Raw materials are the materials a company uses to create and finish products. However, the main categories can be broken down even further to help companies manage their inventory more accurately and efficiently. These four main categories help businesses classify and track items that are in stock or that they might need in the future. There are four different top-level inventory types: raw materials, work-in-progress (WIP), merchandise and supplies, and finished goods.

Having this information on hand can improve customer relations, cash flow and profitability while also decreasing the amount of money lost to wasted inventory, stockouts and re-stocking delays. Understanding purchasing trends and the rates at which items sell determines how often companies need to restock inventory and which items are prioritized for re-purchase. Although inventory can be described and classified in numerous ways, it’s ultimately its management that directly affects an organization’s order fulfillment capabilities.įor example, in keeping track of raw materials, safety stock, finished goods or even packing materials, businesses are collecting crucial data that influences their future purchasing and fulfillment operations. Insights gained from inventory evaluations are necessary for success as they help companies make smarter and more cost-efficient business decisions.Īn organization’s inventory, which is often described as the step between manufacturing and order fulfillment, is central to all its business operations as it often serves as a primary source of revenue generation.

While there are many ways to count and value your inventory, the importance lies in accurately tracking, analyzing and managing it.

While there are many types of inventory, the four major ones are raw materials and components, work in progress, finished goods and maintenance, repair and operating supplies.Inventory, which describes any goods that are ready for purchase, directly affects an organization’s financial health and prosperity.East, Nordics and Other Regions (opens in new tab)

Example of business process model