Unplanned inventory

Unplanned inventory refers to both the unexpected surpluses and shortages that occur outside the original supply plan or forecast. These typically result from order cancellations, customer returns, or supplier variances. While surplus stock increases storage costs, shortages create a greater opportunity cost by missing potential sales. In supply chains where vendors and suppliers maintain trusted lead times, vendors can confidently commit to orders knowing replenishment covers fulfillment. This approach helps boost sales, strengthen channel buyer retention, and enhance the overall customer experience.

Sterling Intelligent Promising supports unplanned inventory management by enabling vendors to:

Oversell against anticipated supply
Promise orders based on supplier lead times

Both concepts artificially inflate inventory levels at fulfillment locations that increases the available-to-sell quantities and improving overall channel capture.

For example, assume the network has 10 units of Item01 available.

Scenario 1 - Oversell via expected cancellations: If analytics predict 4 units to be cancelled in the upcoming sales cycle, the system can oversell up to 14 units in total. After cancellations, the net sales remain at 10 units, achieving a 100% sell-through rate.

Scenario 2 - Backfill replenishment

If the replenishment lead time is 5 days with a maximum of 10 units per shipment, and the current stock is 5 units, the availability view becomes:

On-hand inventory: 5 units available today.
Future Inventory: 15 units available in 5 days (lead time).

Because markets can shift unpredictably, leveraging supplier lead times and anticipated order cancellation rates allows you to capture otherwise unrealized sales by incorporating unplanned inventory uplift into your reported available-to-sell quantity.

Concept of overselling

Overselling is unnecessary when supply and demand forecasts are perfectly accurate. In practice, however, evolving market trends often deviate from predictions. Time-sensitive products - such as concert tickets, airline seats, celebrity merchandise, limited editions, or telemarketing offers - are subject to high demand volatility, creating risks of both excess inventory and missed sales. Overselling can also be used strategically to offset return rates and sustain sales momentum.

Concept of lead-time based fulfillment

Vendors often maintain contracts with multiple suppliers to ensure steady inventory flow. These agreements may include provisions for backfilling stockouts, with defined lead times for replenishment orders. By leveraging this information, vendors can accept future orders instead of rejecting them, aligning delivery dates with replenishment cycles and improving overall channel fulfillment.

Sample business scenarios

See the following possible scenarios for overselling:

Example 1 - Social media sales campaign: A vendor launches a one-week sales event on a social media channel, anticipating high demand for a featured product. Given the short selling window, there is a heightened likelihood of cancellations during the remorse period. To maximize sell-through, the vendor intentionally uplifts available inventory quantities by a percentage aligned with the predicted cancellation rate. This approach drives sales closer to net-zero remaining inventory, reducing the risk of markdowns and overstocking.; A similar principle is applied in the airline industry, where frequent cancellations lead airlines to oversell tickets. In the rare case that overselling results in more passengers than seats, compensation is offered. The overall gains outweigh the cost of empty seats.

Example 2 - Supplier lead contracts: Vendors negotiate supplier agreements that guarantee replenishment within defined lead times and quantities. These contracts enable sellers to confidently oversell near stockout by relying on inbound supply commitments. For example, securing up to X units within five days, where X exceeds the immediate order demand. This maximizes sales capture while ensuring reliable fulfillment and a stronger customer experience.

Example 3 - Overselling to compensate for high return rate on items: A steady stream of returns can dampen sales momentum since items must usually be received and processed in the warehouse before resale. However, if most returns are unopened and return rates are predictable, retailers can adjust available inventory by the expected return rate and resell sooner. For example, with a 10% return rate where 90% are resellable, the retailer can safely oversell up to 9%. This shortens resale cycles, reduces restocking delays, and maximizes inventory utilization.

To support the overselling scenarios and consider the high demand situations, the fulfillment manager needs a way to define the overselling strategies via unplanned inventory rule.

Unplanned inventory rule

The unplanned inventory rule is defined by Conditions and Actions:

Conditions specify which inventory and locations are eligible.
Actions determine the exact quantity to be added to the inventory pool to achieve business objectives.

Duration

Rules can be permanent or active for a specific date range, which is useful for short-term sales campaigns.

Start and End Date

Conditions

By unique item - ItemID, Unit of Measure, SegmentType, Segment
By Category
By Item Attributes
Include participating locations for unplanned inventory

Actions

Unplanned Quantity Uplift
Unplanned Lead Day - Number of days for unplanned inventory to take effect
- Overselling - Set N = 0. The uplift applies immediately until the end of the duration.
- Supplier Lead Contract - Set N > 0. The uplift applies N days from the availability request date until the end of the duration.

Vendors should take proactive measures when managing unplanned inventory. For example, if oversold quantities are not resolved within the expected cancellation window, the system should manually cancel unfulfillable orders. Conversely, if future demand requires supplier replenishment, purchase orders should be issued immediately to ensure timely backfilling of shortages.

When the rule is active for a given item and node, the system inflates total availability enabling to capture additional demand, particularly for time-sensitive sales.

The inflated availability quantity that includes original and unplanned supply is reflected in both node and network availability APIs and events as availableQuantity under the currentAvailability and futureAvailability groups. To distinguish regular inventory from unplanned, the unplanned object provides details on total unplanned inventory as well as the associated demand and reservations matched against it. As noted earlier, unplanned quantities in currentAvailability indicate overselling of existing stock, while those in futureAvailability imply that supplier backfilling is required.

See Network Availability by date V2 and Node Availability by date V2 for the API documentation.

Refer to the following sample of the availability payload:

"currentAvailability": {
  "availableQuantity": 7.0
     "unplanned": {
     "availableQuantity": 5.0,
     "demandQuantity": 3.0,
     "reserveQuantity": 2.0
     }
}