Work-In-Progress (WIP)

Work-in-progress (WIP) is defined as the value of all unfinished work in a manufacturing process. WIP includes all raw materials, work-in-process inventory, and finished goods that have not yet been sold or delivered. The goal of any WIP management system is to minimize the amount of WIP while maximizing production efficiency.

WIP can be calculated using either the first-in, first-out (FIFO) method or the weighted average method. FIFO assigns the cost of each unit of WIP according to when it was started. The weighted average method assigns the cost of WIP according to the average cost of all units in WIP.

The key benefits of managing WIP include:

· Reduced lead times

· Increased production efficiency

· Reduced inventories

· Reduced costs