How Amazon Optimizes Where to Store Products to Avoid Stockouts
A mathematical method for deciding how many items to stock in different warehouses to minimize the cost of running out of products.
Original patent title: “Allocating regional inventory to reduce out-of-stock costs”
A mathematical method for deciding how many items to stock in different warehouses to minimize the cost of running out of products. Granted to Amazon Technologies Inc in 2014 with 23 claims and 41 forward citations.
Key facts
Coverage
What does this patent actually cover?
This patent describes a computational method for distributing a fixed supply of goods across multiple regional warehouses. It uses a probabilistic model—specifically a gamma distribution—to forecast customer demand in each region. By calculating the specific financial cost of an out-of-stock event in each location, the system determines the optimal number of units to store in each warehouse. The goal is to minimize the total expected cost across the entire network, ensuring that high-demand or high-cost-of-failure regions receive priority in inventory allocation.
The gap
What does this patent NOT cover?
- Does not cover real-time inventory replenishment triggered by individual customer purchases.
- Does not cover the physical logistics of transporting goods between warehouses.
- Does not cover demand forecasting methods that do not utilize a probabilistic distribution model.
- Does not cover manual inventory management decisions made without the specified mathematical optimization.
These exclusions are unique to PatentBrief — derived from the actual claim language, not patent-office boilerplate.
What made this novel
The system treats the 'cost of being out of stock' as a variable that can be balanced across regions using a set of equations, effectively equalizing the marginal risk of stockouts across the entire network.
Schematic visualization of the patent's claim structure. Hand-drawn diagrams in progress for each landmark patent.
Where you've seen this
Real-world examples
Amazon fulfillment center inventory distribution
Automated supply chain management software
Regional warehouse stock level planning
Why it matters
The bigger picture
This technology is fundamental to modern e-commerce, where the speed of delivery is a primary competitive advantage. By mathematically balancing inventory across a vast network, companies like Amazon can reduce shipping costs and avoid the significant financial penalty of failing to fulfill an order from the nearest warehouse. It transformed inventory management from a reactive process into a predictive, data-driven optimization problem.
Filed
December 29, 2010
Granted
May 20, 2014
Market context
Who's building on this
Companies in this space
Amazon continues to refine these methods within its global logistics network. Major retailers and logistics providers, including Walmart and various third-party supply chain software companies, utilize similar predictive modeling to optimize their own distributed inventory systems.
Market impact
This approach helped standardize the use of predictive analytics in large-scale logistics. It enabled the shift toward 'distributed fulfillment,' where inventory is placed closer to the customer to support rapid delivery promises, which is now a baseline expectation in the retail industry.
Claim 1 — Plain English
What this patent covers
This patent describes a computational method for distributing a fixed supply of goods across multiple regional warehouses. It uses a probabilistic model—specifically a gamma distribution—to forecast customer demand in each region. By calculating the specific financial cost of an out-of-stock event in each location, the system determines the optimal number of units to store in each warehouse. The goal is to minimize the total expected cost across the entire network, ensuring that high-demand or high-cost-of-failure regions receive priority in inventory allocation.
The clever bit
The system treats the 'cost of being out of stock' as a variable that can be balanced across regions using a set of equations, effectively equalizing the marginal risk of stockouts across the entire network.
What it does not cover
- Does not cover real-time inventory replenishment triggered by individual customer purchases.
- Does not cover the physical logistics of transporting goods between warehouses.
- Does not cover demand forecasting methods that do not utilize a probabilistic distribution model.
- Does not cover manual inventory management decisions made without the specified mathematical optimization.
Patent timeline
Application submitted to the patent office
Application published, typically 18 months after filing
Patent officially issued
PatentBrief Score
Impact Score
Strong
Citation count
32/40
Moderately cited
Claim breadth
15/20
Broad claimsclaimsThe numbered statements at the end of a patent that legally define what the inventor owns.Read more →
Recency
5/20
Granted 10–20 years ago
Assignee scale
20/20
Major company or institution
PatentBrief Impact Score — based on citation count, claim breadth, recency, and assignee scale. Not a legal assessment.
