Pipeline inventory

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​  In Transit or Pipeline Inventory is Inventory that is in transit.  Typically the inventory that has left the shipping dock of the seller or supplier, but not yet reached the receiving dock of the buyer or customer.  Any inventory that is in the “pipeline” is inventory that is moving within the supply chain.

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  The idea helps clarify between the buyer and supplier whether the buyer or seller of goods has taken possession, as well as identifying who is paying for the transportation.  A best practice is for either the buyer or supplier to record the inventory that is in transit in some type of log for accounting.  This inventory pipeline is one of the biggest reasons for low inventory accuracy.  Let’s look at an example. 
Example:

1. Lean Strategies International LLC. ships $5,000 of merchandise to K&K on November 18.  The terms of delivery are FOB shipping point. 
2. The minute this inventory leaves Lean Strategies International LLC’s facility and it is in transit, or movement to the next destination it becomes pipeline or in-transit inventory. 
3. These FOB terms mean that K&K takes ownership of the inventory when it leaves Lean Strategies International shipping dock.
4. Lean Strategies International LLC.  should record a sale transaction on November 18.
5. K&K should record an inventory receipt on the same date as well. 

This is important to understand because ownership of the in-transit inventory will tell us who's inventory list the order goes on and help keep track of what inventory is in transit or in the pipeline.
Challenge:  

• We would like to give you a little challenge.  If a facility drives an item to ship on an airplane, when does it become intransit inventory?  Share your thoughts in the comments section below and receive a coupon to one of Lean Strategies International LLC's courses.     

For more support improving inventory accuracy contact us here!