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When should you allocate stocks to various customer channels?
Most companies selling across several customer channels have separate revenue teams to focus on revenue generated from each channel. These teams would like to have assurance of stocks to fulfil their customer demand. As a result, supply teams often practice allocating stocks to each channel based on its estimated demand. This practice of stock allocation has its roots in the mindset of a deterministic demand scenario.
Some companies allocate it at the time of production itself, based on indents coming from the channel specific teams. A few others do it when stocks reach their central warehouse. Some do it at the RDC level and some at the CFA level. If the demand is completely deterministic, it doesn’t really matter.
However, we must deal with a stochastic demand scenario in actual practice. Therefore, it makes sense to pool the stocks for as long as possible and allocate it to channels as late as possible. If we must cover availability for specific channels, it should be only to the extent of maximum demand during the replenishment lead time. If we allocate higher stocks, it could have an adverse impact on availability for other channels if the demand shifts.