Understanding On-Hand vs Available Inventory
For: Sales Representatives, Warehouse Staff, Administrators Priority: 🔴 Critical Last Updated: March 2026
Overview
Understanding the difference between on-hand and available inventory is one of the most critical concepts for preventing overselling and managing orders effectively. These two numbers work together to give you a complete picture of your inventory status.
What You'll Learn
The exact difference between on-hand and available inventory
How inventory allocation works
When each inventory number changes
Real-world examples and scenarios
How to monitor and troubleshoot inventory issues
Why Two Inventory Numbers?
The problem we're solving: You physically have 100 bottles in your warehouse, but you've already promised 30 of them to confirmed orders. How many can you sell to new customers?
❌ Wrong answer: 100 (you'd be overselling)
✅ Right answer: 70 (the truly available inventory)
This is why Masava tracks both numbers:
On-Hand = What you physically have (100)
Available = What you can actually sell (70)
Quick Reference
On-Hand Inventory Defined
On-Hand Inventory = Total physical quantity in your warehouse(s)
This is the actual count of products sitting in your warehouse, regardless of whether they're promised to customers or not.
What Counts as On-Hand
Included in on-hand inventory:
Products physically received and stocked
In any warehouse location
In any condition (unless separately tracked as damaged)
Regardless of allocation status
Whether promised to customers or not
Examples:
100 cases on the shelf
50 cases in receiving area (after check-in)
20 cases in picking area ready to ship
All count toward on-hand total: 170 cases on-hand
What Affects On-Hand Inventory
On-hand increases when:
✅ Receiving purchase orders - Goods received from vendors
✅ Manual inventory adjustments (additions) - Physical count corrections, found inventory
✅ Returns from customers - Products returned and restocked
On-hand decreases when:
✅ Fulfilling orders - Products physically leave warehouse
✅ Manual inventory adjustments (reductions) - Damaged goods, theft, corrections
✅ Samples or giveaways - Products given away
On-hand does NOT change when:
❌ Creating or confirming orders - Order created but not yet fulfilled
❌ Draft purchase orders - Just planning, haven't received yet
❌ Allocations - Doesn't affect on-hand, only available
Example On-Hand Changes
Scenario timeline:
Notice: Confirming orders did NOT reduce on-hand. Only fulfillment reduced it.
Available Inventory Defined
Available Inventory = Inventory available to promise to new orders
This is the true sellable inventory after accounting for commitments to existing confirmed orders.
The Formula
What Affects Available Inventory
Available decreases when:
✅ Anything that decreases on-hand (fulfilling orders, adjustments)
✅ Confirming orders - Creates allocation, reduces available
✅ Manually allocating inventory (if feature enabled)
Available increases when:
✅ Anything that increases on-hand (receiving POs, adjustments)
✅ Canceling orders - Releases allocation back to available pool
✅ Removing items from confirmed orders - Releases that allocation
Available does NOT change when:
❌ Fulfilling orders - Already reduced when order was confirmed (allocation created)
❌ Creating draft orders - Draft orders don't allocate inventory
Why Available Matters More for Sales
When taking orders, always check available inventory, not on-hand.
Why this is critical:
Example: Looking at wrong number
Example: Looking at right number
Available Inventory Prevents Overselling
The system uses available inventory to:
Show how much you can sell during order entry
Warn when trying to order more than available
Create backorders for amounts exceeding available
Ensure no double-selling of the same inventory
Inventory Allocation Explained
Allocation is the bridge between on-hand and available inventory.
What is an Allocation?
Allocation = Reservation of specific inventory quantity for a specific order
Think of it like putting a "Reserved" sign on inventory. The cases are still physically in your warehouse (on-hand), but they're spoken for (not available to others).
