Pipeline Inventory

What does pipeline inventory include?

Pipeline inventory includes all goods that are on their way into the company but cannot yet be sold, picked, or used in production. It differs from on-hand inventory because the goods have not yet been received, but it also differs from forecasts, since a binding purchase order has already been placed.

Typical examples of pipeline inventory include:

• Goods ordered from suppliers with long lead times

• Products that have been shipped but not yet arrived

• Raw materials in production at an external manufacturer

• Goods awaiting receipt or quality inspection

Pipeline inventory therefore serves as a critical link between purchasing and warehousing, offering a more realistic picture of total product availability.

Why is pipeline inventory important?

Pipeline inventory plays a central role in both operational and delivery planning. If a company focuses only on physical inventory, decisions may be based on incomplete information. This can result in rush orders, duplicate purchases, or delayed customer deliveries.

With accurate insight into pipeline inventory, companies can:

• Plan sales and deliveries more accurately

• Avoid unnecessary urgent purchases

• Reduce the risk of stockouts

• Create better alignment between inventory and demand

Pipeline inventory is therefore closely connected to effective inventory management, where both current and incoming stock levels are part of the decision-making process.

Pipeline inventory and lead time

The longer the lead time, the more important pipeline inventory becomes. In businesses with global suppliers, sea freight, or custom production, weeks or even months may pass between placing an order and receiving the goods. During this time, the goods remain part of the pipeline inventory and must be included in planning.

The relationship between lead time, consumption, and pipeline inventory is critical. If pipeline inventory is too low relative to demand, the company risks running out of stock. If it is too high, it can lead to excess inventory once the goods finally arrive.

Pipeline inventory therefore functions as a buffer between purchasing and consumption and is closely tied to the company’s overall inventory strategy.

Pipeline inventory and capital tied up

Even though pipeline inventory does not yet physically occupy warehouse space, it still ties up capital. Once a purchase order has been placed, funds are effectively committed, even if the invoice is paid at a later stage.

This means pipeline inventory contributes to the company’s total capital tied up in inventory. A large pipeline inventory can strain liquidity and reduce financial flexibility, even if on-hand inventory appears low.

For this reason, pipeline inventory and physical inventory should be viewed together when assessing the financial impact of inventory decisions.

Pipeline inventory in purchasing management

In purchasing management, pipeline inventory is a key planning parameter. Knowing which goods are already on the way helps prevent ordering the same items again—or ordering too late.

Accurate visibility into pipeline inventory makes it possible to:

• Time reorders more precisely

• Adjust order volumes to actual demand

• Coordinate purchasing across products

• Improve collaboration with suppliers

This is especially important in companies with many SKUs or fluctuating demand, where poor visibility can quickly lead to imbalances.

Pipeline inventory vs. safety stock

Pipeline inventory is often confused with safety stock, but the two serve different purposes. Pipeline inventory consists of goods that have already been ordered and are in transit, while safety stock is additional inventory held physically in the warehouse to cover uncertainty in demand or lead time.

The two complement each other. Pipeline inventory covers known lead times, while safety stock provides a buffer against unexpected disruptions. Effective inventory management considers both and ensures they align with the company’s risk tolerance.

How does pipeline inventory relate to Rackbeat?

Pipeline inventory is closely tied to the daily interaction between inventory, purchasing, and orders. With a system like Rackbeat, companies can work more systematically with visibility into both current and incoming goods.

When purchase orders, expected delivery dates, and inventory levels are connected, pipeline inventory becomes an active part of planning rather than a blind spot. This creates a stronger decision-making foundation in purchasing and order management, where insight into upcoming deliveries can be critical for determining what can be promised to customers—and when.

When is pipeline inventory particularly critical?

Pipeline inventory is especially important for companies with:

• Long or unstable lead times

• International suppliers

• Seasonal demand

• Fast-moving products

In these situations, a lack of visibility into pipeline inventory can quickly lead to operational challenges, even when on-hand inventory initially appears sufficient.

Want to learn more about inventory concepts?

Pipeline inventory is just one of many concepts that influence daily inventory and purchasing decisions. If you want more insights into inventory management, order handling, and business optimization, sign up for Rackbeat’s monthly newsletter.

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