Director of Marketing, SortlyShahzad Karachiwala
by Shaz K
Thursday 13, Feb 2020
If there’s one thing that is true for inventory, it’s that it moves across a lot of channels before it gets to the consumer. To run your business cost-effectively, it’s important to understand the four different types of commonly used inventory and the stages they move through.
The four types of inventory most commonly used are Raw Materials, Work-In-Progress (WIP), Finished Goods, and Maintenance, Repair, and Overhaul (MRO). When you know the type of inventory you have, you can make better financial decisions for your supply chain. That includes choosing the best inventory management software to keep track of all that inventory.
Materials that are needed to turn your inventory into a finished product are raw materials. For example, leather to make belts for your company would fall under this category. Or if you sell artificial flowers for your interior design business, the cotton used would be considered raw materials.
Inventory that is being worked on is Work-In-Progress (WIP), just like the name sounds. From a cost perspective, WIP includes raw materials, labor, and overhead costs. Think of the inventory under this category as being a part of the bigger end-product picture. If you sell medical equipment, the packaging would be considered WIP. That’s because the medicine cannot be sold to the consumer until it is stored in proper packaging. It’s literally a work-in-progress.
Maybe the most straight-forward of all inventory types is finished goods inventory. That inventory you have listed for sale on your website? Those are finished goods. Any product that is ready to be sold to your customers falls under this category.
Also known as Maintenance, Repair, and Operating Supplies, MRO inventory is all about the small details. It is inventory that is required to assemble and sell the finished product but is not built into the product itself. For example, gloves to handle the packaging of a product would be considered MRO. Basic office supplies such as pens, highlighters, and paper would also be in this category.
Depending on the specifics of your business, this inventory might be in storage, at a supplier, or in transit out for delivery.
Keeping track of all that inventory can feel overwhelming, especially if your products are stored all over the place. This is especially true if you are still using outdated systems like spreadsheets.
But with the right inventory management software, you can keep everything organized. Inventory software reveals in real time exactly how much product you have in stock, and alerts you when you need more. It’s also an easy way to monitor which stage of the process all your inventory is currently in. Customizable features make it even more intuitive.
With inventory management software you can:
Get help with organizing all that inventory. Start a free trial of Sortly today.