How Much Stock Do We Have? Why It Depends on Who You Ask, and How to Fix It

On hand, on order and on the road: why every department gives a different answer, and how to see them all at once.

Ask four people in the same business how much of your best-selling product you have.

The warehouse says 400. They counted it this morning.

The buyer says 1,600, because another 1,200 are on the way.

Finance says 2,000, because that's how many you've paid for.

And sales says great, because they've already promised 900 of them to customers.

Every one of those numbers is true. The trouble is that each department hears the same question differently. The warehouse hears "what's on the shelf?" The buyer hears "what have we ordered?" Finance hears "what have we paid for?" And sales hears "what can I sell?"

That would be fine if nobody had to make a decision. But somebody always does, usually this afternoon: whether to reorder, whether to move stock between sites, whether to say yes to a big order. To get it right, every department needs to be looking at the same picture. Get it wrong, and you find out at the loading dock.

This is the second piece in our series on planning for the unpredictable. The first, when the lead time becomes a range, is about planning when arrival dates keep moving. This one is about keeping track of your stock while it's moving.

The short version. "How much stock do we have?" has four honest answers: on hand, already promised, on order, and moving between your own sites. The longer journeys get, the more of your stock sits in the last two, out of sight. One stock picture puts all four on the same screen for every department, with a real expected date for anything on the move. Without it, businesses order stock they already own and turn down orders they could have filled.

Why does "how much stock do we have?" have four answers?

Because stock lives in four states, and most businesses keep each one in a different place.

On hand is what's physically in your buildings right now. It's the number the warehouse trusts, because they can walk over and count it.

Committed is the part of that stock already promised to customers. It's still on the shelf, but it's no longer yours to sell. Selling it again is how you end up apologising twice.

On order is what you've bought from suppliers but haven't received yet. It might still be at the factory. It might be at sea.

In transit is stock moving between your own places: from the port to an import warehouse, from the main warehouse to a regional one, from a regional site to a shop or a van.

The number a planner actually needs combines all four: what's free to sell now, what will be free to sell, and when. In plain terms, that's on hand, minus what's already promised, plus whatever arrives in time. Simple arithmetic, as long as the four numbers aren't kept in four different systems. Usually they are.

How much of your stock is on the road?

More than you'd think, and it grows every time a journey gets longer.

Operations research has a simple rule for this, called Little's Law, published by John Little in 1961 and still taught everywhere. In plain words: the average amount of anything inside a process equals how fast it flows through, multiplied by how long it stays inside.

Apply that to stock. Say you use 100 units of a product a day, and it takes 25 days to get from your supplier to your shelf. Then, on average, about 2,500 units are always somewhere on the way: ordered, often paid for, and not yet sellable.

Now the journey stretches to 35 days. Same demand, same supplier. You now have about 3,500 units in the pipeline. That's 1,000 extra units tied up on the road without a single extra sale. Your stock didn't grow. It just took the scenic route.

Longer journeys don't only delay your stock. They quietly swallow more of it.

So when lead times stretch, seeing stock on the move stops being a nice-to-have. A bigger share of what you own is somewhere you can't walk over and count.

Why does stock go missing between sites?

It doesn't, really. It falls into the gap between the people who can see it.

The buyer sees purchase orders, usually in a spreadsheet or an ERP screen. The warehouse sees the shelves. The transport team sees the trucks. Each of them sees their part perfectly. Nobody sees the handovers in between.

So stock leaves the main warehouse and drops out of its count, but doesn't appear in the regional site's count until it's received. For a day or two, it exists only on a delivery note. A large order arrives in three loads over three days, and someone has to remember that two-thirds of it is still coming. An import moves from the port to a bonded warehouse to a distribution centre, and each leg is tracked by someone different.

This is where the expensive mistakes happen. A regional site runs low, so someone reorders from the supplier, not knowing a transfer from the main warehouse is already on a truck. Or a big customer order is turned down because the system says zero, while 600 units sit in a container that cleared customs this morning.

There's a wider cost, too. When companies can't see each other's stock and orders, they over-order to protect themselves, and the distortion grows as it travels up the supply chain. The 1997 study that named this the bullwhip effect recommended sharing inventory information as one of the most direct fixes. That sharing starts inside your own four walls, between your own departments.

What should one stock picture show?

