Allocation refers to reserving items for orders. When you allocate products on an order, then only those specific items can be pulled for only that specific order. They cannot go on another order, nor can other products be added to the order instead of the ones being allocation.
Available inventory is the inventory that is open to use and sell. It’s not on an order. In other words, it is not allocated. Inventory that has already been designated for an order is allocated. This is a separate number that is useful to keep track of. Knowing how much of your product is allocated at any given time can be used for reporting and making informed decisions in your operations.
For example, if almost all of your inventory in stock is allocated to orders, you might increase your purchase orders to replenish those products even before they’re physically gone. With an inventory management system that provides for allocation, and reporting and analysis of those allocations, managers can see beyond what they have on their shelves at any given time. They can see all the true numbers of their inventory. This kind of visibility can’t come from tracking via pen and paper or spreadsheets.