Most small manufacturers track inventory with a single number: how many do we have? This is quantity on hand, and it is the number in the spreadsheet, the number on the whiteboard, the number someone shouts across the floor when you ask "do we have enough?"
The problem is that "how many do we have" and "how many can we use" are not the same question. The difference between them causes more production delays, missed shipments, and emergency purchases than almost any other operational gap.
The single-number trap
Here is a scenario that plays out in shops every week:
Example: AL-6061 Sheet Stock
Day 1: You check inventory. You have 200 sheets.
Day 2: You release WO-101, which needs 80 sheets. The sheets are still on the shelf, but they are committed to WO-101.
Day 3: A sales rep quotes a new job. They check inventory, see 200 sheets, and promise the customer a fast turnaround.
Day 4: Both jobs try to pull stock. There is not enough. One job stalls. The customer is unhappy. Someone makes an emergency purchase at premium pricing.
The root cause is that the spreadsheet showed 200 sheets on Wednesday because it only tracks one number. It had no way to show that 80 of those sheets were already spoken for.
Three numbers that fix it
The fix is to track three numbers for every item:
- Quantity on Hand (QOH) — how many units are physically in your facility right now. This is the number you would get if you walked to the shelf and counted.
- Allocated — how many units are committed to open work orders, material requests, or other reservations. These units exist on the shelf, but they are spoken for.
- Available — the number that actually matters for planning. Available = QOH minus Allocated. This is how many units you can commit to new work.
Same example, with three-state tracking
Day 1: QOH = 200, Allocated = 0, Available = 200
Day 2: WO-101 releases. QOH = 200, Allocated = 80, Available = 120
Day 3: Sales rep checks inventory. They see Available = 120, not 200. They quote based on what is actually free to use.
Day 4: Both jobs have the material they need. No emergency purchase. No angry customer.
Where allocation happens
In a well-connected system, allocation happens automatically at the moment a work order is released. Here is the flow:
- An engineer creates a build plan with a bill of materials (BOM). The BOM says this product needs 80 sheets of AL-6061.
- When the work order is released against that build plan, the system reads the BOM and checks whether 80 sheets are available.
- If available, the system allocates 80 sheets. QOH stays at 200 (the sheets have not moved), but Allocated increases by 80 and Available decreases by 80.
- When the operator actually picks the sheets for production, QOH drops by 80. Allocated also drops by 80 (the reservation is fulfilled). Available stays the same.
This means Available only changes when new work is committed or when stock is received. It does not change when someone physically picks stock — because the pick was already accounted for at allocation time.
What about reorder points?
Reorder alerts should fire against the Available number, not QOH. If your reorder point for AL-6061 is 50 sheets, you want to be alerted when Available drops below 50 — not when QOH drops below 50.
Why? Because by the time QOH drops below 50, the work orders that consumed those sheets have already been delayed by the stockout. The reorder alert came too late. Monitoring Available gives you early warning before the physical stock runs out.
Common questions
What if I over-allocate?
A good system will not let you release a work order if there is not enough available stock to cover the BOM. It will show a shortage warning and let you decide: wait for stock, create a purchase order, or release anyway and accept the risk.
What about reserved stock?
Some shops need to reserve stock for a specific customer or project before a work order exists. This is a fourth state — "reserved" — that sits between available and allocated. In Axis, you can reserve stock against a project, and those units are excluded from the available count until the reservation is released or converted to an allocation.
Does this work for lot-tracked items?
Yes. QOH, Allocated, and Available are tracked per lot when lot tracking is enabled. You can see not just that you have 200 sheets, but that lot L-26-0089 has 120 sheets available and lot L-26-0413 has 80 sheets available.
Why spreadsheets cannot do this
You can technically build a spreadsheet with three columns per item. The problem is keeping it up to date. When an operator picks stock, someone has to update the spreadsheet. When a work order releases, someone has to manually subtract from the available column. When a PO arrives, someone has to add to QOH.
In practice, the spreadsheet drifts from reality within hours. By the end of the week, the numbers are directionally correct at best. A connected system where work orders, material requests, and receiving all feed the same inventory record does not have this problem — the numbers are always current because they are derived from the transactions, not manually entered.
Getting started
If you are currently tracking inventory with a single QOH number, the first step is not to change your system. The first step is to start asking "how much is available?" instead of "how much do we have?" in your planning conversations. That shift in thinking reveals the gaps immediately.
Once you feel the pain of not knowing available stock, the case for a system that tracks it automatically becomes obvious.