Allocated Stock Details

The term allocated stock belongs to the vocabulary used by companies handling logistics of goods and raw materials. Along with other inventory management techniques like contingency planning and safety stock, order allocation is explicitly an efficient process of locating the goods, assigning them to order, and arranging for their pick-up. Orders can be allocated from multiple storages to assure that they are completed as quickly as possible.

Allocation is performed by reserving a specific quantity of a particular item in the application the storage uses. Some stock allocation uses are to achieve a requisition, finish a custom, or work order.

You can allocate inventory items either online or by batch. Using the online allocation option, you will issue stock as soon as each customer order is complete. In other words, you will reserve items on a first-come, first-served basis. On the other hand, when using batch allocation, you will be able to allocate multiple items at the same time when you run a batch program. This type of allocation can reserve stock based on the date it was requested, the date it was entered, or the expected shipping date. It is a method you'll use when you need to allocate out-of-stock items and when you need to deallocate inventory.

Example of Allocated Stock

Let's say you have 1000 t-shirts for sale. You create a Facebook page, and you hire a person to list each model with the sizes and the colors available. You need to keep track of your inventory, so you use an inventory management program and enter your quantity of 1000 items.

The first order you receive is from the local high school and is for 200 t-shirts for a school trip that will take place in two weeks. You will need to allocate 200 t-shirts, and this action will change the value of the allocated stock from 0 to 200 items in your inventory management program. Your on-hand stock's value will remain 1000 until you ship the t-shirts, but the available stock value will change from 1000 to 800 items.

After you send the ordered t-shirts out, the on-hand stock's value will decrease to 800 items as well, and the value of the allocated stock will again become zero.

Significance of Allocated Stock

In addition to the benefit of avoiding overselling, the process is beneficial because stocks can be allocated while they're still in production or transit. It reduces storage costs and concerns over perishable inventory. Furthermore, allocation increases the speed of sale. Stock allocation requires good forecasting and planning of the demand so that there are no shortages or pile-ups.

The popularity of dropshipping today amplifies the importance of inventory management and the accuracy with which stocks are allocated.

Allocated vs. Available Stock

Computer programs keep track of the on-hand quantity in a warehouse by calculating it from stock that has been received. They are also used for recording the changes in the inventory levels.

On-hand is the quantity you see in your storage, including products that have been already ordered, while allocated stock is the quantity you saved to use for a pending sale.

Finally, the available stock is the difference between the number of on-hand items located in the warehouse and the number of the allocated items.