Why Committed Stock Is Vital to Multi-Channel Merchants
Committed stock is the amount of inventory already allotted to a customer’s order, preventing it from being used in other orders. This simple, yet underappreciated practice can make ecommerce inventory management incredibly easier, particularly for multi-channel merchants.
In this article, we’ll introduce you to committed stock and its benefits, then walk you through a step-by-step guide to implement it effectively.
What Is Committed Stock?
“Committed” stock designates inventory that a customer has bought and paid for but is yet to be fulfilled. With inventory constantly moving, setting aside this quantity increases visibility into what’s on hand and available for sale.
It’s the closest quantity to live inventory you can measure, which is especially helpful for businesses that use third-party logistics providers (3PLs) for distribution.
It shows you how many goods are allocated to orders or are being transported to other locations. Monitoring committed stock gives you a more precise indication of your inventory so you can maintain accurate counts.
Why Is Committed Stock Important in Ecommerce?
If you haven’t yet experienced a sudden unexpected influx in demand, the concept of committed stock may seem like overkill. After all, you have healthy inventory levels and more sales are always welcome.
However, as you grow, your brand reputation hinges on correctly utilizing committed stock to enhance your buyer experience and internal operations.
Here are a few key reasons tracking committed stock is critical in every ecommerce business.
Stockouts and overselling are a huge challenge for ecommerce businesses. They occur when a product sells out, but your system doesn’t update its depleted inventory in real time. As a result, the item remains listed as in stock, and when someone tries to order it, you’ll be unable to fulfill it, and your customer’s experience will tank.
Insufficient inventory prevents you from serving your customers properly, which can damage your brand reputation, customer loyalty, and, ultimately, your revenue. In fact, overselling and stockouts can cost businesses up to $1 trillion annually. Committed stock, meanwhile, can help counteract that.
Business growth often entails additional sales channels, which fragments your supply chain. This aggravates the need for accurate supply and demand predictions, efficient inventory management, and seamless fulfillment.
Maintaining up-to-date inventory in such a disjointed setup is difficult, especially if you have several external data sources. However, digitally connecting your information sources and implementing committed stock can unify your supply chain and help you keep accurate stock counts even as you scale.
Gather Accurate Data
Some companies may wonder why, if it’s so hard to consolidate data from third parties, they shouldn’t rely on sales channels directly for their data?
The answer is that it’s hard to gain a clear picture of your business by looking separately at individual segments. You also end up missing significant nuances that are obvious if you analyze your data side by side.
Committed stock gives you more accurate data in a centralized location, so you avoid overselling, while also showing you insights into your business as a whole.
Understanding the Life Cycle of Committed Stock
You’ll need tools to manage and employ committed stock. For the purposes of this article, we’ll use Flxpoint as an example. Prior to showing you how to use it though, we’ll first explain the life cycle of committed stock.
Certain events trigger the creation, release, or cancellation of committed stock on Flxpoint:
- Generating a purchase order (PO) causes stock to be committed.
- *You can release stock by updating your quantities via integration AND uploading a shipment. This applies when your inventory quantities are integrated from an external source.
- *Committed stock can also be released by uploading ONLY a shipment; it doesn’t need an external quantity change as well to occur. You can do this when managing your inventory quantities within Flxpoint.
- You can only cancel committed stock by negating the PO that triggered it.
*Note: These are accessible through internal warehouse sources.
Committed Stock Life Cycle Example
To illustrate the life cycle of committed stock, imagine the following situation: Let’s say you have a SKU with a quantity of 50. After receiving and generating a PO for five units of that SKU, you check its inventory levels and see the following:
- In Stock = 50
- Committed = 5
- Available = 45
Your Available quantity will appear as 45 after the channel’s next sync. Then, if your source finishes syncing without a shipment being added to the order, it’ll update your quantity from 50 to 40:
- In Stock = 40
- Committed = 5
- Available = 35
Stock is still committed, so your Available quantity changes to reflect that. But, if your source transmits the order’s shipment information, what’s committed can be released. Then, once your source syncs after the release, your In Stock quantity will update from 40 to 35, and stock will no longer be committed:
- In Stock = 35
- Committed = 0
- Available = 35
How to Manage Committed Stock and Inventory
Now, we’ll use Flxpoint to show you how to manage your committed stock and inventory.
Step 1: Select How You’ll Manage Your Inventory
Flxpoint offers two ways to replenish and adjust your Owned Inventory quantities: automatically and manually. We’ll take a quick look at both options.
Sync Quantities via Integrations or API
If you can regularly upload or integrate your inventory levels into Flxpoint, we suggest this method, as it’s also the standard for updating your quantities. It’s supported by two processes:
- Get Inventory – Primary: This lets you include and update all information about your product like attributes, images, and more.
