Inventory planning
Inventory Position
By the Supply Chain Manager team · Updated October 16, 2026
Inventory position is stock on hand plus stock on order, minus backorders and committed stock: the figure reorder decisions should be based on.
On-hand stock answers 'what is on the shelf?'. Inventory position answers 'what will I have once everything already in motion lands?'. Reorder triggers that use on-hand stock alone place a second order while the first is still on its way.
Inventory position is the right trigger for reorder decisions because it looks forward. On-hand stock alone ignores what is already coming; available stock alone ignores what has been ordered. Using inventory position is the simplest fix for the classic problem of a second purchase order going out while the first is still on the water.
How to calculate inventory position
Inventory Position = On Hand + On Order − Backorders − Allocated (committed) stock
Inventory position example
Illustrative numbers: 150 on hand, 400 on an open PO, 50 backordered and 30 allocated to an order being picked. Inventory position = 150 + 400 − 50 − 30 = 470. With a reorder point of 300, no new order is needed yet, even though on-hand stock alone is below it.
Why inventory position matters for distributors
It prevents duplicate orders, which are a common source of overstock when lead times are long or several people raise purchase orders.
Common inventory position mistakes
- Triggering reorders from on-hand stock alone.
- Counting cancelled or stale purchase orders as on order.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.