What is work in process inventory?
Work in process inventory encompasses all inventory types in the intermediate stage between raw materials inventory and final products. If raw material is combined with direct labour but is not ready to be sold, it counts as WIP inventory. For example, if a company sells bags of coffee, their WIP inventory would include bags, labels, coffee beans and shipping boxes.
Work in process vs work in progress inventory
These two terms are interchangeable, for the most part. However, some supply chain managers might use work in process in the context of production operations that can be completed in a short period of time (like our coffee example above) and use work in progress for large-scale productions like construction projects.
Both terms can be abbreviated as WIP inventory.
Work in process inventory in the big picture
To clarify where WIP inventory falls in the production process, let’s look at it in the larger context of other inventory classifications. All of the following terms are under the umbrellas of manufacturing inventory.
- Raw materials inventory: anything needed to manufacture a product.
- Work in process inventory: all materials waiting to be assembled.
- Finished goods inventory: assembled materials ready to be sold.
Now that you’ve got a grip on what WIP inventory is, you might be wondering why it’s important to classify in the first place.
