unit
- Selling price and variable costs of each sale
- Monthly demand and annual carrying rate
Calculation results
Result after inventory cost
—
What the order leaves once the cost of holding it is paid.
Contribution per unit—
Initial investment—Goods plus fixed cost
Months of stock—How long it takes to sell
Average inventory—Half the MOQ
Cost of holding the cycle—
Total order contribution—
Most cash the batch can return—Selling all of it
Does it pay the money back?—Before the batch runs out
Months to recover cash—Cash approximation
Inventory left at the horizon—
Value of remaining inventory—
Any inventory left over?—
Assumes uniform demand?—Model assumption
See the breakdown
| MOQ units | — |
| Landed cost per unit | — |
| Initial investment | — |
| Total contribution | — |
| Holding cost | — |
| Result after inventory | — |
Recommended next step
This whole calculation rests on the cost per unit in your warehouse. If you used the supplier price, the result is optimiztic: work out the real landed cost.
Work out my landed costResults are estimates based on the information you enter. Fees, taxes and platform terms can change: always check the figure that matters to you against your invoice or the official platform. They do not replace your real invoices, your official accounts or professional tax, financial or legal advice.
What this tool works out
This MOQ profitability calculator assesses the impact of a specific minimum order: how much money it ties up, how long it takes to sell, and what survives of the profit once you deduct the cost of keeping those goods waiting.
It matters to understand what it does not do: it does not calculate an optimal MOQ. The minimum quantity is set by the supplier from their own production costs, and no formula negotiates it. What Profyza evaluates is whether that quantity pays off for you.
MOQ is not EOQ
Two concepts that get confused and that belong to different people. MOQ is the smallest quantity the supplier will accept: a constraint imposed from outside. EOQ is the quantity that suits you, minimizing the sum of ordering and holding costs: a calculation of your own.
When the MOQ is larger than your EOQ, you are buying more than you should because the supplier will not let you buy less. This calculator tells you what that imposition costs, which is useful both for deciding and for negotiating.
How the formula works
Carrying cost is applied to average inventory, which is half the order, and only for the months it takes to run out.
initial investment = MOQ x landed cost + fixed order cost
months of stock = MOQ / monthly demand
average inventory = MOQ / 2
carrying cost = average inventory x landed cost
x annual rate/100
x months of stock / 12
contribution per unit = price - landed cost
- variable selling costs
result after carrying = contribution x MOQ
- carrying cost
- fixed order cost
Average inventory is half the order because stock falls steadily from the MOQ to zero as you sell. That is the uniform demand assumption, and it is the strongest simplification in the calculation.
A worked example
A supplier requires a minimum order of 1,200 units at a landed cost of $7.40 each plus $250 of fixed order cost. The product sells at $19.90 with $2.60 of variable selling costs, 180 units sell per month, and the annual carrying rate is 18 %. The analysis horizon is 6 months.
| Item | Value |
|---|---|
| Minimum order | 1,200 |
| Initial investment | $9,130.00 |
| Months of stock | 6.7 |
| Carrying cost | $444.00 |
| Total contribution of the order | $11,880.00 |
| Result after carrying cost | $11,186.00 USD |
| Months to recover the cash | 2.9 |
| Units unsold at the horizon | 120 |
The initial investment is $9,130 and the MOQ represents 6.7 months of stock. Holding it costs $444, so of the $11,880 of contribution, $11,186 survives after carrying cost. Cash returns in 2.9 months, but at 6 months 120 units would still be unsold: $888 tied up that is not yet profit.
Recovering cash is not earning money
The calculator gives two figures that are easily confused. Months to recover the cash measures when the money you advanced returns to your account; result after carrying cost measures what you earn from the whole operation.
You recover the cash long before you earn the profit, because every sale returns the full price minus its variable costs, while profit only appears once every unit has found a buyer.
Confusing them leads to believing an order is 'already paid for' when there is still inventory that may never sell.
And there is one case where the cash never comes back with that order: when selling the whole batch brings in less than it cost. A batch of 100 units bought at 10 EUR costs 1,000 EUR; sold at 5 EUR, those 100 units only bring in 500 EUR. That is not a long payback, it is an impossibility, and the calculator says so instead of inventing a number of months.
How to read the result
Months of stock is the first signal. A MOQ representing six months of sales is a long bet: six months in which the product can go obsolete, fall out of fashion or be displaced by a competitor.
Inventory remaining at the horizon is the concrete warning. If units are still there at the end of the period you set, those units have generated no profit and are still consuming carrying cost. Their value is tied up, not earned.
And the result after carrying cost is the honest figure. Gross contribution always looks attractive; what remains after paying to store the goods for half a year is a different conversation.
What to decide next
This whole calculation rests on one figure: the cost per unit delivered to your warehouse. If you used the supplier price instead of the real landed cost, every result is optimiztic, and the more it costs to bring the goods in, the more optimiztic it is.
What this assumes
- Monthly demand is uniform across the whole period
- Average inventory is half the minimum order
- The landed cost per unit already includes freight, duty and clearance
- The annual carrying rate is yours, not a generic benchmark
- Every unit sells at the price you entered
What it does not cover
- Calculating an optimal order quantity, which is EOQ
- Volume discounts if you buy above the minimum
- The obsolescence risk specific to your product
- Seasonality of demand within the period
- Negotiating the MOQ with the supplier
Frequently asked questions
Does this calculator tell me my ideal MOQ?
No, and the distinction matters. The MOQ is set by your supplier from their production costs. Here you evaluate whether the minimum they demand pays off: how much cash it ties up, how many months of stock it represents, and what survives after holding it.
What is the difference between MOQ and EOQ?
MOQ is the smallest quantity the supplier accepts, imposed from outside. EOQ is the quantity that suits you, minimizing the sum of ordering and holding costs. When the MOQ exceeds your EOQ, you buy too much because you are not allowed to buy less.
Which cost per unit do I enter?
The landed cost: the real cost of the unit sitting in your warehouse, with freight, duty and clearance included. Using the supplier price leaves every result optimiztic, by however much it costs to bring your goods in.
Where do I get the annual carrying rate?
From your own cost of holding inventory divided by the average value stored. If you have never calculated it, do that first: using a generic rate off the internet turns the result into an estimate built on another estimate.
Why is average inventory half the order?
Because stock falls steadily from the MOQ to zero as you sell, so the average level across the cycle is half. That is the uniform demand assumption, and it is the strongest simplification here: if you sell in bursts, real average inventory is higher.
What does it mean if units remain at the end of the horizon?
That the minimum order exceeds what you will sell in the period you set. Those units have generated no profit, still cost money to hold, and their value is still tied up. It is the clearest sign the MOQ is large for your sales rate.
Why do I recover the cash before earning the profit?
Because every sale returns the price minus its variable costs, which amortizes the investment quickly. Profit, by contrast, is only complete when everything has sold. An order can have its cash back and still have earned nothing.
What should I work out after this?
The real landed cost, if you did not have it. This whole analysis rests on the cost per unit in your warehouse, and using the supplier price leaves the result systematically optimiztic.
Official sources
Shopify — minimum order quantity and how it differs from EOQhttps://www.shopify.com/blog/minimum-order-quantity
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