Inventory Reservation, Allocation and ATP: How ERP Should Manage Available Stock
On-hand inventory is not the same as truly available inventory. Stock may be under quality inspection, allocated to a project, reserved for a sales order, committed to a work order, held at a subcontractor or protected as safety stock. ERP must manage not only quantity, but who has a claim on that quantity and when it can be promised.
Having 100 units physically on hand does not mean 100 units are available to a new demand.
Table of contents
- On-hand, available, reserved, allocated and ATP are different
- Reservation versus allocation
- Soft versus hard reservation
- Example: 100 on hand, but only 35 available
- When should reservation be created?
- Lot and serial reservation
- Project, customer and special-purpose stock
- Should safety stock be included in ATP?
- ATP: promiseable quantity on a date
- CTP: if stock is not enough, when can we make it?
- MRP is not reservation
- Reservation, allocation and picking are not the same
- What if two demands want the same stock?
- Reservation and ATP KPIs
- ERP reservation design checklist
On-hand, available, reserved, allocated and ATP are different
| Concept | Meaning |
|---|---|
| On-hand | Physical quantity recorded in inventory |
| Free stock | Quantity not blocked by quality/status |
| Reserved stock | Quantity protected for a specific demand |
| Allocated stock | Quantity limited to a customer/project/segment |
| Available stock | Quantity the current demand can actually use |
| ATP | Quantity that can be promised on a specific date |
| CTP | Date/quantity that can be promised after checking material and capacity |
Concept
On-hand
Meaning
Physical quantity recorded in inventory
Concept
Free stock
Meaning
Quantity not blocked by quality/status
Concept
Reserved stock
Meaning
Quantity protected for a specific demand
Concept
Allocated stock
Meaning
Quantity limited to a customer/project/segment
Concept
Available stock
Meaning
Quantity the current demand can actually use
Concept
ATP
Meaning
Quantity that can be promised on a specific date
Concept
CTP
Meaning
Date/quantity that can be promised after checking material and capacity
Key distinction
Available stock is a current-state concept. ATP adds the time axis and future supply/commitments. CTP goes further by checking whether new supply can actually be produced or procured.
Reservation versus allocation
Terminology varies by ERP and company, so define behavior rather than rely on labels. Reservation usually connects a specific demand to supply; allocation often defines a broader usage right or inventory pool.
| Dimension | Reservation | Allocation |
|---|---|---|
| Link | Specific sales/work-order demand | Customer, project, contract or pool |
| Granularity | Quantity; optionally lot/serial/bin | Policy or stock segment |
| Purpose | Protect supply for one demand | Limit who may consume a stock pool |
| Release | Shipment, consumption, cancellation | Policy or allocation change |
Dimension
Link
Reservation
Specific sales/work-order demand
Allocation
Customer, project, contract or pool
Dimension
Granularity
Reservation
Quantity; optionally lot/serial/bin
Allocation
Policy or stock segment
Dimension
Purpose
Reservation
Protect supply for one demand
Allocation
Limit who may consume a stock pool
Dimension
Release
Reservation
Shipment, consumption, cancellation
Allocation
Policy or allocation change
Soft versus hard reservation
| Model | Behavior | Best fit |
|---|---|---|
| Soft | Protect quantity without fixing exact lot/serial/bin | Early order stages |
| Hard | Lock exact inventory identity/location | Traceability or picking |
| Hybrid | Reserve quantity first; fix identity later | Most complex operations |
Model
Soft
Behavior
Protect quantity without fixing exact lot/serial/bin
Best fit
Early order stages
Model
Hard
Behavior
Lock exact inventory identity/location
Best fit
Traceability or picking
Model
Hybrid
Behavior
Reserve quantity first; fix identity later
Best fit
Most complex operations
A hybrid model often protects the customer commitment without sacrificing warehouse and FEFO flexibility.
Example: 100 on hand, but only 35 available
| Item | Qty |
|---|---|
| On-hand | 100 |
| Quality pending | -10 |
| Sales reservations | -25 |
| Project allocation | -15 |
| Work-order hard reserve | -10 |
| Safety stock protection | -5 |
| Available to new demand | 35 |
Item
On-hand
Qty
100
Item
Quality pending
Qty
-10
Item
Sales reservations
Qty
-25
Item
Project allocation
Qty
-15
Item
Work-order hard reserve
Qty
-10
Item
Safety stock protection
Qty
-5
Item
Available to new demand
Qty
35
ATP may still be higher later
If 40 units are due in three days and no additional commitments consume them, today's available stock can be 35 while ATP three days later is 75.
When should reservation be created?
| Trigger | Benefit | Risk |
|---|---|---|
| Quote | Strong customer promise | Locks stock before real order |
| Sales-order approval | Protects confirmed demand | Must react to order changes |
| Payment/credit approval | Avoids holding stock for unqualified order | Needs commercial-status integration |
| Work-order creation | Secures material early | Long-horizon orders may lock stock |
| Production release | Closer to real consumption | Critical material may be lost earlier |
| Picking release | Operationally precise | May be too late for customer promise |
Trigger
Quote
Benefit
Strong customer promise
Risk
Locks stock before real order
Trigger
Sales-order approval
Benefit
Protects confirmed demand
Risk
Must react to order changes
Trigger
Payment/credit approval
Benefit
Avoids holding stock for unqualified order
Risk
Needs commercial-status integration
Trigger
Work-order creation
Benefit
Secures material early
Risk
Long-horizon orders may lock stock
Trigger
Production release
Benefit
Closer to real consumption
Risk
Critical material may be lost earlier
Trigger
Picking release
Benefit
Operationally precise
Risk
May be too late for customer promise
Lot and serial reservation
Traceability answers 'which inventory?'; reservation answers 'whose claim?'. Exact lot/serial reservation is needed when customer, certificate, grade, shelf-life, origin or revision constraints matter.
