Transit inventory: this represents the stock that is either moving or awaiting movement in transportation vehicles. This portion of the total inventory is also known as pipeline inventory. It can also be defined as the materials moving forward but not yet received. It is necessary to achieve order replenishment. Transit inventory represents real assets and must be paid for even though it is not accessible or usable. There has typically been a high degree of uncertainty associated with transit inventory because shippers were unable to determine where a transport was located or when it was likely to arrive. While satellite communications have somewhat reduced this uncertainty.
Shippers bill have limited accessibility to such information. Increased focus on smaller order quantities, more frequent order cycles and just in time strategies have resulted in transit inventory becoming a larger percentage of the total inventory assets. As a result, greater attention is paid to reducing the amount of transit inventory and its associated uncertainty.
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