Solar & battery
Solar Inventory Carrying Cost Calculator
Works the cost of holding solar inventory, where obsolescence is the real risk.
Result
Obsolescence is the line that makes this different from general contracting inventory. Panel and inverter models are superseded on short cycles, and superseded stock either sells at a discount, becomes unusable in a design that specifies current equipment, or fails to match an existing array when a customer adds to it. Warranty and certification also travel with the specific model, so old stock can be unsellable rather than merely cheap. The stockout figure is shown separately and not added into the rate because it pulls the other way: reducing inventory cuts carrying cost and raises stockout risk, and the total is what you are actually trying to minimise rather than either half.
Get a Free Business AuditHow the calculation works
Average inventory value multiplied by a carrying rate covering financing, storage, insurance, handling and obsolescence, giving the annual cost of holding stock. In solar the obsolescence component is unusually heavy, because module and inverter prices have fallen and specifications have moved.
What moves the number
- Average inventory value held.
- Financing cost on the capital tied up.
- Obsolescence risk on modules and inverters.
- Storage, handling and damage.
Where this one goes wrong
Modules held for a long period can be worth less than they cost and harder to match for a job, since specifications change and a partial pallet of a discontinued model is difficult to use. That is a real loss rather than a theoretical carrying cost. Handling damage is the other item, since modules are fragile in ways that are not always visible and a module damaged in storage produces less for its whole life without anyone knowing why.
Before you quote
- Include obsolescence, which is heavy in this category.
- Avoid holding partial pallets of discontinued models.
- Handle and store modules to prevent invisible damage.
Questions
About this calculator
Why is solar inventory risky to hold?
Because module and inverter prices have fallen and specifications move, so stock held for a long period can be worth less than it cost and harder to match for a job. A partial pallet of a discontinued model is particularly difficult to use.
What does carrying cost include?
Financing on the capital tied up, storage, insurance, handling and obsolescence. In solar the obsolescence component dominates, which is why the carrying rate for this category is higher than for more stable materials.
Does storage damage modules?
It can, in ways that are not visible. Modules are susceptible to microcracking from poor handling and stacking, and a module damaged in storage produces less for its whole life without any obvious cause, which makes storage practice a real cost issue.
The formula
carrying cost = average inventory x (capital + storage + insurance + shrinkage + obsolescence); turns = annual materials cost / average inventory; days on hand = 365 / turns
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How to use this calculator
- Average inventory value on hand ($). Enter your own figure; the page starts at $180,000.
- Work turns out from. Enter your own figure; the page starts at Annual cost of materials used.
- Annual cost of materials used ($). Enter your own figure; the page starts at $1,250,000.
- Cost of capital (%). What the money tied up in stock would otherwise earn or cost you to borrow.
- Warehousing and handling (%). Enter your own figure; the page starts at 4%.
- Insurance and taxes on stock (%). Enter your own figure; the page starts at 1.5%.
The result updates as you type, so you can try a figure, see what it does to carrying cost per year, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Average inventory value on hand | $180,000 |
| Work turns out from | Annual cost of materials used |
| Annual cost of materials used | $1,250,000 |
| Cost of capital | 9% |
| Warehousing and handling | 4% |
| Insurance and taxes on stock | 1.5% |
| Damage, loss and shrinkage | 2% |
| Obsolescence | 6% |
| Cost of a job delayed by a stockout | $1,400 |
| Jobs delayed per year by stockouts | 8 |
What comes out
| Result | Value |
|---|---|
| Carrying cost per year main result | $40,500 |
| Total carrying rate | 22.5% |
| Days of stock on hand | 53 |
| Inventory turns per year | 6.9 |
| Obsolescence portion | $10,800 |
| Cost of the capital tied up | $16,200 |
| Cost of stockouts | $11,200 |
| Carrying plus stockout cost | $51,700 |
| Carrying cost per month | $3,375 |
Holding 180,000 of stock costs $40,500 a year at a carrying rate of 22.5%, or $3,375 a month. You turn stock 6.9 times a year, which is 53 days on hand. Obsolescence alone is $10,800, and stockouts add $11,200 on top.
How sensitive the answer is
Holding everything else steady and changing only average inventory value on hand, this is what happens to carrying cost per year. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Average inventory value on hand ($) | Carrying cost per year |
|---|---|
| $90,000 | $20,250 |
| $135,000 | $30,375 |
| $180,000 example above | $40,500 |
| $270,000 | $60,750 |
| $360,000 | $81,000 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Average inventory value on hand ($)
- A money amount, between 0 and 50000000, starting at $180,000.
- Work turns out from
- Choose from Annual cost of materials used, Inventory turns I already know.
- Annual cost of materials used ($)
- A money amount, between 0 and 500000000, starting at $1,250,000.
- Cost of capital (%)
- What the money tied up in stock would otherwise earn or cost you to borrow.
- Warehousing and handling (%)
- A percentage, between 0 and 40, starting at 4%.
- Insurance and taxes on stock (%)
- A percentage, between 0 and 20, starting at 1.5%.
- Damage, loss and shrinkage (%)
- A percentage, between 0 and 30, starting at 2%.
- Obsolescence (%)
- Panels and inverters are superseded quickly, and superseded stock sells at a discount or not at all.
- Cost of a job delayed by a stockout ($)
- A money amount, between 0 and 500000, starting at $1,400.
- Jobs delayed per year by stockouts
- A number, between 0 and 1000, starting at 8.
What the results tell you
| Result | What it is |
|---|---|
| Carrying cost per year | The headline result. A money figure. |
| Total carrying rate | A percentage. |
| Days of stock on hand | A number. |
| Inventory turns per year | A decimal figure. |
| Obsolescence portion | A money figure. |
| Cost of the capital tied up | A money figure. |
| Cost of stockouts | A money figure. |
| Carrying plus stockout cost | A money figure. |
| Carrying cost per month | A money figure. |
A design still needs a site visit
Output and sizing figures use the assumptions you enter, not measured irradiance, shading or roof orientation at your address. Real production depends on all three, plus inverter behaviour and local interconnection rules.
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