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Understanding Inventory Management

Endless Commerce tracks inventory by product across the lifecycle (incoming, in stock, and outgoing) and with detailed granularity at each stage.

Source of Truth​

For inventory, we have a clear definition of the term "source of truth." Our point of view is that whoever has physical possession of the physical goods is the source of truth. That means they are:

  • responsible for providing the quantity of inventory for each product to Endless Commerce
  • responsible for the accuracy of the inventory counts

You can use Endless Commerce as your warehouse management system (WMS). If you have physical possession of your inventory, you can reflect those quantities directly in Endless Commerce, and together, we'll be the source of truth.

You can also work with an external WMS or third-party logistics (3PL) provider. If they have physical possession of the goods, then they are the source of truth.

Our goal is to obtain frequent, accurate, and granular updates on inventory from any external WMS or 3PL. The more information we receive, the more detailed and granular we will be.

Key Logic and Rules​

  1. We only remove a unit of a product from physical inventory when an order ships - when it literally leaves the building.
  2. There is no limit to ordered inventory - no cap on demand - which means that available inventory can go negative.
  3. Available inventory is the most important number of them all - it's what you have left to sell, and what we push to sales channels like Shopify or Amazon.
  4. The simple rule of thumb is:
    a. If available inventory is high, you have full stock
    b. If available inventory is positive but low, you have low stock
    c. If available inventory is zero, you're out of stock
    d. If available inventory is negative, you're oversold

Inventory Hierarchy and Definitions​

Physical Inventory​

Total quantity of a product present in the building.
This field is a calculated field.
Formula: Physical Inventory = In Stock + Quarantine

Quarantine​

Units that may not be allocated to an order or shipped to a customer. They might be damaged, defective, or otherwise unsellable. We want to keep track of how many you have, but also ensure they don't go out the door.
This field is obtained from the inventory source of truth.

In Stock​

Units physically present in a building that can be allocated to an order, or already have been allocated to an order. Effectively, this is everything except for any quarantined or damaged units. Informally, in stock will also be equal to allocated plus unallocated.
This field is obtained from the inventory source of truth.

Allocated​

Units that have not yet been fulfilled, but have been allocated to specific orders. Allocation actions can be reversed, because the product hasn't left the building.
This is a calculated field.
Formula: Allocated = Unfulfilled + In Process

  • Unfulfilled​

    Units allocated to orders that have not yet been transmitted to a fulfillment service, like a WMS or 3PL. You may wish to "hard" allocate inventory to a specific order to ensure that no other order takes that inventory, but may also wish to wait until a later date (such as shipment window) to send it to your fulfillment partner.
    This field is obtained directly from the order records in Endless Commerce.

  • In Progress​

    Units allocated to orders that have been transmitted to a fulfillment partner. The fulfillment process is underway and we are listening for updates, but the products have not yet left the building.
    This field is obtained directly from the order records in Endless Commerce.

Unallocated Stock​

In stock units that have not been allocated to any specific orders.
This is a calculated field.
Formula: Unallocated Stock = In Stock - Allocated

Ordered​

The total quantity of the product that has been ordered but not yet allocated. Importantly, there is no limit to the ordered quantity - your customers can have effectively unlimited demand! In a future release, we will introduce the concept inventory reservations; at that point, we will further divide ordered units into reserved and unreserved.
This field is obtained directly from the orders in Endless Commerce.

Available to Make​

The number of units of a composed item (like a bundle) that can be made from the available quantity of its underlying components. This amount is limited to the lowest available quantity across all components that make up the composed item. If a product does not have components, this value will be zero.
This field is obtained directly from the inventory records of other products within Endless Commerce.

Available to Sell​

You made it. All the way down the rabbit hole. These are the droids you're looking for! These are the units that are freely available to sell. Note that this is a calculated field, and because you can have unlimited demand (tons of ordered units), available inventory can go negative. If you're experincing success beyond your wildest dreams, then that's OK. Otherwise - don't let this happen!
This is a calculated field.
Formula: Available to Sell = Unallocated Stock - Ordered + Available to Make

Incoming​

Units expected to arrive but not yet in physical inventory. In a future release, we will introduce the concept inventory reservations; at that point, we will further divide incoming units into reserved and unreserved.
This is a calculated field.
Formula: On PO (Shipped) + On PO (Unshipped) + Other Incoming

  • On PO - Shipped​

    These are units that exist on a purchase order to one of your suppliers, and that have already shipped. They are on their way to you already.
    This field is obtained directly from the Purchase Order and Shipment records in Endless Commerce.

  • On PO - Unshipped​

    These are units that exist on a purchase order to one of your suppliers, but that have not shipped yet.
    This field is obtained directly from the Purchase Order and Shipment records in Endless Commerce.

  • Other Incoming​

    These are units that are on a shipment, but do not belong to any purchase order. These might be samples, or returns, or any other inbound shipment you are tracking other than a purchase order.
    This field is obtained directly from the Shipment records in Endless Commerce.

Future Available​

The total number of units that will be available to sell in the future. This considers current inventory, current orders, and all inbound inventory.
This is a calculated field.
Formula: Future Available = Available to Sell + Incoming

Total Demand​

Total units needed to fulfill all orders and allocations.
This is a calculated field.
Formula: Total Demand = Ordered + Allocated

Key Formulas Summary​

  • Physical Inventory = In Stock + Unavailable
  • Allocated = Unfulfilled + In Progress
  • Unallocated = In Stock - Allocated
  • Available to Sell = Unallocated - Ordered + Available to Make
  • Incoming = On PO (Shipped) + On PO (Unshipped) + Other Incoming
  • Future Available = Available to Sell + Incoming
  • Total Demand = Ordered + Allocated