When Allocations Are Created
Automatic allocation (most common):
Order moves from Draft to Confirmed status
System automatically allocates inventory
Allocation amount = order quantities
Available inventory reduced immediately
Manual allocation (if supported):
Administrator reserves inventory in advance
For VIP customers or special orders
Rare in normal operations
When Allocations Are Released
Automatic release:
✅ Order fulfilled - Allocation consumed, becomes actual usage
✅ Order cancelled - Allocation released back to available pool
✅ Order items adjusted/removed - That portion of allocation released
Manual release (rare):
Administrator intervention for stuck allocations
System error correction
Generally not needed in normal operations
Viewing Allocations
From product detail page:
Shows total allocated quantity
Lists which orders have allocations
Order numbers, customers, quantities
From order detail page:
Shows allocation status for each line item
Confirms inventory reserved for this order
From inventory dashboard:
Summary of allocations across all products
Products with high allocation percentages
Mathematical Relationship
Real-World Examples
Example 1: Simple Order Flow
Starting point:
Customer A orders 20 bottles → Order Confirmed
Customer A's order fulfilled and delivered
Key insight: Available dropped from 100 to 80 in two steps:
When confirmed (allocation created)
When fulfilled (on-hand reduced, allocation released)
Example 2: Multiple Concurrent Orders
Starting point:
Customer A orders 30 bottles → Confirmed
Customer B orders 40 bottles → Confirmed
Customer C wants 50 bottles
Customer A's order fulfilled (30 bottles)
Customer B's order fulfilled (40 bottles)
Example 3: Order Cancellation Frees Allocation
Current state:
Customer wants 30 bottles
One customer cancels their 20-bottle order
Now can fulfill the 30-bottle order
Key insight: Cancellations immediately free up allocated inventory without changing on-hand.
Example 4: Inventory Adjustment Impact
Current state:
Receive new stock: +50 cases (purchase order received)
Both on-hand AND available increased by 50
Later: Damaged goods adjustment: -20 cases
Both on-hand AND available decreased by 20
Key insight: Inventory adjustments affect both on-hand and available equally. Allocations don't change.
Common Scenarios & Questions
Scenario: Available is Negative
What you see:
What this means:
❌ Over-allocated (shouldn't happen in normal operations)
You've promised more inventory than you have
30 cases short to fulfill all confirmed orders
Common causes:
Manual inventory adjustment decreased on-hand below allocated amount
Inventory damage/loss after orders confirmed
Data correction or system migration issue
Solutions:
Receive more inventory immediately (+30 cases brings available to zero)
Fulfill some pending orders (reduces both on-hand and allocated)
Cancel or adjust some orders (releases allocations)
Contact customers about delays or backorders
Scenario: Large Gap Between On-Hand and Available
What you see:
What this means:
Many confirmed orders pending fulfillment
80% of inventory is allocated (160/200)
Fulfillment backlog
Actions to take:
✅ Prioritize fulfilling confirmed orders to free up inventory
✅ Check for stuck orders (old confirmations not fulfilled)
✅ Ensure warehouse staff aware of pending orders
✅ May need to pause new orders until backlog cleared
Scenario: Available Matches On-Hand
What you see:
What this means:
No confirmed orders waiting for fulfillment
All inventory available for new sales
Clean slate
Good or bad?
✅ Good: Low backlog, efficient fulfillment
⚠️ Potential concern: Are orders being confirmed properly? Or just slow sales?
Common Questions
Q: Can I sell available inventory?
✅ Yes! That's exactly what available means - inventory you can promise to customers
Q: Can I sell allocated inventory?
❌ No, it's already promised to another customer
Selling it would create a conflict
Would need to cancel other order first
Q: Why did available decrease but on-hand stay the same?
An order was confirmed (allocated), not yet fulfilled
When confirmed: allocation created, available reduced
When fulfilled: on-hand reduced, allocation released
Two separate events
Q: Why is my available inventory negative?
More inventory allocated to orders than you have on-hand
Happens when inventory reduced after orders confirmed
Need to receive more inventory or cancel some orders
Q: Why didn't available increase when I created a purchase order?
