Inventory refers to the stock of items or materials held by a business. It is one of the key components of managing a business, as it represents the value of the company's assets.
In order to properly manage inventory, businesses need to track both their incoming and outgoing inventory levels. This allows them to keep tabs on what needs to be restocked, and what can be sold off.
Types Of Inventories
To better understand the types of inventories, let’s have a look at some inventory examples.
Virtual inventory is a type of inventory that is not physically present in a company's warehouse but is still available to be sold.
This can include inventory that is being stored at a different location, such as a supplier's warehouse, or inventory that has not yet been manufactured.
Virtual inventory can be an important tool for businesses, as it allows them to sell products that they would not otherwise be able to keep in stock.
However, it is also important to manage virtual inventory carefully, as it can be easy to oversell products and end up with angry customers.
A physical inventory is a count of all the physical assets in a company. This count includes all the products, materials, and supplies that a company has on hand.
A physical inventory is usually taken once a year, but it can be done more frequently if needed.
The purpose of a physical inventory is to make sure that all the assets are accounted for and to verify the accuracy of the records.
Taking a physical inventory can be a time-consuming and difficult process, but it is important to do it accurately.
Perpetual inventory is an inventory system in which businesses keep track of their inventory levels on a regular basis, usually daily. This allows businesses to have a more accurate picture of their inventory levels and needs.
There are several benefits to using a perpetual inventory system.
- First, it can help businesses avoid stockouts by keeping them aware of their current inventory levels.
- Second, it can help businesses save money by reducing the need for safety stock.
- Finally, it can help businesses make more informed decisions about production and purchasing by providing accurate and up-to-date information about inventory levels.
Inventory Items Examples
There are many different types of inventory items examples that businesses use in order to keep track of their stock. Some common examples include raw materials, finished goods, work-in-progress, and waste.
Each type of inventory has its own unique characteristics and purpose, which helps businesses to better understand their stock levels and needs.
Raw materials are the unprocessed inputs that are used to create a finished product. This could be anything from lumber to fabric to metals.
Finished goods are completed products that are ready for sale. This could be anything from furniture to clothing to electronics.
Work-in-progress (WIP) refers to inventory that is currently being worked on but is not yet completed.
This might include unfinished products, semi-finished products, or even raw materials that are in the process of being transformed into a finished good.
Inventory is a crucial part of any business and needs to be managed carefully in order to avoid overspending and stockpiling.
Overall, Different types of inventories can be useful for different purposes depending on the needs of the user. It is important to choose the right type of inventory based on what your business goals are.