In-transit inventory is stock that has left the supplier but not yet reached you: on a ship, in a port or on a truck. Whether it is already yours depends on the terms of the sale, not on where the goods are. You can't sell it yet, but you may already own it and carry its risk.
It is also called pipeline inventory. This guide covers who owns goods on the road and who insures them. It then works out what each day in transit costs a Kampala importer, and how to count the goods at a month end.
What is in-transit inventory?
In-transit inventory is any stock between two points of the supply chain: no longer on the seller's shelf, not yet on the buyer's. For a shop, it comes in three kinds.
- Purchases on their way to you, from a local distributor or from a factory abroad.
- Transfers between your own branches, loaded at one and not yet counted in at the other.
- Goods you have sold and sent, on their way to a customer who hasn't received them.
Two numbers go wrong if you ignore it. Your reorder point must count goods already on the way, or you order twice, as the reorder point formula shows. Your stock count must include goods on the road that are already yours, or your accounts understate your stock.
Ownership rules: who owns in-transit inventory
The sale contract decides who owns goods in transit, and its shipping terms decide who carries the risk. Contracts state them in one of two sets of terms: FOB shipping point and FOB destination, or the Incoterms rules.
FOB shipping point and FOB destination come from the US Uniform Commercial Code, section 2-319:
- FOB shipping point: the buyer takes on the goods' cost and risk once the seller hands them to the carrier. From then on, the buyer carries the shipment in transit.
- FOB destination: the seller keeps the cost and risk until the goods reach the buyer's place. The seller carries the shipment in transit.
Import contracts use the Incoterms rules of the International Chamber of Commerce (ICC), in their 2020 edition. Each rule says where the seller delivers, and so where the risk passes to you, and who pays for the main carriage.
| Rule | The seller delivers, and the risk passes to you | Main carriage paid by | Insurance the rule makes the seller buy |
|---|---|---|---|
| EXW | At the seller's premises, at the agreed collection point | You | None |
| FCA | When loaded on your transport, or handed to your carrier | You | None |
| FOB (sea only) | On board the ship at the port of loading | You | None |
| CFR (sea only) | On board the ship at the port of loading | Seller | None |
| CIF (sea only) | On board the ship at the port of loading | Seller | Minimum cover, Institute Cargo Clauses (C) |
| CIP | When handed to the first carrier | Seller | Wider cover, Institute Cargo Clauses (A) |
| DAP | At the named destination, at your disposal | Seller | None |
| DDP | At the named destination, with import duties paid | Seller | None |
Incoterms don't decide who owns the goods. The ICC's introduction to Incoterms 2020 says they don't deal with the transfer of title or ownership. The sale contract must say when the goods become yours.
FOB doesn't mean the same in both sets of terms. Under the US code, FOB shipping point passes the risk when the seller hands the goods to a carrier. Under Incoterms, FOB is a sea rule: the risk passes only once the goods are on board the ship.
For your stock count, your purchase terms decide when goods on the road become yours. Give your accountant each shipment's rule and its ownership clause. Is inventory an asset shows the container you own on the road as stock you count.
Who insures goods in transit
Whoever carries the risk should insure the goods. Under six of the eight rules above, that is you, from the port of loading or earlier. Only CIF and CIP make the seller buy cover for you.
The two give different cover. The ICC's introduction says Institute Cargo Clauses (C), CIF's minimum, cover "a number of listed risks, subject to itemised exclusions". Clauses (A), which CIP requires, cover "all risks", again subject to exclusions.
A CIF price names the destination port, such as Mombasa. Ask where the seller's cover ends, and insure the road to your shop yourself if it ends at the port.
Transfers between your own branches are your risk all the way. If your insurance covers stock only at named premises, ask whether it covers goods on your own vehicle.
Why tracking in-transit inventory is hard
Goods in transit change hands several times, and each handover can add days nobody planned. For an import through Mombasa, the port and the road alone took about eight days in 2022.
The Northern Corridor Transport Observatory's 2022 report gives the averages. Import containers spent 86.8 hours at the port of Mombasa, against a target of 60 hours.
Trucks then took 104 hours from Mombasa to Kampala, 1,169 km. The report blames the port delays on equipment breakdowns, late documents from clearing agents, and cargo picked up late after release.
No single record follows the goods. The shipping line, the clearing agent and the transporter each know one leg, and none of them updates your stock. Keep one list of every shipment and transfer on the road, with its expected date, and chase anything late.
That chase is one of the controls in inventory control, which sets a time limit on transfers still on their way.