- Get Inventory – Secondary: This process only lets you update pricing and quantities.
Below are three typical integration methods you can use when managing your Owned Inventory:
If you’re unable to update your quantities consistently, however, you should use committed stock; it automatically decreases your In Stock inventory until it’s released.
Manually Adjust Quantities and Commit Stock
On the other hand, if you have no way of importing your inventory levels to Flxpoint, we suggest directly inputting the amount you received in your Stocking Purchase Order (SPO) or Transfer Order (TO). Here’s how it works:
- After building a stocking manifest, SPOs and/or TOs are created.
- Once they’re sent to your source—which appears as Processed—you can start adjusting your quantities.
Step 2: Enable Committed Stock
You need to enable committed stock to take advantage of it. This is done at the source level by tweaking a specific source’s settings.
Once you’ve selected Yes, new POs and fulfillment requests (FRs) for that source will begin to commit stock. However, keep in mind the following points:
- Stock won’t be committed for POs or FRs that were created before the feature was enabled.
- Disabling the feature means new POs or FRs will no longer commit stock from that point on; it doesn’t void previously committed stock.
Step 3: Monitor Your Committed Stock
Tracking your committed stock is best done by source. You can automatically do this if you sync your quantities via integrations or API: Simply hover above a specific source’s available quantities and you’ll see something similar to the image below.
Note that once you receive new orders, the number in Committed on the created PO or FR will be deducted from In Stock. Additionally, the next time Flxpoint syncs to the channel it’s connected to, the Available amount that can be committed will appear as available on that channel.
For your POs and FRs, you’ll see the amount of committed stock under Fulfillment Details (as shown in the image above).
Meanwhile, when viewing your inventory by product variant, your In Stock and Committed quantities can be found under the Source Links section. This takes into account varying pricing, quantities, and sources.
That’s all there is to managing your committed stock and inventory automatically. However, doing it manually involves some extra steps.
Step 4: Adjust Your Quantities and Committed Stock
Before adjusting your inventory quantities and committing stock, remember:
- Manually adjusting your quantities is necessary to receive your incoming inventory properly and increase your In Stock quantity.
- Make sure you use the After an update in quantity and shipments import option. This enables POs and FRs to decrease your on-hand quantities correctly.
First, navigate to your Stocking Manifests, SPOs, and TOs through the following steps:
- Select Orders.
- Click the PO/FRs or the Stocking Manifest tab.
- Input a search or filter.
- Click on your chosen PO/FR or Stocking Manifest.
Next, adjust your quantities. We’ll use the below image of an SPO/TO to explain how to adjust your inventory quantities:
- Make sure the PO Status (inside the blue rectangle on the upper left) for your SPO or TO says Processed. That’s when the Incoming Inventory section becomes visible.
- Input the inventory amount you want to modify under Adjust.
- Click on the Receive button to lower the Incoming quantity and add to your In Stock quantity.
- Alternatively, you can select Void to decrease your Incoming quantity. However, only use this if, for some reason, your source doesn’t send enough stock.
- Incoming (inside the yellow square) is the remaining amount you’re waiting to receive from your SPO/TO. It’s calculated using the following formula: Ordered Quantity – Received – Voided = Incoming.
- Clicking on the Stocking Manifest button at the top of your screen directs you to where your SPO/TO was derived.
Adjustments can be made at each line item. However, if you want to receive your inventory for your entire SPO/TO, all you have to do is:
Click on the Stocking Manifest button on your SPO/TO page.
Select Receive on the stocking manifest itself.
Once that’s done, your stocking manifest will be closed and its status will change to Received. Now, your inventory and committed stock is set.
When Not to Use Committed Stock
Although setting up committed stock is a relatively simple process, there are certain situations where using it is inadvisable.
Your Source Doesn’t Update Inventory Quantities
Under this circumstance, your source will typically use a fixed value. If you enable committed stock in Flxpoint, your inventory count will deplete while committed stock remains unreleased.
Your Source Already Tracks Committed Stock
This often occurs with 3PLs. If you enable committed stock in Flxpoint, duplicate commitments will appear and you’ll have inaccurate available quantities synced to your channel.
Wrapping up — Synchronize Your Data Accurately Across Sales Channels Using Committed Stock
Understanding committed stock helps you align your inventory levels and data across multiple sales channels. The “blocked off” inventory makes it easier to accommodate the right amount of orders and prevents sold out items from being purchased.
You’ll need tools like Flxpoint to leverage committed stock effectively, but learning how to use and sync them with your various channels is simpler than it sounds. Incorporate the points we’ve discussed and you’ll be able to streamline your inventory management for seamless operation.
To stay updated on the latest articles, webinars, podcasts and feature releases, subscribe today!