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.
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.
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.
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