It’s pretty common for companies to have significant amounts of “out-of-house inventory” items, which aren’t in your facility but you need visibility of the quanties without being able to easily lay eyes on it. Thus it can be a challenge to keep track of them.

Most commonly it’s inventory en route from your vendor, or inventory you’ve staged at a customer site. So, how do you track each of those scenarios?

Inventory from a vendor which you own while it’s being shipped to you, called “FOB Origin,” is best handled by creating a warehouse specifically for receipt and tracking while en route. As an example, we have clients purchasing items from overseas manufacturers and we’ll create a warehouse named ON-THE-WATER or EN-ROUTE to receive POs into once the items are released from the vendor. For additional visibility we create bins in that warehouse with the expected arrival date as the name of the bin, such as 20240415 for April 15th. When the items subsequently arrive on your doorstep, you transfer the inventory from your ON-THE-WATER warehouse to your MAIN warehouse so they’ll be available for shipment. During this transfer is also a good time to implement a business process for inspecting the items.

For inventory staged at a customer, often called vendor-supplied-inventory (as you’re your customer’s vendor), we recommend creating a warehouse called ONSITE and then a “bin” for each customer—or if you have numerous customers with this scenario you can create a separate warehouse for each customer. When staging inventory to your customer, do a <Warehouse Transfer> to the ONSITE warehouse and have all Sales Orders for their reported usage “ship” from the ONSITE warehouse to decrement the quantity there and maintain correct/current quantities at the staging location.

Your staff will then have easy visibility to the quantities of these remote items. This approach of using separate warehouses also provides clear and complete reporting for tax and insurance purposes of inventory not under your roof—including a simple means of validating the GL asset accounts via reporting inventory “by warehouse.”

We hope the above has generated some thoughts on how you could use your accounting and financial management system to improve your business processes.