How to estimate in-transit inventory cost
Goods in transit cost you money from the day you pay for them until the day you can sell them. You pay no rent on a container at sea, so the rate to use is what the money costs you:
In-transit cost = (Inventory value × annual cost of money ÷ 365) × days in transit
For a USD 20,000 shipment at 15% a year, 14 days in transit cost about USD 115. Insurance and any port storage come on top.
For example, a Kampala electrical shop pays USD 50,000 for solar panels when they are loaded, on FOB terms. At the August 2026 average of UGX 3,730.25 to the dollar, that is UGX 186,512,500. These are illustrative figures, not a real shop's.
The shop's money costs 17.32% a year, the average rate on shilling loans in July 2026 (Ministry of Finance, Uganda). Each day in transit costs 186,512,500 × 17.32% ÷ 365 = UGX 88,504.
| Leg | Days | Cost of the money tied up |
|---|---|---|
| Sea, port of loading to Mombasa (example) | 30 | 2,655,120 |
| Port of Mombasa, 86.8 hours (2022 average) | 3.6 | 320,090 |
| Road, Mombasa to Kampala, 104 hours (2022 average) | 4.3 | 383,517 |
| Clearing and delivery in Kampala (example) | 3 | 265,512 |
| Total | 41 | 3,624,239 |
The journey costs about 1.9% of the goods' value before insurance. The 26.8 hours Mombasa ran over its target in 2022 cost this shipment about UGX 98,800.
Use the same sum to compare routes and suppliers. A regional supplier that delivers in 5 days instead of 41 saves 36 days, about UGX 3.2 million on this order, before any difference in price.
Port storage adds to it once the free days run out. The report gives 9 free days for transit cargo at Mombasa in 2022, and 15 days from 2023.
How to count in-transit inventory at a month end or year end
Count the goods on the road that are already yours, and leave out those that aren't yet, whatever your stock records say. Then value what you own at cost.
- List every shipment not yet received, with its supplier, its Incoterm and the date the risk passed.
- Mark each one yours or not yet, from the purchase terms and the contract's ownership clause.
- Add the ones you own to your count at cost, with the freight and duty already paid on them.
- Add transfers still on the road between branches. They have left one warehouse and not reached the other, so neither count holds them.
- Keep the documents with the count: the invoice, the bill of lading and the transfer note.
At the year end, list each shipment and let your accountant place it, as the year-end inventory count explains. For transfers between your own sites, see managing stock across several warehouses.
How to track in-transit inventory in ArmPOS
ArmPOS has no in-transit report, but its purchase and transfer statuses keep goods on the road apart from stock on the shelf. These steps come from the Help center's guides.
- Record the order on the day you place it. In Purchases › Create Purchase, set Status to ordered: your stock doesn't change (Record a purchase). Write the Incoterm and the expected date in the Note, and add the invoice with Attach Documents.
- See what is on the way. Purchases › All Purchases shows each purchase's Status. The ones still ordered are your pipeline.
- Receive it when it arrives. Count the goods, open Edit Purchase and set Status to received. The stock is added then, into the warehouse on the purchase.
- Record what you paid on its real date. Create Payment appears once a purchase is received, and its Date can be changed to the day you paid at loading (Pay your suppliers).
- Move stock between branches with a transfer. Once approved, Status Sent takes the stock out of the sending warehouse while it is on the road. Edit it to Completed when it arrives (Move stock between warehouses).
- Reorder with the pipeline in mind. Product Quantity Alerts compares the stock in each warehouse with its Stock Alert (Reports to check every day). Check All Purchases for goods already ordered before you order again.
At a month end, the ordered purchases you already own and the transfers still Sent are the goods to add to your count.
Frequently asked questions
Is in-transit inventory included in inventory?
Yes, for the side that owns it. Goods on the road that the sale terms have made yours belong in your stock count and your accounts, even before they arrive.
Who pays if goods are damaged in transit?
The side carrying the risk at that point, which the Incoterm decides. That side claims from its insurer, if it insured the goods.
What is the difference between goods on order and goods in transit?
Goods on order are ordered but not yet shipped; goods in transit have left the supplier. Both count as stock on order when you check your reorder point.
Does FOB mean the same thing in every contract?
No. A US contract may say FOB shipping point or FOB destination. An import contract usually means the Incoterms rule FOB, where the risk passes once the goods are on board the ship.
Take your next import and write down its Incoterm, where the risk passes and who insures each leg. To keep ordered goods apart from stock on the shelf, create a free ArmPOS account.
