Allocation

Allocation is used in three situations: initial allocation of new or seasonal items, which have no sales history at store level; distribution of promotional stock bought in advance for the whole network; and rationing when the distribution center holds less than the stores' combined requirement. The rule sets the result. A fair‑share split in proportion to forecast demand gives every store the same share of its need; a priority rule serves the most important locations in full and passes the shortfall on to the rest; a push to target days of cover equalizes how long the stock lasts in each store.

• Fair share for location i = available quantity × forecast_i ÷ Σ forecast
• Coverage ratio = allocated quantity ÷ requirement (the same for every location under fair share)

Allocation in practice

Choosing the rule is a decision about where the shortfall will appear. Fair share looks neutral, but when stock covers 70% of total demand, every store receives 70% of its need and all of them run out at about the same time – including those whose availability matters most. A priority rule keeps the gap in the less important locations, where it costs the least, and makes it visible. Neither rule is right by default; what matters is that the rule is chosen deliberately rather than inherited from the order in which the system processes the stores.

The second effect is rounding. Allocation ships in cases, not units. With 30 units in cases of 6 and twelve stores asking for 2–3 units each, only five stores receive anything, and the formula matters less than the rule that decides which five. Small quantities also make the first allocation of a new item fragile: stock sent to the wrong store does not sell there and has to be moved later, so an allocation plan should include a point at which the remaining stock is rebalanced by actual sell‑through.

Veritico STOCK treats the network as one pool: limited stock is assigned according to the target service level, A locations are served first, and surplus or near‑expiry stock gets stock transfer proposals. See allocation, stock transfers and overstock and demand forecasting.

Related terms

• Replenishment
• Service Level
• Stockout
• Multi‑Echelon Inventory Optimization (MEIO)
• FEFO and FIFO