Types of Inventory Every Business Should Know
Inventory management is the accounting of items, components and materials used in product manufacturing and selling. This process is often regarded as the classification of types of inventory. The ultimate goal is to maintain a specific inventory level to run the business smoothly. In order to manage your inventory effectively, you need to know what kind of product you are selling. When you thoroughly understand your inventory, you’ll be able to make wiser choices when it comes to the strategy and inventory management software to keep track of them. What are the types of inventory? Typically, there are 4 most common types of inventory: raw materials, work-in-progress (WIP), finished goods, and maintenance, repair, and overhaul (MRO). The categorization is based solely on the stages within the manufacturing process the product is currently in. 1. Raw materials Raw materials are the materials used to create a product. For example, clothes are made of fabric such as silk, cotton, denim, wool, etc. The original form of the material will be completely transformed after the manufacturing process. 2. Work-in-progress (WIP) WIP inventory refers to items during the production process. It includes components, labor, overhead, and packaging materials. For instance, a car consists of the engine, mirror, internal lightning, the event data recorder, etc. In this sense, WIP is the procedure of assembling all these components. 3. Finished goods Similar to the name, finished goods is the completed product that can be sold on the market at a predetermined price. The costs including the labour cost as well as the packaging coming along with it. 4. Maintenance, repair, and overhaul (MRO) MRO inventory is materials used in the manufacturing process but not included in the finished goods. Examples of this are gloves, masks and other safety equipment, cleaning and janitorial supplies, office supplies, etc. How an automation platform helps inventory management? Keeping track of inventory might be overwhelming, especially when you have a lot of products stored in different locations. It’s even more complicated when using outdated methods such as a spreadsheet which you have to fill in manually every now and then. Fortunately, an automation platform can help keep your inventory organized. The app keeps track of the inventory level in real-time, informs you if you need more, and even warns of suspicious orders. It also makes it easier to control which stage of the manufacturing process your goods are currently in. This can all be executed with our Ergo Automation platform for Shopify. With Ergo you can: Keep track of changes in the inventory level when a new order is placed Send an internal notification to order new products when the inventory reaches a certain threshold Send an alert of suspicious fraudulent orders Auto-generate data into a spreadsheet for better analysis Final note Inventory management is one of the major assets for business development, thus it’s very important for owners to understand its meaning and operation. In addition to knowing multiple types of inventory, even the one that is not specifically included in the final product, it is highly recommended to have an automation platform working on it. This can help merchants save time to invest in more impactful decisions and increase productivity.
