Finished goods inventory is what manufacturers depend on to generate revenue. When the manufacturing process is finished, the work in process becomes a finished good. In those instances, companies move straight from raw materials inventory to finished goods inventory.
There are some very short or simple manufacturing processes that don’t require specific reporting of WIP inventory. This is when the actual manufacturing is happening. Work in process inventory (AKA work in progress or WIP inventory) is everything that happens to inventory in between raw materials and finished goods. It’s been moved out of its initial warehousing environment and is now a work in progress. At that point, the inventory is no longer raw. They’re considered raw materials inventory until they’re combined with human labor. Raw materials inventory is all the ingredients or base component parts that will be used in the production process. Becoming Finished Goods Inventoryįinished goods inventory becomes finished goods inventory by first being the other two types of manufacturing inventory. One manufacturer’s finished goods inventory may be a retailer’s merchandise inventory, dropshipping inventory, or another manufacturer’s raw material or component. It depends where those finished goods go after their completion. It’s also known as finished product inventory. All the raw materials, all the items in every stage of production, it culminates in finished goods inventory. Finished goods are all the products that manufacturers actually sell to buyers, be they upstream vendors or retailers.
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