Also called net inventory, this is the quantity of stock that is available to use after considering allocations, reservations, backorders, and quantities set aside to compensate for quality problems. It is also known as net inventory. Synonyms include Available-to-Promise.
What is Available Inventory?
Available inventory, also known as net inventory or net stock, refers to the quantity of goods or products that are readily available for use or sale. It is a crucial concept in logistics and supply chain management as it helps businesses determine the amount of stock they have on hand that can be allocated to meet customer demands.
When calculating available inventory, various factors are taken into consideration. These factors include allocations, reservations, backorders, and quantities set aside to compensate for quality problems. Allocations refer to the portion of inventory that has been assigned or earmarked for specific purposes, such as fulfilling existing orders or meeting contractual obligations. Reservations, on the other hand, are quantities of stock that have been set aside for specific customers or purposes but have not yet been allocated.
Backorders are orders that have been received but cannot be fulfilled immediately due to insufficient stock. In such cases, the available inventory would be reduced by the quantity of the backordered items. Additionally, quantities set aside to compensate for quality problems, such as defective or damaged products, are also subtracted from the available inventory.
The concept of available inventory is crucial for businesses to effectively manage their supply chain operations. By understanding the quantity of stock that is readily available, businesses can make informed decisions regarding order fulfillment, production planning, and customer service. It allows them to accurately promise delivery dates to customers and avoid overpromising when stock is limited.
Furthermore, available inventory plays a vital role in demand forecasting and inventory management. By analyzing historical data and considering factors such as lead time and customer demand, businesses can determine the optimal level of available inventory to maintain. This helps prevent stockouts, minimize carrying costs, and ensure efficient operations.
In conclusion, available inventory is the quantity of stock that is readily available for use or sale after considering various factors such as allocations, reservations, backorders, and quantities set aside for quality issues. It is a critical concept in logistics and supply chain management, enabling businesses to effectively manage their inventory, fulfill customer orders, and optimize their operations.