Inventory in transit

What is inventory in transit?

Inventory in transit — also called transit, transportation, or pipeline inventory — is a shipping term that refers to the finished goods that have been shipped by a seller, but have yet to reach the buyer. As the name suggests, inventory items are in ‘transit’ to their destination as well as their respective recipient. Many times, the goods are moving from a wholesaler to an ecommerce retailer (who then becomes a reseller). This phrase is primarily used by the company that’s responsible for selling and shipping the product.

Frequently Asked Questions

  • What items are part of transit inventory?

    Merchandise that has shipped from the seller’s dock but has yet to arrive at the buyer’s location is called transit inventory. The types of inventory considered goods in transit are a crucial part of the inventory management and supply chain process (as well as the wholesaler-retailer relationship). Additionally, inventory in transit is used to indicate whether the buyer or seller has taken possession of the goods, and who is accountable for paying relevant shipping costs.

  • Who owns the inventory when it is in transit?

    The main consideration for shippers as it relates to transit inventory is when ownership transfers (on paper) to the buyer. The recipient can either own the inventory when it's loaded onto the freight vessel for shipment (freight on board shipping point), or when the inventory arrives at its destination point (freight on board destination). Monetary exchange will always happen within one of these two moments, but it all depends on whether the buyer’s contract includes an FOB shipping point versus FOB destination clause.

  • Why is ownership of in transit inventory important?

    Ownership of the goods in transit is important because it has the potential to impact multiple inventory accounting or financing decisions for the buyer. For example, in certain cases a buyer may try to use the goods they’ve purchased as collateral to gain funding for other business operations. Whenever this is true, inventory ownership becomes much more influential than just a written agreement among participating vendors.