Inventory glossary

What is Inventory position?

Inventory position is the total stock you can count on at a point in time: what you physically have, plus what is already on order from suppliers, minus what is already committed to customer orders.

Looking only at on-hand stock can trick you into reordering too early or too late. A store might have 10 units on the shelf but also 50 units arriving next week and 15 already promised to open orders. The real number that matters for reorder decisions is the inventory position, not the shelf count alone.

Use inventory position whenever you decide if it is time to place a new order. If the position is above your reorder point, wait. If it has dropped below, order now, because the incoming stock and committed orders are already accounted for.

Formula

Inventory position = On hand inventory + On order inventory - Committed inventory

Example

A candle store has 40 jars on hand, 120 jars on order from the supplier, and 30 jars already allocated to unfulfilled orders. Inventory position = 40 + 120 - 30 = 130 jars. Even though the shelf only shows 40, the store is well covered and does not need to reorder yet.

Common mistakes

  • Confusing inventory position with on-hand inventory and reordering based on the shelf count alone.
  • Forgetting to subtract committed inventory, which overstates how much stock is actually free to sell.
  • Not updating the on-order figure when a supplier shipment is delayed or partially received.

Inventory position and SteadyShelf

SteadyShelf tracks on-hand and incoming stock per SKU and uses this picture to tell you the order-by date instead of relying on a single stale on-hand number.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

On hand inventory · On order inventory · Committed inventory · Reorder point · Available to promise

Full inventory glossary

FAQ

Why is inventory position more useful than on-hand inventory for reordering?

Because on-hand inventory ignores stock already on order and stock already promised to customers. Inventory position gives the real, usable number for deciding when to place the next order.

Can inventory position be negative?

Yes. If committed orders exceed on-hand plus on-order stock, the position goes negative, which signals a backorder situation that needs an order placed immediately.

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