Inventory planning
Allocated Inventory
By the Supply Chain Manager team · Updated October 16, 2026
Allocated inventory is stock that is still physically on hand but already reserved for a specific customer order, transfer or job.
Allocation happens when an order is confirmed and stock is set aside for it, before it is picked and shipped. Allocated stock still counts towards on-hand quantity but not towards available stock.
Systems differ on when allocation happens. Some allocate the moment a sales order is entered, others only when the order is released to the warehouse for picking. Whichever rule you use, the planning view needs to know which stock is truly free, or the same units will be promised twice when two large orders land on the same day.
Allocated inventory example
Illustrative: a customer orders 200 units for delivery next Thursday. The units are allocated today, so the sales team cannot promise them to anyone else, even though they will not leave the building for a week.
Why allocated inventory matters for distributors
Allocations show demand that is already certain. Ignoring them makes stock look healthier than it is; allocating too early, for orders far in the future, can block stock that could serve customers today.
Common allocated inventory mistakes
- Not releasing allocations when orders are cancelled or changed.
- Allocating stock for orders weeks away while current orders go short.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.