What does allocation refer to in inventory management?

Allocation in inventory management refers specifically to the quantities assigned to specific orders. This process is essential in ensuring that inventory levels are accurately managed and that customers receive their orders on time. When inventory items are allocated, it means that a determined quantity is set aside from the available stock to fulfill certain customer orders or production needs.

This helps in maintaining an organized inventory management system, where the business can track what has been promised to whom, thereby minimizing the risk of stockouts and ensuring better customer satisfaction. By having a clear allocation process, companies can efficiently manage their resources and optimize inventory turnover.

In the context of the other options, the distribution of goods to customers refers more to the logistics and delivery aspects, while stock rotation is concerned with the systematic arrangement of inventory to ensure older stock is sold first. The amount of stock reserved for future orders relates to planning but does not specifically capture the concept of allocation as directly related to existing orders. Thus, the focus on distinct quantities assigned to specific orders aptly defines allocation within the framework of inventory management.