Project, customer and special-purpose stock
| Segment | General use? |
|---|---|
| General stock | Yes |
| Project stock | Usually no |
| Customer-specific | Restricted |
| Consignment | Depends on ownership |
| Quality/blocked | No |
| Safety stock | Policy-based |
| Subcontractor-held | Lead-time/access dependent |
Segment
General stock
General use?
Yes
Segment
Project stock
General use?
Usually no
Segment
Customer-specific
General use?
Restricted
Segment
Consignment
General use?
Depends on ownership
Segment
Quality/blocked
General use?
No
Segment
Safety stock
General use?
Policy-based
Segment
Subcontractor-held
General use?
Lead-time/access dependent
Should safety stock be included in ATP?
This is a service-level policy. It may be fully excluded, date-dependent, customer-class dependent, or available only through an approved override.
ATP: promiseable quantity on a date
ATP evaluates available inventory, dated firm supply and existing commitments. The exact formula varies by ERP; the design principle is time-phased supply-demand netting.
| Date | Supply | Existing commitments | Remaining ATP |
|---|---|---|---|
| Today | 35 available | 0 | 35 |
| +3 days | +40 purchase receipt | -20 | 55 |
| +7 days | +60 production receipt | -30 | 85 |
Date
Today
Supply
35 available
Existing commitments
0
Remaining ATP
35
Date
+3 days
Supply
+40 purchase receipt
Existing commitments
-20
Remaining ATP
55
Date
+7 days
Supply
+60 production receipt
Existing commitments
-30
Remaining ATP
85
CTP: if stock is not enough, when can we make it?
Simplified CTP flow
- 1
Demand
50 units requested for Oct 10
- 2
ATP check
Only 20 promiseable
- 3
Material check
When can components be ready?
- 4
Capacity check
When is routing/work-center capacity available?
- 5
Production/logistics
Calculate feasible completion and shipment
- 6
CTP date
Example: 50 units on Oct 12
MRP is not reservation
MRP plans what supply should be created and when. Reservation protects or associates existing/planned supply with a specific demand. They interact but are not the same mechanism.
Reservation, allocation and picking are not the same
Demand-to-shipment maturation
- 1
Demand
Sales order
- 2
Soft reserve
Protect quantity
- 3
Allocation
Choose eligible stock pool
- 4
Hard reserve
Fix lot/serial/bin if needed
- 5
Picking
Physically collect
- 6
Shipment
Consume reservation
What if two demands want the same stock?
Priority can use order date, customer class, project criticality, promise date, contractual penalty or approved manual override. Any reallocation should be auditable.
Reservation and ATP KPIs
| KPI | Meaning |
|---|---|
| Reservation aging | Stock locked for too long |
| Expired reservations | Stale unreleased claims |
| Reservation fill rate | Demand protected by supply |
| ATP accuracy | Promise versus actual ability |
| Reallocations | Priority volatility/scarcity |
| Stockout despite inventory | Bad segmentation/reservation logic |
| Promise-date adherence | Quality of ATP/CTP dates |
KPI
Reservation aging
Meaning
Stock locked for too long
KPI
Expired reservations
Meaning
Stale unreleased claims
KPI
Reservation fill rate
Meaning
Demand protected by supply
KPI
ATP accuracy
Meaning
Promise versus actual ability
KPI
Reallocations
Meaning
Priority volatility/scarcity
KPI
Stockout despite inventory
Meaning
Bad segmentation/reservation logic
KPI
Promise-date adherence
Meaning
Quality of ATP/CTP dates
ERP reservation design checklist
- Define on-hand, free and available stock explicitly.
- Separate reservation and allocation behavior.
- Define soft/hard reservation stages.
- Tie reservation creation/release to document lifecycle.
- Expire stale reservations.
- Define when lot/serial/bin becomes fixed.
- Define ATP treatment for quality, project, customer-specific, subcontractor and safety stock.
- Make MRP aware of reservation/allocation policy.
- Use dated incoming supply in ATP.
- Use material and capacity checks when CTP is required.
- Audit manual reallocations.
- Measure stockouts caused by bad reservation logic.
Design principle
Good inventory control answers not only 'how much do we have?' but also 'who can use it, when can we promise it, and under what rule can that claim change?'
Frequently asked questions about reservation and ATP
- What is inventory reservation?
- Protecting or linking inventory quantity to a specific demand. Granularity can range from quantity only to exact lot, serial or bin.
- Is reservation the same as allocation?
- Terminology varies, but reservation can represent a specific demand-supply link while allocation represents a broader usage right or inventory pool.
- What is ATP?
- Available-to-Promise evaluates what quantity can be promised on a given date using available inventory, dated supply and existing commitments.
- What is CTP?
- Capable-to-Promise checks whether additional supply can be created by considering material availability and production capacity.
- Should safety stock be included in ATP?
- It is a policy decision; many companies exclude it from normal ATP and allow controlled overrides.
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