Stock allocation when supply runs short.
Supply is short and three customers want the same pallets. If nobody has agreed the rules, the loudest phone call wins.
I've sat in plenty of those meetings. Sales escalates. Customer service makes promises. The planner reshuffles the schedule. By Friday, the stock has gone to whoever pushed hardest, rather than to the orders that earn the most margin or protect your most important customers.
Allocation is a planning decision!
The rules belong in place before supply gets tight, not after three customers are already waiting.
A practical framework
- Prioritise customer commitments. Contracted service levels, penalties, strategic relationships and longer-term customer value.
- Understand product economics. Margin, available substitutes and whether the product is critical to the customer's operations.
- Choose an allocation method. Fair share, priority fill or a hybrid. Make sure customers can't gain an advantage by inflating orders.
- Agree on decision rights. Sales, finance and operations contribute, but one person makes the final call.
- Communicate early. A known shortage is easier to manage than a surprise on delivery day.
What to watch when supply is tight
During constrained periods, I'd watch four measures:
- Delivery in full on time by customer priority
- Margin earned per unit of constrained supply
- Contractual penalties and service failures
- Allocation overrides and hours spent resolving disputes
The financial impact isn't just the margin on the next pallet. It's also disrupted schedules, broken promises and damaged customer relationships.
Before the Christmas peak, list the SKUs most likely to run short in December, agree the allocation policy and name who makes the final call.
When supply falls short in your business, is allocation governed by agreed rules or does it come down to whoever escalates hardest?
Questions this usually raises
When should stock allocation rules be agreed?
Before supply gets tight, not after three customers are already waiting. Before the Christmas peak, list the SKUs most likely to run short in December, agree the allocation policy and name who makes the final call.
What goes into a stock allocation policy?
Prioritise customer commitments such as contracted service levels, penalties, strategic relationships and longer-term customer value. Understand the product economics: margin, available substitutes and whether the product is critical to the customer's operations. Choose a method, fair share, priority fill or a hybrid, that customers cannot game by inflating orders. Sales, finance and operations contribute, but one person makes the final call.
What should you watch during a constrained period?
Four measures: delivery in full on time by customer priority, margin earned per unit of constrained supply, contractual penalties and service failures, and allocation overrides and hours spent resolving disputes.
If shortages still get settled by whoever shouts loudest, get in touch. A consultation is ninety minutes: we'll look at how allocation works in your business today.