During the recent webinar, Inventory Fitness – Governance, Targets, and Segmentation, we took audience questions and answered them.
Here are some issues that people in industry face and are interested in finding a solution to!
Question 12 of 14
Question:
When we are talking inventory, what about the category of in-transit stock or pipeline? Should that also be considered as a controllable type of inventory?
Answer:
An interesting question. Oftentimes, we see sourcing and supply chain not necessarily in the same team, and supply chain is kind of forced to take sourcing as an input. But when you’re talking inventory, in-transit stock is absolutely not only controllable, but it’s controllable in multiple ways and with multiple audiences or people responsible. So I’m going to go through this briefly, but there’s probably a whole lot more that we could unpack.
You can control it physically as far as when and where it exists and how long it takes. You can control it financially as far as how it shows up on your, your suppliers or your customers’ balance sheet, and you can control it in terms of liability and responsibility. They’re all separate but related. And if you think I’m only talking Incoterms, because they cover who owns and is responsible or liable for the inventory, as well as who pays for the freight, that’s only one piece, and that’s something that should involve supply chain and planning.
Sometimes your commercial team, I’ll get to that in a second, transit time and variability.
Transit time and variability are independent entries. Transit time is fixed. Variability is how much it moves around on that. That timing also affects your safety stock. So that, has to be taken into account by the supply chain, but also needs to be looked at. Quantity variability typically has an impact on safety stock and then timing. Overall, that timing is taken into account both in lead times, which affect a lot of things, as well as in things like reshoring.
If I bring something to a closer supplier or shorten my supply chain, how does that impact my security or my variability?
So, when we’re talking inventory, the in-transit stock is not always visited. It’s not visited as frequently as some others, but it is absolutely controllable. It just requires an audience that understands the complexities from finance to sourcing to liability to supply chain and planning.
Remember, we’d be happy to chat with you about any of this in more detail.
And if you’re interested, check out our schedule for upcoming business process improvement courses that we offer throughout the year to help you achieve business excellence.