Guide · Net flow
Net flow position: formula, qualified demand and order spikes
Net flow position decides whether a buffered item needs an order today. Here is what goes into it, what stays out, and a worked example you can check.
Updated October 16, 2026
In short: net flow position = on hand + on order − qualified demand. Qualified demand is open demand that is past due or due today, plus any future day within the spike horizon whose demand reaches the spike threshold. When net flow position is at or below the top of yellow, you order enough to bring it back to the top of green.
The formula
Net flow position = on hand + on order − qualified demand
- On hand is physical stock you can use today.
- On order is all open supply already placed: purchase orders, production orders and transfers, whatever their due date. The buffer was sized to cover the lead time, so supply that is still on its way counts.
- Qualified demand is the part of open demand the buffer can't be expected to absorb, explained below.
Comparing the result with the buffer zones gives the planning signal: at or below the top of red is red, at or below the top of yellow is yellow, at or below the top of green is green, and above that the item is over the top of green.
What counts as qualified demand
Not every open customer order is subtracted. The yellow zone already covers average daily usage over the lead time, so subtracting all future orders would count the same demand twice. Three kinds of demand qualify:
- Past-due demand: orders that should already have shipped.
- Demand due today.
- Qualified order spikes: a future day, within the spike horizon, whose total open demand reaches the spike threshold. A common starting point is a horizon of one decoupled lead time and a threshold of 50% of the red zone. Both are settings to tune.
Everything else, the normal flow of orders, is what the yellow zone is for.
A worked example
A made-up pump seal with these buffer inputs and zones:
Buffer for the example item
| Input or zone | Value |
|---|---|
| Average daily usage (ADU) | 20 units/day |
| Decoupled lead time | 12 days |
| Lead time and variability factors | 50% and 50% (medium, medium) |
| MOQ / order cycle | 150 units / 5 days |
| Red = 20 × 12 × 0.5 × 1.5 | 180 |
| Yellow = 20 × 12 | 240 |
| Green = max(150, 120, 100) | 150 |
| Top of red / yellow / green | 180 / 420 / 570 |
On hand is 260. Two purchase orders are open: 200 units due in 6 days and 150 due in 14 days, so on order is 350, including the one due after the lead time. The spike threshold is 50% × 180 = 90 units and the horizon is the 12-day lead time.
Open customer demand and whether it qualifies · Swipe sideways to see all columns.
| Due | Quantity | Qualifies? | Why |
|---|---|---|---|
| 2 days ago | 30 | Yes | Past due |
| Today | 25 | Yes | Due today |
| Day 3 | 40 | No | Below the 90-unit threshold |
| Day 5 | 120 | Yes | Spike: 120 ≥ 90, inside the horizon |
| Day 9 | 60 + 45 = 105 | Yes | Spike: the day's total counts, 105 ≥ 90 |
| Day 16 | 200 | No | Outside the 12-day horizon |
Qualified demand = 30 + 25 + 120 + 105 = 280Net flow position = 260 + 350 − 280 = 330- 330 is above the top of red (180) and at or below the top of yellow (420): yellow, so order now.
Order = top of green − net flow = 570 − 330 = 240, which already meets the 150-unit MOQ.- Planning priority = 330 ÷ 570 = 57.9% of the top of green.
What happens if you ignore spikes
Counting only past-due and due-today demand gives 260 + 350 − 55 = 555, which is in the green zone, so no order is placed. But 225 units of large orders land within the lead time. That gap is what the spike rule is there to catch. Leaving the day-16 order out is also deliberate: it falls after the replenishment lead time, so an order placed later can still cover it.
Planning priority: sort by buffer status, not due date
Net flow position divided by the top of green turns every item onto the same scale. Sorting lowest first puts the items most at risk at the top of the list, whatever their volume or price. A 20% item needs attention before a 58% item even if the 58% item has an earlier purchase order due.
Net flow is for planning; on hand is for execution
Net flow position decides whether to order. Whether open orders need expediting is a separate check of on hand against the red zone. In the example, on hand of 260 is above the top of red (180), so nothing needs expediting yet, even though the item needs a new order. Tracking the two separately keeps you from expediting items that are only short on paper.
Common mistakes
- Subtracting all open demand. This double counts demand the yellow zone already covers and inflates orders.
- Leaving out late purchase orders. Supply that is past due is still on order. Flag it for follow-up rather than dropping it from net flow.
- A threshold that is too low. If most days qualify as spikes, the buffer is effectively being ignored.
- A horizon that is too long. Orders beyond the lead time can be covered by a later replenishment.
- Using on hand to trigger orders. On hand alone ignores both open supply and spikes.
The free planner applies these rules to every item in a workspace, shows the qualified spikes for each one, and lets you change the threshold and horizon. For how the zones themselves are sized, see the buffer zones worked example.