Purchase orders don't affect inventory until received
Creating PO = intent to order
Receiving PO = actually adds to on-hand (and available)
Q: Can I edit allocated inventory directly?
❌ No, allocated is automatically calculated from confirmed orders
To change allocated:
Cancel or modify orders (reduces allocation)
Fulfill orders (consumes allocation)
Never manually adjust allocated - adjust on-hand instead
Monitoring Inventory Levels
Where to View On-Hand vs Available
Product detail pages:
Click into any product/variant
Inventory section shows both metrics
Also shows allocated amount
See which orders have allocations
Inventory reports:
Products list with inventory columns
Filter by low available inventory
Sort by allocation percentage
Export for analysis
Dashboard widgets (if available):
At-a-glance inventory summary
Products with negative available
High allocation warnings
Low stock alerts
During order creation:
Product search shows available quantity
Warns if trying to order more than available
Helps prevent overselling
Setting Low-Stock Alerts
Configure alerts based on available inventory, not just on-hand:
Example setup:
Alert when:
Available drops below threshold
High allocation percentage (e.g., 80%+)
Available approaching zero
Any negative available
Reorder Point Recommendations
Calculate reorder points based on:
Average allocation duration (days from confirm to fulfill)
Daily sales rate
Lead time from vendors
Safety stock needs
Example:
Best Practices
Monitoring & Management
✅ Monitor available inventory for sales decisions
Don't look at just on-hand when taking orders
Available is the true sellable quantity
Prevents overselling and customer disappointment
✅ Set reorder points based on average allocation time
Account for days inventory sits allocated
Include buffer for fulfillment time
Order before available reaches zero
✅ Fulfill orders promptly to free allocated inventory
Long allocation times tie up inventory
Faster fulfillment = more available inventory
Better cash flow and turnover
✅ Cancel stale orders to release allocations
Old confirmed orders holding inventory
Review orders confirmed > 30 days ago
Cancel or follow up to complete
✅ Conduct regular physical counts to verify on-hand accuracy
Monthly cycle counts for high-volume products
Quarterly full inventory counts
Correct discrepancies promptly
Accurate on-hand = accurate available
What to Avoid
⚠️ Don't sell more than available inventory
System will allow it (creates backorders)
But creates customer service issues
Check available before confirming
⚠️ Don't adjust inventory without understanding allocation impact
Reducing on-hand doesn't release allocations
Can create negative available
May not be able to fulfill confirmed orders
⚠️ Don't ignore negative available inventory
Sign of serious problem
Customers' orders cannot be fulfilled
Address immediately
💡 Tip: Available inventory is your best friend
Most important number for sales
Tells you exactly what you can sell
Prevents problems before they happen
💡 Tip: Review allocation aging regularly
Which orders holding inventory longest?
Follow up on stuck orders
Keep inventory flowing
Related Documentation
Inventory Management
Making Inventory Adjustments - How to adjust on-hand quantities
Stock Allocation & Reservations - Detailed allocation management
Adding Products & Product Variants - Setting up products
Managing Product Information - Updating product data
Order Management
Creating Orders - How available inventory affects orders
Order Status Lifecycle Explained - When allocations created/released
Managing Backorders - Handling insufficient inventory
Purchase Orders
Receiving Inventory from Purchase Orders - Increasing on-hand inventory
Need Help?
For inventory discrepancies:
Verify physical count matches on-hand
Check for recent adjustments or fulfillments
Review allocation list for stuck orders
For negative available inventory:
Review all confirmed orders (allocations)
Receive pending purchase orders
Cancel or adjust orders if needed
Contact customers about delays
For overselling prevention:
Always check available (not on-hand) before confirming
Set up low-stock alerts on available inventory
Train sales staff on the difference
Use system warnings during order entry
Document Status: ✅ Complete | Priority 1 | Inventory fundamentals guide
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