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Inventory Allocation & Reservations in an Enterprise WMS
When running modern warehouses and distribution centers, inventory accuracy alone is no longer enough. What matters just as much is knowing how much of that inventory is actually available to promise.
That’s where the concept of inventory allocation and reservation comes in — a vital functionality in any Enterprise Warehouse Management System (WMS) that can make or break your ability to deliver reliably.
What is Inventory Allocation?
Inventory allocation refers to the process of committing available stock to specific customer orders, production jobs, or channels before the stock is physically picked or shipped.
This helps businesses:
- Avoid overcommitting stock
- Prioritize high-value customers or urgent orders
- Improve fulfillment rates and customer satisfaction
- Plan replenishment and transfers accurately
What is a Reservation?
A reservation is a system-level “hold” placed on a specific quantity of inventory — marking it unavailable for other orders.
It’s like telling the warehouse: “Keep this aside. It’s spoken for.”
The Key Inventory States in an Enterprise WMS
Here are the most common buckets inventory falls under, and how each impacts allocation logic:
1. On-Hand Available Inventory
This is the physically present, quality-cleared stock that is not reserved and is ready to be picked.
Can be immediately allocated to orders
WMS dynamically checks availability during order allocation
Can be segmented further by zone, bin, lot, batch, or location type
Key Rule: “If it’s on hand and unreserved, it can be promised.”
2. In-Transit Inventory
This refers to stock that has been shipped by a supplier or from another warehouse but hasn’t yet arrived.
Not yet available for fulfillment
May be partially visible in the WMS for planning
Common in multi-warehouse or JIT replenishment setups
Use Case: Pre-allocate based on ETA for committed customer orders
3. On-Order Inventory
These are items that are on open purchase orders but haven’t been shipped yet.
Helpful in long lead time procurement
Can be “soft allocated” to upcoming demand
Often used in backorder fulfillment planning
WMS Tip: Advanced systems allow forward visibility to inform allocation decisions
4. Reserved Inventory
This stock is already committed to a sales order or internal requirement, and therefore unavailable to others.
Can be reserved at SKU, lot, or serial level
Typically tied to customer priority, order type, or SLA
Can be released or reallocated if order is canceled
Scenario: You receive 100 pieces, reserve 60 for existing orders — only 40 remain for new orders
5. Blocked / Quarantined Inventory
Inventory held for quality checks, damage inspection, or regulatory clearance.
Not available for allocation
May become available post clearance
Requires special status control in WMS
Important for: Pharma, food, and any batch-sensitive business
Smart Allocation Strategies in Modern WMS
A robust Enterprise WMS doesn’t just allocate blindly. It can be configured to allocate based on:
Order Priority (Premium vs standard customers)
Channel Preference (e.g., D2C vs distributor)
Inventory Type (FEFO for expiry goods, FIFO for regular)
Warehouse Location (closest ship-from-point)
Slotting Efficiency (pick from fastest zones first)
Supply Visibility (what’s inbound and when?)
Dynamic Reallocation & Exception Handling
The real world isn’t perfect — cancellations, returns, and stock discrepancies happen.
A smart WMS should:
Automatically reallocate freed-up inventory to backorders
Alert users on stock shortfall vs committed quantities
Offer manual override options in special cases
Help with reservation expiry rules if orders aren’t fulfilled in time
Why This Matters
Without proper allocation & reservation logic:
You risk double-booking inventory
You lose customers due to missed delivery promises
Your warehouse becomes reactive instead of strategic
But with the right WMS:
You match stock with demand accurately
Improve OTIF (On-Time-In-Full) metrics
Reduce cancellations, expedite costs, and stockouts
Build customer trust with reliable fulfillment
Picking Mistakes to Avoid in Warehouse Management System
Conclusion
Inventory is not just what you have — it’s what you can confidently promise.
As supply chains become more complex and customer expectations rise, mastering allocation and reservation logic is no longer optional — it’s mission-critical.
Does your WMS support smart inventory commitments across your network?
7. Quality Hold / Quarantine Inventory
