Inventory Position
Definition
The total stock available to meet future demand, calculated as on-hand inventory plus on-order inventory minus backorders and committed allocations. It is the number replenishment decisions should be based on.
In Practice
Inventory position exists to prevent a classic error: reordering based on what is on the shelf while ignoring what is already on the way. By adding open purchase and transfer orders and subtracting backordered or committed quantities, it represents the true forward-looking stock picture that reorder points are meant to be compared against.
Planners who trigger orders on on-hand alone systematically double-order during shortages, because the shelf looks empty even as three replenishment POs are inbound; those duplicate orders then arrive together and become excess. Every standard policy, continuous review, periodic review, min-max, is defined on inventory position, not on-hand.
Example: a SKU shows 150 units on hand against a 380-unit reorder point, which looks alarming. But with 400 units on an open PO arriving Friday and 20 units backordered, the inventory position is 530, comfortably above the trigger, and the correct action is no action.
Related Calculators
Related Terms
The physical quantity of stock currently present in a location, regardless of whether it is committed to orders. It is what you would find if you walked out and counted the shelves.
On-Order InventoryStock that has been ordered from suppliers or other facilities but not yet received, represented by open purchase orders, transfer orders, or production orders. It is committed inbound supply.
BackorderA customer order, or portion of one, accepted for fulfillment despite the item being out of stock, to be shipped when inventory becomes available. Managing backorders means tracking, prioritizing, and clearing this unmet demand.
Reorder PointThe inventory level that triggers a replenishment order. It equals expected demand during supplier lead time plus safety stock.