On-order inventory: the units already in transit, and why they matter
On-order inventory means the units you have already ordered from a supplier that have not landed yet. They are committed, they are not sellable today, and they are the reason a low stock number is sometimes nothing to worry about.
What on-order inventory means
On-order inventory is stock you have committed to buy that has not arrived yet. Units on a purchase order. Units in a container. Units on your supplier's floor waiting for a pickup. The order exists. The stock does not, not where you can sell it.
That puts every unit you own into one of three states:
- On hand. In your warehouse or your store, counted, sellable now.
- On order. Committed to a supplier, with a quantity and an expected arrival date.
- Received. A delivery is checked in. The units move from on order to on hand, and the on-order count drops.
In a store admin the same idea is usually labelled incoming. Treat the two words as one thing: units with your name on them that are not in the building.
A worked example
Take one candle variant. You hold 40 units. You ordered 120 last week, due in 11 days. It sells about 4 a day.
On hand says 10 days of cover. On order says relief arrives on day 11. That is one short day of empty shelf. So the decision is not whether to order again. It is whether to chase the supplier or accept the gap. Without the on-order number, the same 40 units look like a store about to place a second order it does not need.
The four numbers on one SKU
| Number | This SKU | What it tells you |
|---|---|---|
| On hand | 40 units | Sellable today, counted in your warehouse |
| On order | 120 units, due day 11 | Already committed, arriving, not sellable yet |
| Sales velocity | 4 units a day | The average pace your chosen window reports |
| Days of inventory | 10 days | 40 on hand divided by 4 a day |
Where the number meets your reorder point
A reorder point tells you when stock is low enough to act. On-order inventory tells you whether you already acted. Two different questions. Merge them and you get the worst of both: a double order that ties up cash, or a skipped order because a six-week-old purchase order still shows as incoming.
Two habits keep the on-order side honest.
- Date beats quantity. 500 units on order help nothing if they ship in 40 days and you have 9 days of cover. Record the expected arrival beside the quantity. Treat an unconfirmed date as a guess.
- Close the order when the pallet lands. A balance nobody clears argues against reordering with stock that never arrived.
The trigger is the part a tool can hold for you. Restoc is built to calculate a reorder point per SKU from a sales velocity window of 7, 14 or 30 days and the lead time you enter for that SKU, so the stock level that says order now is already worked out when you look. You bring the arrival date. The reorder point tells you whether waiting for it is safe.
Related terms
On-order inventory only makes sense next to the numbers either side of it.
- Lead time is the real gap between placing an order and receiving it. It decides how early you have to commit, and only you can supply it.
- Reorder point is the stock level that says order now, built from velocity and lead time.
- Committed and available inventory cover the other direction: units promised to customers, still on your shelves.
- Days of inventory on hand turns your on-hand count into a runway in days. That is what you compare an arrival date against.
- Safety stock is the cushion for weeks when a supplier slips or demand spikes, which is exactly when an arrival date stops being reliable.
- Backorder is the fallback when the on-order units land after the on-hand units run out.
- Replenishment is the whole loop: watch, order, receive, repeat.
Questions
Is on-order inventory the same as incoming inventory?
In day to day use, yes. Both mean units committed to a supplier and not yet received. Some teams reserve incoming for stock that has physically shipped. If you split the two, write down which is which. The groups carry very different arrival risk.
Does on-order stock count towards what I can sell?
No. Until a delivery is checked in, those units cannot ship to a customer. Counting them as sellable is how stores end up overselling and apologising.
Should I subtract on-order units from my reorder point?
No. The reorder point is a stock level set by your sales pace and your lead time. It does not move because you placed an order. Use the on-order figure as the check after the trigger fires: stock is below the line, is a delivery already covering it, and does it land before you hit zero.
When does a unit stop being on order?
On receipt, when you count it in. If a supplier short-ships or cancels, clear the balance the same day. A stale on-order number is the most common reason a store talks itself out of an order it needed.
What does a reorder point need from me?
Two inputs. A sales velocity window, which Restoc offers at 7, 14 or 30 days, and the lead time for the SKU. From those it works out the stock level that should start the order.