Four depots have asked the central warehouse for 1,800 units of a fast-moving item. The warehouse holds 1,200. Somebody has to decide who gets short, and the first rule that comes to mind is usually the wrong one.

Cutting every request by the same percentage feels fair. It ignores the stock each depot already holds, the speed at which each one sells and the customers each one serves.

What Goes Wrong With an Even Cut?

The illustrative network below shows the problem. Each depot sells at a different pace and starts from a different stock position.

Depot	Sales per day	On hand	Request	Even cut	Equal cover
A	60	300	600	400	476
B	40	100	500	333	417
C	30	300	400	267	88
D	20	40	300	200	219

An even cut gives every depot two thirds of its request. After delivery, Depot C sits on 567 units, close to 19 days of sales, while B holds 433 units and under 11 days of cover. Within two weeks B runs dry. C will still have stock to spare, and someone will pay for a transfer between the two.

What Does a Days-of-Cover Rule Give Each Depot?

A better default sets the inventory allocation so every depot ends with the same number of days of cover. Add the 1,200 units to the 740 already in the depots and divide by total daily sales of 150. Each location should end with about 12.9 days.

The last column of the table shows the result. C receives only 88 units, because it already holds enough. The units it would have taken under an even cut go to A and B, where they protect sales over the next fortnight. The shortage is shared in the measure that matters to customers, which is how long each depot can keep serving them before the next supply arrives.

Forecasts work better than history here when demand is shifting. Use the forecast for the next two or three weeks, since that is the window the allocated stock has to cover before the next inbound shipment reaches the central warehouse.

When Should Priority Override the Formula?

Equal cover treats every unit of demand alike. Contracts differ, and so do customers. Some carry penalties. A depot serving a contract customer with late-delivery penalties may need protection before the formula runs.

Set a short list of priority rules in advance:

• Contracted volumes with penalty clauses come first, up to the contracted quantity.
• Strategic accounts come next, within an agreed cap.
• Everything left is shared by days of cover.

Agree these rules in a calm month. Debating them during a shortage wastes days the depots do not have.

Should Some Stock Stay Back at the Centre?

Holding a reserve often pays during a shortage. Once units reach a depot, moving them again costs freight and time, while units kept at the central warehouse can still go wherever demand turns out highest next week. A common approach ships enough to give each depot one week of cover and keeps the rest centrally until the next allocation run. How much to hold upstream and how much to push down is the same question multi-echelon inventory planning answers in normal months, only under tighter supply.

Allocations should also stay open to change. If priorities shift midweek, stock reserved for one order but not yet shipped should be free to move. Hard allocations, locked to one order at the moment of release, make that difficult and push planners into manual workarounds. Say a key account brings an order forward by five days. With soft reservations, the planner moves 150 units from a later, lower-priority order and sees which delivery slips as a result. Hard reservations force someone to unpick each one by hand, often after the truck has left. That delay is usually where a manageable shortage becomes a missed customer date.

How Should the Team Run Allocation Week to Week?

Run the allocation as a scheduled step during any shortage, with the rules written down and the inputs refreshed each time. Publish the result with the logic behind it, so depot managers can see why their share came out as it did.

Review the outcome after each run. Count stock-outs by depot and the transfers needed to fix imbalances. Compare each depot’s fill rate with the target agreed before the shortage began. If transfers keep rising, the inventory allocation rules need another look.

Shortages end. When supply recovers, return to normal replenishment settings and record what the rules achieved. Multi-echelon inventory planning then starts the next season with better buffers, and the next shortage starts with an agreed playbook.

Book an Oritiq demo to test these allocation rules on your own depots.