A stock count tells you how many units are recorded at a location; it does not tell you how many are available to sell. Inventory systems track units in different business states—such as available, committed, unavailable, or incoming—and move quantities between those states as orders, inspections, and receipts occur. Thinking of inventory this way explains why one total is not enough, without implying that every platform uses the same state model.
What is the difference between on-hand, available, and committed inventory?
Shopify defines on hand as all inventory units at a location. Available is the portion customers can still buy. Committed is stock already promised, such as units assigned to an unfulfilled order. These figures answer different questions, so they should not be treated as interchangeable. Shopify’s overview explains the distinction in its inventory basics guide.
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For example, a warehouse might record 20 units on hand: 12 available to sell, 5 committed to orders, and 3 held for inspection. The physical total remains 20, but only 12 are currently available. Moving a unit from available to committed changes what can be sold without changing the number physically at the location.
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What inventory states describe
States describe why a unit is—or is not—available for a particular use. Shopify’s merchant-facing documentation distinguishes these categories, though names and rules can vary by system.
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- Available: physically present and eligible for sale under the system’s rules.
- Committed: set aside for an obligation, such as an unfulfilled order, a reserved draft order, or a transfer marked ready to ship.
- Unavailable: at the location but excluded from sale. Shopify gives damage, quality control, and safety stock as examples.
- Incoming: expected at a destination but not yet physically received there. Incoming units do not become available merely because they are on the way.
Shopify’s definitions and examples are in Understanding inventory states. The key distinction is between physical presence, a business commitment, and permission to sell—not just the number attached to a product.
How inventory moves between states
A state-machine model is useful because inventory changes through events and operations. In a warehouse example, recording an order can move units from available to committed. Flagging units for inspection can move them from available to unavailable for quality control. Once inspection is complete, a business may release them back to available, depending on its procedures and software rules.
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A receipt is another transition: units marked incoming at a destination become physically present when received, and may then be made available subject to the system’s rules. Shopify’s developer documentation describes explicit operations to set or adjust quantities and to move units among states including available, reserved, damaged, safety stock, and quality control. These operations make a change to inventory in context; they are not simply edits to one undifferentiated count. See Apps in inventory management.
The term “state machine” here is a way to reason about these transitions, not a claim that all inventory products implement one standard finite-state machine. A platform may use different labels, combine categories, or expose more detail in its developer interface than in its merchant interface.
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How allocations fit alongside inventory states
Allocation is a related control: it protects some on-hand inventory for a chosen channel, customer group, region, or promotion. Microsoft Dynamics 365 documents allocation separately from consumed quantities, illustrating that a business can reserve stock for a purpose without treating it as generally available to every other use. Allocation rules therefore affect who may use stock, while state labels describe its status in the inventory model. Details are in Microsoft’s Inventory Visibility inventory allocation documentation.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to check in an inventory system
Do not assume that a familiar label has identical meaning across products. When selecting or configuring an inventory system, establish its rules in operational terms:
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- Which states count toward physical on-hand stock?
- Which states are sellable, and which are excluded from availability?
- How are order reservations, allocations, safety stock, damage, and quality holds represented?
- What event or operation changes a unit’s state—for example, order placement, transfer dispatch, receipt, or inspection release?
- Can quantities move back to a prior state, and who or what can authorize that change?
- Can the business configure classifications to match its own workflows?
The vocabulary is not universal. Shopify’s merchant guide lists five inventory states, while its developer material names additional states and operations. Infor MES, by contrast, documents user-defined classifications that can be configured for workflows or business rules. See Infor MES: Inventory States.
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