Inventory glossary

What is Net inventory?

Net inventory is the stock you actually have to sell, calculated as on hand inventory minus committed or reserved units, plus any incoming inventory you expect soon.

Net inventory matters because on hand inventory alone can lie to you. A store might show 50 units of a candle in stock, but if 20 are already committed to unfulfilled orders, only 30 are actually available to sell or promise to a new customer.

Use net inventory when deciding whether to place a purchase order or run a promotion. If net inventory is low even though the on hand count looks fine, you still need to reorder or hold off on marketing a product.

Formula

Net inventory = On hand inventory - Committed inventory + Incoming inventory

Example

A candle store has 80 units of a vanilla candle on hand. 15 units are committed to open orders. 40 units are on order from the supplier and due next week. Net inventory = 80 - 15 + 40 = 105 units.

Common mistakes

  • Confusing net inventory with on hand inventory and overselling because committed units were not subtracted.
  • Forgetting to add incoming inventory, which makes reorder decisions look more urgent than they are.
  • Not updating committed inventory in real time, so the number is always out of date.

Net inventory and SteadyShelf

SteadyShelf factors incoming inventory and current stock levels into its forecast so order-by dates reflect what you actually have available, not just raw stock counts.

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

Related terms

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

Full inventory glossary

FAQ

Is net inventory the same as on hand inventory?

No. On hand inventory is the raw count of stock in your warehouse. Net inventory subtracts committed units and adds incoming stock to show what is truly available to sell.

Why can net inventory be negative?

If committed inventory is higher than on hand stock and nothing is incoming, net inventory goes negative. This usually means orders have been accepted that cannot yet be fulfilled, a sign to expedite a reorder.

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