Definition

Inventory allocation refers to the strategic allocation of inventory throughout your company’s distribution network. In sync with customer demand, which will vary from one location to the next, inventory allocation means your store shelves will remain properly stocked and online orders will arrive quickly and less expensively because they are shipped from warehouses that are closest to your customers.

Inventory allocation is an ongoing process that should be adjusted according to your customer's demand and fluctuations in inventory levels. For example, if a pair of Nike Shoes are sitting on the shelves at three stores in Los Angeles but are close to selling out at two shops in San Diego, it would make sense to reallocate the items so as not to run out where they’re in demand.