FOB (How it Affects Ownership of Inventory)

FOB is an acronym for the commonly used term FREE ON BOARD.

Although this term is widely used in the shipping and trucking industry it is important to discuss why it is vital to understand its implications on your inventory. There are two types of FOB freight. There is FOB Origin and FOB Destination. FOB origin typically is understood that the freight costs are the responsibility of the buyer. However the question that I propose is, who owns the inventory and at what point does the title of the merchandise switch hands? When an item is FOB Origin, the buyer takes responsibility of both the shipping costs as well as the ownership of the material as soon as the items leave the shipper’s dock. Conversely, when the items are FOB Destination, it is the responsibility of the shipper to cover the freight costs, as well as to ensure that the material arrives to it’s destination in satisfactory condition. Only when the recipient accepts delivery do they gain title of the items. FOB Destination protects the buyer from the risk of loss, damage, or theft during transit.

If items travel FOB Origin there is a great probability that the system will reflect items in-stock even though they have not reached their designated location. These would be instances of the paper life of an item traveling faster than the item itself. Inventory management Software must understand how the shipment is placed with a particular vendor and when to make the proper adjustments to the system. In transit may be an interim status set by the software between the time the items were shipped and received. This would alert the warehouse personnel why there may be a discrepancy in their counts and what the inventory system reflects.

To learn more on how to manage the differences between the actual life and the paper life of your inventory, contact us and see the power of Zenventory web based inventory management software. Call directly at 1-800-268-6296.