Inventory
An organisation requires items or products in order to operate. These items are collectively called Inventory. The term inventory refers to all the materials or products held by an organisation which is needed to fulfil the needs of the customer. There are various forms of inventory and can be split into four main categories as shown in Figure 1:
Figure 1: Types of Inventory
Raw Materials
Raw Materials (RM) are inventory items that are required to produce the goods that are required by the customer. The following items are examples of raw material inventory that a car assembly plant would hold:
- Tyres
- Wheels
- Engines
- Windows
- Nuts/Bolts
Work-in-Progress
As raw materials move through the production process, they are converted into semi-finished goods or sub-assemblies which are collectively referred to as Work-in-Progress (WiP). For example in a car assembly plant, WiP would include items such as:
- Chassis
- Door Assemblies
- Dashboards
Finished Goods
Finished Goods (FGs) are inventory items that are ready to be sold or shipped to the customer.
Consumables
Captive consumable goods or simply consumables are items which are used by the manufacturer in the production process but are not used contained in the finished product. These are also referred to as indirect items. Examples of indirect items for a car assembly plant are:
- Machine tools
- Lubricants
- Janitorial equipment
- Maintenance, Repair and Operational goods (MRO)