Here's a good test. Could a new planner, on their first morning, answer "can we fill this order, and from where?" from one screen, without phoning anyone? To pass, the picture needs:

• On-hand stock by site and location, down to where in the warehouse it sits.
• Committed stock, with the actual orders holding it, so a planner can see which promises could move if something more urgent comes in.
• Every open purchase order as stock on the way, with where it's heading and when it's expected.
• Stock moving between your own sites, visible from the moment it leaves one building until it's received at the next.
• Partial arrivals, with the balance still on its way shown clearly, not left to someone's memory.
• Expected dates that change when reality changes, so a delay on one leg of a journey shows up in every plan that depends on it.

That last one matters most when lead times are unpredictable. A stock picture full of yesterday's dates is worse than none at all, because people trust it.

What does it change on Monday morning?

Quite a lot, in small ways that add up.

The buyer stops ordering stock the business already owns, because inbound orders and transfers are visible before a new purchase order goes out.

The planner covers a shortfall at one site with a transfer from another, instead of an emergency order at a premium price.

The warehouse plans receiving staff around what's actually arriving this week, not what was due.

The transport team schedules collections around dates that are still true.

And sales can see what's genuinely free to promise. That raises the next question, and the subject of the last piece in this series: what to promise a customer when you don't know when stock will land.

How this runs on one platform

In Depot WMS, all four answers sit in one view. On-hand stock is tracked by product, warehouse and bin. Committed stock shows the specific sales orders holding each unit. And open purchase orders show as in-transit stock, with the warehouse they're heading to and a projected receipt date from the order's delivery terms.

Movements between your own sites are transfer orders that progress from planned to in transit to received. Stock leaves one warehouse's count when it's dispatched and joins the next when it's received, and stays visible as in transit the whole way. Travel times between sites are set on the routes themselves, so expected arrival dates for transfers come from your network rather than a guess.

When a large movement has to be split across several loads or days, it stays one transfer. Each partial arrival is recorded as it's received, and the remaining balance stays visible as in transit until the last load lands.

For imports that travel in stages, from a port to an import or bonded warehouse and on to regional sites, Depot WMS treats the journey as a chain of linked legs. You can see the stock's status at each stage, and a delay on one leg carries through to the plans downstream automatically.

And when stock isn't there yet, Flow OMS can hold the order as a backorder and fulfil it automatically when the stock is received, so the demand isn't lost while the supply catches up.

The short version

When journeys get longer, more of your stock is on the road, and more of your decisions depend on seeing it. On hand, committed, on order and in transit are four honest answers to one question. Put them on one screen that every department shares, keep the dates current, and most of the expensive surprises go away.

You can't plan with stock you can't see. And these days, a lot of it is travelling.

Talk to us about seeing all of your stock in one place

Frequently asked questions

What is in-transit inventory?

In-transit inventory is stock that has left one location but has not yet been received at the next. It includes goods on their way from a supplier and goods moving between a company's own sites, such as from a central warehouse to a regional one. It is usually already owned, and often already paid for, but it cannot be picked or sold until it is received.

What is the difference between on-hand, committed and available stock?

On-hand stock is what is physically in a location. Committed stock is the part of on-hand stock already allocated to customer orders. Available stock is what is free to promise: on hand minus committed, plus any inbound stock expected in time for the order.

How much inventory is in transit at any time?

By Little's Law, average in-transit inventory equals the rate of usage multiplied by the transit time. A business using 100 units a day with a 25-day journey has about 2,500 units in transit on average. If the journey stretches to 35 days, that rises to about 3,500 units, with no change in sales.

Why do businesses double-order stock?

Usually because inbound purchase orders or transfers between their own sites are not visible to the person placing the new order. A site that looks low gets reordered from the supplier even though stock is already on its way. Showing on-order and in-transit stock alongside on-hand stock prevents most of these duplicate orders.

How do you track stock moving between warehouses?

Treat each movement as a transfer with a status: planned, in transit and received. Remove the stock from the sending site when it is dispatched and add it to the receiving site when it is received, while keeping it visible as in transit in between. For split or multi-leg movements, track the remaining balance until the final load arrives.

References

Little, J. D. C. (2011). Little's Law as Viewed on Its 50th Anniversary. Operations Research, 59(3), 536-549.

Lee, H. L., Padmanabhan, V. and Whang, S. (1997). Information Distortion in a Supply Chain: The Bullwhip Effect. Management Science, 43(4), 546-558.

More in this series

This piece is part of Planning for the Unpredictable. The first, when the lead time becomes a range, covers planning when arrival dates keep moving. The last, on what to promise a customer when you don't know when stock lands, is coming next.

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