Delays, lack of visibility, and inventory shortages do more than disrupt operations; they can directly impact customer satisfaction and profitability. One critical yet often overlooked factor behind these issues is pipeline inventory goods that are currently in transit between suppliers, warehouses, or production points.
Although these items are not yet physically in stock, they still represent tied-up capital and play a significant role in the overall efficiency of the supply chain. Without clear insight into what is in transit, companies risk overstocking, missed delivery timelines, or supply chain disruptions.
That is why understanding and managing pipeline inventory is essential for any business looking to operate with precision and agility. Sa artikulong ito, tatalakayin natin kung ano ang pipeline inventory, bakit ito mahalaga, at kung paano makakatulong ang paggamit ng tamang teknolohiya upang magkaroon ng kontrol ang inyong organisasyon at mapabuti ang performance ng supply chain.
Key Takeaways
|
Table of Contents
What is Pipeline Inventory?
Pipeline inventory is the stock of goods that is currently moving through the supply chain but has not yet reached its final destination. It includes items that have been ordered and are in transit from suppliers, manufacturers, or between warehouses.
Even though these goods are not physically on hand, they are still considered part of a company’s inventory because they represent incoming stock that has already been paid for or committed to. This type of inventory is essential for companies with long lead times or complex logistics operations, as it affects production schedules, order fulfillment, and overall inventory planning.
Accurately tracking pipeline inventory helps businesses avoid stockouts, reduce excess inventory, and maintain healthy cash flow all of which are critical for supply chain efficiency and financial stability.
How does the Pipeline Inventory Works?
Pipeline inventory works by keeping track of goods that have already been ordered and are currently on their way through the supply chain. These products are no longer with the supplier, but they haven’t reached your warehouse or production facility yet.
From the moment they are shipped, they become part of your inventory records, even though they are not physically available for use or sale.
What makes pipeline inventory important is that it still represents a financial commitment and affects your stock planning. Delays in transit, inaccurate tracking, or lack of visibility can easily lead to stockouts or overstocking, both of which impact operations and customer satisfaction.
By knowing precisely what is in transit and when it is expected to arrive, companies can plan with more confidence. It is not just about tracking shipments, but about having the correct information at the right time to support more intelligent business decisions.
Calculating Pipeline Inventory
Calculating pipeline inventory helps businesses understand how much stock is currently in transit, which is essential for accurate inventory planning and cash flow management. This calculation gives visibility into goods that are on the way but not yet available for use or sale. The basic formula to calculate pipeline inventory is:
Pipeline Inventory = Lead Time × Demand Rate
Where:
- Lead Time is the average time (in days or weeks) it takes for goods to be delivered from the supplier after an order is placed.
- Demand Rate is the average number of units sold or used per day or week.
Why Understanding Pipeline Inventory Is Important for Your Business?
Understanding pipeline inventory is more than just keeping track of goods in transit. It provides your business with better control over supply chain operations, production schedules, and overall cash flow.
For professionals in PPIC (Production Planning and Inventory Control), this visibility is essential to ensure that materials arrive when needed and that production plans can move forward without unexpected delays.
When you have a clear view of what inventory is on the way, your team can avoid issues like stock shortages, last-minute purchasing, or overstocking that can tie up valuable resources. This allows PPIC departments to make more accurate forecasts, plan more efficiently, and reduce storage costs.
Real-time insights into pipeline inventory help your entire operation from procurement to production stay aligned and respond quickly to changes. Instead of reacting to problems as they happen, you gain the ability to plan with confidence and keep your processes running smoothly.
Advantages of Maintaining Pipeline Inventory
Maintaining pipeline inventory may not always be top of mind, but it brings real, measurable value to your operations. By keeping a close eye on what’s in transit, your business can become more responsive, more efficient, and ultimately, more competitive. Here are some of the key advantages:
1. Improved inventory planning
Having visibility into goods that are currently in transit helps you make more accurate purchasing and stocking decisions. Instead of blindly reordering based on what’s in the warehouse, you’re able to account for what’s arriving soon.
