In supply chain logistics, what is the role of in-transit inventory?

In-transit inventory refers to goods that are in the process of being transported from one location to another, meaning they have not yet been received and accounted for at the destination. This type of inventory plays a significant role in supply chain logistics by providing a clear measure of the goods that a company has purchased or will soon own, but that are not physically present in their warehouse or storage facilities.

By quantifying in-transit inventory, organizations can better understand their overall inventory levels, manage expectations regarding stock availability, and plan for future demand. It allows businesses to maintain a more accurate view of their supply chain operations, ensuring they can effectively plan production schedules and manage customer expectations regarding delivery times.

This context clarifies why in-transit inventory is critical for companies, especially in managing working capital and optimizing the supply chain. Through effective management of in-transit levels, businesses can enhance their operational efficiency and minimize the risk of over- or under-stocking, aligning their logistics strategy with the overall goals of the organization.