Inventory in Transit 101: Everything You Need to Know

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How well are you tracking your shipments? If you have to pause before answering this question, chances are this is an area for improvement.

Inventory in transit can sometimes lead to accounting- and financing-related dilemmas if you don’t effectively track it.

This is why we’ve compiled a comprehensive guide on everything you need to know about inventory in transit and why tracking is a must.

Let’s jump in!

What Exactly Is Inventory in Transit?

Inventory in transit refers to goods that are going from certain companies to other companies — for example, wholesalers to retailers — but that haven’t reached their destinations yet.

These transactions can take a while to occur, particularly if manufacturers are shipping large numbers of items to wholesale suppliers or retailers.

A major question that might crop up when goods are being transferred is at which point the ownership of the goods is transferred from party A to party B.

There are two types of transfers of ownership:

One is called freight on board, or FOB, shipping point. In this situation, party B takes ownership of the items at the place from which they are shipped.

The other type of transfer is called FOB destination. Here, party B takes ownership once it receives the goods at the intended destination.

Accounting Implications

The kind of transfer that takes place has an impact on how your business records that particular transaction.

In the FOB shipping point situation, the transaction can be recorded as a business sale starting from the shipment day.

Meanwhile, in the FOB destination situation, you must wait until the recipient takes ownership of the goods sold at the appointed destination.

This is especially critical to get right if it means that a transaction started in a certain month or year may end up being completed in the following month or year.

Financing Implications

Inventory in transit can also have financing implications.

For instance, let’s say that a buyer tries to use purchased goods as collateral for gaining financing to complete extra business operations.

A lender may decide to issue a loan with the expectation that the appropriate amount of goods will reach the buyer at a certain time. However, the lender must first do its due diligence to make sure that this will actually happen. Otherwise, the buyer may end up defaulting on the loan.

How We Can Help

We offer top-of-the-line shipment tracking software that provides the total end-to-end shipment visibility your company needs. Our goal is to help you to easily track and analyze how your shipments are moving across the globe.

We use a combination of public, private and proprietary datasets to get the job done.

For example, we look at weather data to determine how the environment may impact your business’s supply chain. We also look at warehouse management system data to determine the behavior of your business supply chain’s nodes. And even the performance of carriers in your supply network.

Get in touch with us to find out more about how we can help you to stay on top of your inventory in transit.

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