Heuristic Value Estimate
What this patent might be worth
$164K – $524K
Midpoint $328K · 4.5 yr remaining · industry ×1.6
Heuristic only — blends forward/backward citation counts, claim scope, time remaining, litigation history, and CPC-derived industry baseline. Real valuations need a professional appraisal.
The original legal language
Original claims
23 claims as filed with the patent office.
Concepts involved
Citations
Patent lineage
Cite this patent
Li, X. Y., & Chen, M. (2014). How Amazon Optimizes Where to Store Products to Avoid Stockouts (U.S. Patent No. 8,732,039). U.S. Patent and Trademark Office. https://patentbrief.org/patent/us/8732039/amazon-subscribe-save
Auto-generated from the patent record. Double-check author order and the issue date against the official USPTO document before submitting.
Embed
Add this patent to your site
Drop this plain-English patent card into any blog post or article — free, no signup. It always links back to the full breakdown here.
<div data-patentlens-widget data-patent-number="US8732039"></div> <script src="https://patentbrief.org/embed.js" async></script>
Stay in the loop
Get a weekly digest of new patents.
One email per week. No spam. Unsubscribe anytime.
Keep exploring
Related patents you should know
US 4683195 · 1987
How to Make Billions of Copies of a DNA Segment
This patent describes the Polymerase Chain Reaction (PCR), a method to rapidly create many copies of a specific piece of DNA or RNA, enabling its detection and analysis.
Cetus Corp
US 8697359 · 2014
How to Edit Genes in Human Cells Using an Engineered CRISPR System
This patent describes an engineered CRISPR-Cas9 system for precisely cutting DNA in eukaryotic cells to change how genes work, opening the door for gene editing in complex organisms.
Massachusetts Institute of Technology
US 7657849 · 2010
How the iPhone's Slide-to-Unlock Gesture Works
Apple's 2010 patent describes unlocking a device by dragging a specific graphical image across the touchscreen along a predefined path, a gesture that became iconic with the original iPhone.
Apple Inc
US 4733665 · 1988
How Doctors Implant a Permanent Stent Using a Balloon
This patent describes the method for placing a permanent, expandable wire mesh tube inside a blood vessel or other body tube using a balloon-tipped catheter to widen it and keep it open.
Expandable Grafts Partnership
US 4965188 · 1990
How to Make Many Copies of a DNA Piece with Heat
This patent describes the Polymerase Chain Reaction (PCR) method, a technique to make millions of copies of a specific DNA segment using a heat-resistant enzyme and repeated temperature changes.
Cetus Corp
US 4235871 · 1980
How to Encapsulate Active Materials in Lipid Bubbles Efficiently
This patent describes a method for trapping biologically active substances inside tiny, multi-layered fat bubbles called liposomes, using a specific water-in-oil emulsion and gel-forming process to improve how much material gets captured.
Individual
More to explore
More in Software & Internet
US 4405829 · 1983 · Massachusetts Institute of Technology
How RSA Public-Key Encryption Keeps Digital Messages Secret
US 6285999 · 2001 · Leland Stanford Junior University
How Websites Get Ranked by Importance
US 5960411 · 1999 · Amazon com Inc
How Amazon's One-Click Ordering Works for Online Purchases
US 7669123 · 2010 · Facebook Inc
Displaying Friends' Activities in a Social Network Feed
New to patents?
Common Questions
Frequently Asked Questions
What does How Amazon Optimizes Where to Store Products to Avoid Stockouts cover?
A mathematical method for deciding how many items to stock in different warehouses to minimize the cost of running out of products.
Who owns patent US 8732039?
Amazon Technologies Inc owns this patent, granted in 2014.
When does this patent expire?
This patent is expected to expire on May 20, 2034, when the invention enters the public domain.
What is patent US 8732039 cited by?
This patent has been cited by 41 later patents that build on its ideas.
What problem does this patent solve?
This technology is fundamental to modern e-commerce, where the speed of delivery is a primary competitive advantage. By mathematically balancing inventory across a vast network, companies like Amazon can reduce shipping costs and avoid the significant financial penalty of failing to fulfill an order from the nearest warehouse. It transformed inventory management from a reactive process into a predictive, data-driven optimization problem.
What does this patent NOT cover?
Does not cover real-time inventory replenishment triggered by individual customer purchases.
Same assignee
More from Amazon Technologies Inc
Patent monitoring