Pipeline Inventory
Definition
Inventory that has been ordered or shipped but has not yet arrived at its destination, such as goods in transit between a supplier and a warehouse. It is owned but not yet available to sell.
In Practice
Pipeline inventory, also called in-transit inventory, exists because moving goods takes time. Its average size equals demand rate multiplied by transit time: ship 500 units a day on a 30-day ocean lane and you permanently have about 15,000 units on the water. It ties up cash even though it never touches a shelf.
Planners must count pipeline stock in the inventory position when making replenishment decisions, otherwise they double-order against demand that inbound shipments will already cover. Pipeline inventory is also the hidden cost of long lead time sourcing: switching from air to ocean freight may cut freight cost but adds weeks of capital tied up in transit.
Example: an importer moving from a 5-day air lane to a 35-day ocean lane on a product selling 200 units per day sees pipeline inventory jump from 1,000 to 7,000 units, a working capital increase the landed cost comparison must include.
Related Calculators
Related Terms
Stock that has been ordered from suppliers or other facilities but not yet received, represented by open purchase orders, transfer orders, or production orders. It is committed inbound supply.
Inventory PositionThe total stock available to meet future demand, calculated as on-hand inventory plus on-order inventory minus backorders and committed allocations. It is the number replenishment decisions should be based on.
Cycle StockThe portion of inventory that is consumed and replenished through normal ordering cycles. It is the working stock that satisfies expected demand between replenishments.