Inventory refers to the stocks of goods and materials held by a company in order to meet future demand. It is a vital part of the supply chain, as it ensures that businesses have the necessary resources on hand to meet customer demand.
There are several different types of inventory, including raw materials, work-in-progress (WIP) inventory, and finished goods. Raw materials are the unprocessed inputs that are used to create a product or service. Work-in-progress (WIP) inventory refers to partially completed products that are in the process of being assembled or manufactured. Finished goods are those products that have been completed and are ready for sale.
The level of inventory maintained by a company will depend on a number of factors, including the type of business, the lead time for procurement, and customer demand. Too little inventory can result in stock outs and lost sales, while too much inventory ties up working capital and can lead to storage costs. Therefore, it is important for businesses to strike a balance in order to optimize their operations.