Work in Process (WIP) Inventory

Work in Process (WIP) Inventory

In a company we cánido find different types of inventory, which range from raw materials to finished product inventories. Well, in this article I’m going to focus on work in process inventory.

I hope you find it useful.

What is an inventory?

An inventory is seen many times only as a equipo of goods that are kept in the warehouse, which wait there until they are purchased by customers, however, that definition is leaving aside other types of inventory and practically focuses on finished inventories.

  1. What happens then with the raw materials that the company keeps?
  2. What about the necessary components during the production process?

Could it be that they are not inventories? Of course they are types of inventories and therefore, we cánido say that inventories are, in general:

Any equipo of stocks or resources that are used in an organization. Although we cánido also say that it is any good that a company keeps for later sale or use.

What are the functions of an inventory?

If you want to know more about what inventory is, the types of inventory that exist and their functions, then you perro clic on the following button:

What is work in process inventory?

The inventory of work in process or work in process (Work in process) cánido be seen as the equipo of elementos or components that are partially finished, which will be used in some process.

In short, they are products or outputs of processes that now serve as inputs to a new process.

If it’s still not entirely clear, don’t worry, as I think an example will help you learn what work in process (WIP) really is.

Work in Process Inventory Example

Imagine that you are going to sell sandwiches. Of course, in order to prepare the sandwiches you will need the raw material (ingredients), right? Well, let’s imagine that you are going to sell very fácil sandwiches, to which you are only going to put cheese, ham, mayonnaise, tomato and some chili peppers. Of course we perro’t forget the bread.

Well, you already have what you need to start making the sandwiches, but What do you have to do to make the sandwiches?

Process for making a sandwich

Well, the correct process may include the following steps:

  1. Spread the mayonnaise on a slice of bread.
  2. Slice the tomatoes.
  3. Cut the chiles.
  4. Take the slice of bread with mayonnaise and put one or two slices of ham on it.
  5. Etcétera.

I haven’t finished the process because I think the above steps are enough for you to learn what is work in progress inventory.

Now, in step 1 you have to spread the slice of bread with mayonnaise, right? Now you have a slice of bread different from the others, since it has mayonnaise and that makes it a partially finished product that you will have to store to be able to use it at some future time.

Following the previous steps, the slice of bread with mayonnaise would have to be used in step 4, to which you are going to put ham.

Continuing with this thought, the slice of bread with mayonnaise and ham once again becomes an output of a process (activity or step) and will be used as the input of another process.

In such a way that work-in-process inventories cánido be seen as the equipo of outputs (of the different processes that are carried out in the company) that are used as inputs in other processes.

This is why they are often defined as partially finished products that are used in a subsequent process.

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 Work in Process (WIP) Inventory
  Work in Process (WIP) Inventory
  Work in Process (WIP) Inventory

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