What is Inventory?
Get Expert Help
What is Inventory?
The word inventory simply means the goods and services that businesses currently hold in stock. There are, however, several different categories or types of inventory. The first is called materials and components. This usually consists of the essential items needed to create or make a finished product, such as gears for a bicycle, microchips for a computer, or screens and tubes for a television set. The second type of inventory is called WIP, or work in progress inventory. This refers to items that are partially completed, but are not the entire finished product. They are on their way to becoming whole items but are not quite finished yet. The third and most common form of inventory is called finished goods. These are the final products that are ready to be purchased by customers and consumers. Finished goods can range from cakes to furniture to vehicles. Most people think of the finished goods as being part of an inventory stock, but the parts that create them are held accountable in inventory as well.
Logistics for Inventory Tracking
There are many different ways that companies handle their inventory. Overall, it depends on what kind of business it is. For example, a food manufacturer who makes canned fruit may take into account every single piece of that can in its inventory. The materials used to make the can, the labels, the fruit, and the sugary filling could all be part of the overall analysis of inventory. Keeping track of inventory can be a complex process. The term for watching inventory is called logistics. Logistics is a detailed process by which all inventory is tracked and logged. Several different people are involved in logistics. This can include everything from the owner of the company to the transportation company that delivers the goods to the manufacturing plant. By using complex systems such as barcode integration, every piece of inventory from the smallest parts to the largest finished product can be tracked and observed. You may wonder why companies keep such a close eye on their inventory. The answer is simple: the bottom line. Without inventory control, millions of dollars could be lost each year just because there was no accountability for everything involved in making a product.
Inventory Tracking Prevents Fraud
Of course, inventory is also important on the checks and balances side. Accountants keep an eye on inventory counts in order to be sure that fraud or embezzlement is not occurring. This also serves as a backup to check and be sure that everything is in its place and nothing out of the ordinary is taking place. There have actually been books written on how to reconcile inventory, keep accurate stock counts, reasons that errors occur, tools to use to help make sure inventory is on time and in its place, and much more. Once you learn about the various forms of inventory and the importance of making sure it is logged properly, the process of tracking it should be fairly streamlined and simple, giving your business a cost-effective and competitive edge.