What is channel inventory?
Channel inventory refers to the amount of a product that is out in the supply chain but not sold yet, typically product that’s between a manufacturer and their partners (such as their resellers, wholesalers, or distributors). Think of channel inventory as all the product that’s “in transit,” which can include:
- Inventory in the manufacturer’s warehouse awaiting shipment
- Product that’s in shipment to your partners
- Stock that’s held by your distributors or resellers
- Inventory that’s on the retailer’s shelves or in their warehouses
For example, if you’re a manufacturer selling laptops through a network of retailers, your channel inventory includes all the laptops that have left your factory but haven’t been sold to the end consumer yet. It’s important to keep track of this inventory, as it directly affects your ability to meet customer demand and can influence your sales performance.
Managing channel inventory effectively can be a bit of a balancing act, though. You want to ensure there’s enough product to meet customer demand, but not so much that you end up with surplus stock if sales don’t go as planned. An efficient channel inventory system can lead to smoother operations, better sales forecasting, and more accurate financial planning.