There are many types of inventory to consider and these include:
Raw Materials (RM) – These are materials, parts and components incorporated into products as part of the production process.
Work-in-Progress (WiP) – These are semi-finished goods at various stages in the production process.
Maintenance, Repair and Operational (MRO) – These are spares and consumables for repair and maintenance activities that are not incorporated into final products (e.g. oils, greases, machine parts).
Anticipation inventory – Anticipation inventory of Finished Goods (FGs) in a retail business that allows for seasonal demand, special promotions and holidays, thereby avoiding disruption of standard patterns.
Investment inventory – Investment inventory (or Bulk Buys) is held when there are cost advantages to purchasing stock ahead of requirement such as bulk purchase discounts or favourable foreign exchange rate variations. It is often referred to as ‘Bulk Buys’ to secure a discount.
Another form of Inventory, which is similar to Investment inventory, is ‘All time buys’. This is where a supplier no longer wishes to manufacture a product and will make one last batch. A challenge for the wholesaler/distributor is being able to predict all future demand. This raises the questions over what happens to any tooling. It might be that the ‘all time buy’ needs to cover the period to find an alternative supplier willing to make the product. This is quite common in the Automotive aftermarket.
