In-transit inventory

In-transit inventory is stock that you own — title has transferred to you — but isn't physically at your location yet. It's moving:

• Between a supplier and your warehouse (after title transfer)
• Between two warehouses you operate
• Between your warehouse and a 3PL
• From your warehouse to a wholesale customer (until they take delivery)

It's a real category of inventory with real value, real risk, and real planning implications. And it's the inventory state most commonly miscounted because the units aren't anywhere you can see them.

When does title transfer

This is the question that determines whether goods become your in-transit inventory or remain the supplier's:

• FOB Shipping Point (also called "FOB Origin" or "EXW" under Incoterms): title transfers at the supplier's loading dock. Once it's on the truck, it's yours — including the freight risk.
• FOB Destination: title transfers when goods arrive at your facility. Until then they're the supplier's; their freight, their risk.
• CIF / CIP (Incoterms): seller pays freight and insurance to a named destination but title and risk transfer at origin.
• DDP (Delivered Duty Paid): seller is responsible until delivered, including duties.

The contract Incoterm determines who owns it during transit. Get it wrong and you'll either understate inventory (forgetting stock that's already yours) or overstate it (counting stock that's still the supplier's).

In-transit and the balance sheet

Stock you own in transit is on your balance sheet — even though you can't see it.

For most consumer brands operating with FOB Shipping Point overseas suppliers, in-transit inventory can be substantial. A 14-week ocean freight pipeline means ~14 weeks of buying is sitting in transit at any moment. For a brand that buys £2m/year, that's roughly £540k of in-transit inventory tied up at all times.

Auditors will check that:

• Title transfer is correctly applied per Incoterm
• In-transit inventory is valued at landed cost (including the freight already incurred)
• Cut-off at period-end correctly classifies what just arrived vs what's still in transit
• Lost or damaged in-transit goods are written off appropriately

In-transit and operational planning

Planning treatment of in-transit:

• Visibility. Do you know where each in-transit shipment is, and when it's expected? Container-level tracking is increasingly standard but historically has been weak.
• Inclusion in ATP. Confirmed in-transit can count towards available to promise for orders willing to wait — but only if delivery confidence is high.
• Allocation against in-transit. Wholesale customers sometimes want commitments against specific incoming containers. Doing this requires container-level visibility.
• Replenishment trigger logic. A reorder point that ignores in-transit will trigger early (because it sees only on-hand); one that includes in-transit may trigger correctly.

Why in-transit gets miscounted

Three failure modes:

• System lag. PO marked as "shipped" by the supplier doesn't auto-create an in-transit record in your WMS until receipt. Six weeks of in-transit invisibility.
• Title boundary confusion. FOB Shipping Point goods that the team thinks are still "the supplier's" because they aren't physically with us yet.
• Lost or damaged in-transit. A container that's been delayed or partially destroyed isn't reconciled until receipt fails to match the manifest.

Each of these causes the on-hand + in-transit total to differ from the actual owned inventory. At period-end this becomes an audit issue.

In-transit inventory at period-end

The cleanest practice:

1. Reconcile in-transit per shipment — match what was shipped to what was received.
2. Anything in transit but not received gets valued at landed cost (invoice + freight + duty + insurance, prorated as applicable).
3. Document Incoterm-based title transfer in the period the shipment crossed it.
4. Flag aged in-transit (60+ days without receipt) for investigation.

The in-transit balance shows up as a separate line in inventory disclosures or rolled into total inventory with a memo.

Pipeline inventory and the bullwhip

In-transit is part of "pipeline inventory" — the total inventory in motion at any time, including stock at suppliers, in production, and in transit. Pipeline inventory ties up working capital and is the exposure that makes long-lead supply chains painful in downturns.

When demand drops, pipeline inventory keeps arriving for weeks or months — leading to the over-stock cycles that follow demand declines. This is the bullwhip effect viewed from the warehouse end.