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Understanding the four types of inventory

The four types of inventory

“In today’s fast-paced supply chain, it is crucial for companies to efficiently manage their inventory.” RFgen shares the four main types of inventory that require individual management and oversight: raw materials, work-in-progress inventory, finished goods, and safety stock. Understanding the importance of tracking and monitoring these will result in strong supply chains and in-stock products.

We often use the term inventory to mean finished goods that are then shipped out as part of a company’s supply chain process, but the word encompasses the very start of the manufacturing starting with raw materials to the distribution of finished goods. Let’s dig into these inventory types:

  • Raw Materials Inventory

Raw material inventory acquisition and storage is an essential component of any inventory strategy. Warehouses must monitor raw materials to ensure there aren’t shortages or out of stocks which can lead to production stoppages that will impact delivery schedules, customer service, and profits.

  • Work-in-Progress Inventory

WIP inventory is a company’s partially finished goods. The process for most WIP materials is preparation, mixing, and finishing. Depending on the finished product, managing the raw materials can be very difficult. Consider ice cream or any baked good and the raw ingredients that go into them to transform them into finished goods. Automated data collection can help with visibility when you need to track raw materials once they are a part of the WIP inventory.

  • Finished Goods Inventory

Finished goods are closely tracked from the moment they leave the warehouse until they are delivered to the customer. Not only is technology tracking the items so they aren’t lost, but it is also ensuring visibility of expiration date. Finished goods appear to be one of the simplest examples of inventory but there are additional facets to finished goods inventory such as In-Transit, Cycle, and Slow-Moving Inventory which require additional data inputs for tracking and decision-making.

  • Safety Stock Inventory

Safety Stock Inventory is the “deliberate overstocking of materials to cover unpredictable market fluctuations.” This surplus can be anticipated through historical reporting and data but it must be managed carefully to avoid spoilage, expired goods, and unused inventory.

The ability to manage all types of inventories can be most effectively done with automated mobile software. Pragmatyxs and our partners in the mobile inventory solutions space can help find the best option for your business.