What is Transportation Inventory in E-commerce?
Transportation inventory is the inventory that is in the process of being shipped from one location to another. In-transit inventory is not yet in possession of the intended recipient and is, therefore, not yet available for sale or use. This inventory is necessary to ensure that the goods are delivered to their destination in a timely and cost-effective manner.
Significance of Transportation Inventory in E-commerce Logistics
Transportation inventory provides an accurate picture of a company’s current inventory position. This also helps businesses to efficiently manage their resources, as they can accurately track where their inventory is located, how long it takes to get to destinations, and if any delays have occurred.
The benefits include –
1. Improved customer service: Ensures that customers receive their orders on time, enabling retailers to maintain customer satisfaction.
2. Increased efficiency: Helps streamline the supply chain by decreasing the number of times products must be handled and shipped, resulting in fewer mistakes and delays.
3. Increased visibility: Provides better visibility into the supply chain, enabling retailers to better manage inventory and anticipate customer needs.
4. Reduced costs: By decreasing the number of times products must be handled and shipped, transportation inventory reduces costs associated with shipping and handling.
5. Increased flexibility: Transportation inventory allows retailers to remain agile and responsive to customer needs and market demands.
Prerequisites to Calculate Transportation Inventory and How It Works
The prerequisites cover –
1. A detailed mapping of the warehouses and transportation network.
2. A reliable tracking system to monitor the inventory in transit.
3. Accurate and timely data on the quantity of inventory in each warehouse and location.
4. Access to historical data on inventory in transit.
5. An understanding of the average transit time between warehouses.
6. Appropriate metrics and tools to measure the in-transit inventory levels.
7. A reliable forecasting system to anticipate demand.
8. An understanding of the ordering process and lead times.
Use Case With Transportation inventory
Suppose a company orders raw materials to manufacture t-shirts. The supplier has shipped the raw material. However, it is still in transit. This is counted as transportation inventory as it has not yet reached the company. By tracking inventory in transit, businesses can minimize delays in the supply chain and ensure that products are delivered on time.