TYPES OF INVENTORIES

While managing and controlling stock, a company can experience a number of different
types of inventory. All of these concepts are crucial to grasp in order to achieve successful
inventory management.

(Here is a diagrammatic presentation of types of Inventory)

BASIC INVENTORY FORMS

When it comes to the goods that a company might sell, there are five basic types of
inventory.
There are the following:
 Raw Materials.
 Inventory of work-in-progress (WIP).
 Finished goods.
 MRO (maintenance, repair, and operations) equipment.
 Materials for packaging.

It's also helpful to divide "finished products" into five sub-categories, which we'll go through
later. This list contains ten different categories of inventory that retailers should be aware
of.

Let's take a closer look at each type:

1) STOCKS OF RAW MATERIALS
Any objects used to make finished goods, or the individual components that go into them,
are referred to as raw materials. This can be manufactured or sourced by a company, or
they can be purchased from a vendor.

Consider the following scenario:

Materials may be purchased from a retailer by a company that produces its own bespoke
furniture. While a small business that sells specialty herbs might grow them themselves.
Raw materials are still considered inventory in any case. As a consequence, it must be
properly handled, stored, and accounted for.

2) WORK-IN-PROGRESS (WIP) INVENTORY

Retailers that make their own goods have work-in-progress (WIP) inventory. There are
incomplete or in-progress pieces or parts that are not yet available for sale.

This may include items that have been assembled but not yet painted or packaged in our
furniture business.

3) FINISHED GOODS
The term "finished goods" refers to items that are finished and ready to sell. These may
have been produced in-house or purchased as a complete, finished product from a vendor.
Most retailers can either buy entire, finished goods from a supplier or commission a third-
party to create custom products for them. As a consequence, finished products are often
(but not always) one of the choices under retail inventory control, these are the only forms
of inventory that must be managed.
4) MRO (MAINTENANCE, REPAIR, AND OPERATIONS) ITEMS

MRO goods are objects that are used in the production of products but do not form part of
the final product.

This can include things like:

 Tools for production and repair.

 Uniforms and safety equipment are needed.
 Cleaning supplies are needed.
 Machines are used.
 Batteries are a must.
 The use of computers.

As well as all things used or discarded during the manufacturing process.

This type of inventory may appear to be insignificant. MRO, on the other hand, is
inventory that must be bought from a retailer, stored, and accounted for in financial
statements.

5) MATERIALS FOR PACKAGING

Anything you use to prepare and secure merchandise – whether in storage or during
shipment to customers – is referred to as packaging materials.

As a consequence, this is especially relevant for online retailers. And may include items
such as:

 Bubble wrap.
 Padding.
 Packing chips.
 A variety of boxes.
When it comes to inventory management, many retailers overlook packing
materials. However, these products' stocks must be used and managed on a regular
basis, so they must be included in overall inventory reporting and accounting.
6) FORMS OF FINISHED GOODS INVENTORY
It's also useful to subdivide finished products into a few other forms of inventory in a
retail environment. This gives a company a lot of insight into its inventory, allowing
for better allocation and management.
1. Ready for sale - also denoted as “Available Inventory” is stock that has been
manufactured/purchased and stored in the warehouse ready for sale, also known as
available inventory. It could be picked, packed, and delivered at any time without
difficulty.
2. Allocated - This is inventory that a customer has purchased and assigned to a sales
order. As a result, it can no longer be sold and must be withdrawn from the usable
inventory figure.

3. In-Transit - This is unsold inventory that is currently in transit, such as a sales

order delivery or stock being transferred to a different warehouse.

4. Seasonal - This is inventory that has been produced or acquired to directly cover a
forecasted upturn in demand. It is also known as "anticipation stock." To cover Black
Friday sales, for example, or your peak season.

5. Safety - This serves as a reserve of stock to protect you in the event of

unanticipated demand increases or supply issues.

Inventory management requires a thorough understanding of (and application of)

these various forms of inventory.