2. Smoother production schedules
For PPIC teams, timing is everything. When raw materials or components arrive precisely when they’re needed, production can continue without disruption. A clear picture of pipeline inventory supports better production planning, helps avoid costly downtime, and allows manufacturing teams to stay focused on output, not delays.
3. Enhanced cash flow management
Pipeline inventory ties up working capital, even though the goods aren’t physically present yet. By monitoring this inventory closely, finance and operations teams can better manage cash flow, schedule payments wisely, and avoid unnecessary borrowing or emergency spending.
4. Better supplier coordination
When you have insight into where your shipments are and when they’re expected to arrive, communication with suppliers becomes more proactive. You can flag delays early, adjust orders when needed, and build stronger supplier relationships based on real-time coordination, not guesswork.
5. Increased customer satisfaction
Ultimately, good inventory management techniques including what’s still in the pipeline, leads to better service. Being able to fulfill orders on time, even during peak periods, helps build trust and loyalty with your customers. It also allows your sales and customer service teams to provide more accurate delivery timelines.
Pipeline Inventory Example
Imagine a furniture manufacturing company based in the Philippines that sources timber components from a supplier in the Philippines. This company carefully manages its manufacturing inventory by placing purchase orders every two weeks, with an average lead time of 10 days for shipments via sea freight.
The manufacturer typically uses around 500 units of these components each day for production. To calculate its pipeline inventory, the PPIC (Production Planning and Inventory Control) team applies the following formula:
Pipeline Inventory = Lead Time × Daily Demand
10 days × 500 units/day = 5,000 units
This means the company can expect to have approximately 5,000 units of material in transit at any given time.
By consistently tracking pipeline inventory, the procurement and PPIC teams are able to plan with greater accuracy. They know when to reorder, how to buffer against delays, and how to prevent costly production disruptions.
As a result, the manufacturing floor stays productive and customer delivery timelines remain on track.
Efficient Pipeline Inventory Management with HashMicro’s ERP Systems
Managing pipeline inventory effectively is essential for maintaining smooth operations and meeting customer demands. HashMicro’s inventory system offers a comprehensive solution that simplifies this process by providing real-time visibility and automation across your entire supply chain.
With HashMicro, you can track inventory in transit, optimize order timing, and improve coordination between procurement, production, and sales teams. Here are some key features of HashMicro’s ERP system that support efficient pipeline inventory management:
- Real-time inventory tracking: Monitor your pipeline inventory at every stage from purchase order to delivery so you always know what’s on the way and when it will arrive.
- Automated alerts and notifications: Receive instant updates on shipment statuses, delays, or changes, helping you respond quickly and avoid production disruptions.
- Integrated demand forecasting: Align pipeline inventory with sales forecasts and production plans to optimize stock levels and reduce excess inventory.
- Seamless supplier management: Coordinate better with suppliers by sharing accurate, up-to-date information and managing lead times efficiently.
- Detailed reporting and analytics: Access in-depth reports on inventory movement and supply chain performance to make data-driven decisions that improve efficiency.
Conclusion
Effectively managing pipeline inventory is a cornerstone of supply chain efficiency. By gaining clear visibility into goods currently in transit, businesses can make smarter decisions around procurement, production, and cash flow management. This reduces costly delays, minimizes excess stock, and helps maintain steady operations critical factors.
For managers and executives, having the right tools to track and analyze pipeline inventory is essential. HashMicro’s inventory system offers a powerful yet user-friendly platform that automates inventory tracking, integrates real-time data, and provides actionable insights.
This means your team can proactively manage supply risks, optimize inventory levels, and improve overall operational agility. If you’re ready to elevate your supply chain management and experience these benefits firsthand, explore how HashMicro can help by signing up for a free demo.
