Work in progress or process refers to one form of inventory. WIP as it is often referred to as, is the work that is in process or production at a stage that falls between raw material and finished product.
Lean is a continuous improvement strategy that a company embarks on to maximize customer value and minimize waste. The term "Lean" was first used in the book The Machine That Changed the World by James Womack. A lean organization focuses on providing complete value or Value added activities to their customers. One of the ways that lean accomplishes this is through the complete and total elimination of any form of waste.
A raw material is any purchased, supplied or extracted item that will eventually be transformed via a manufacturing or transformative process. The raw material or materials are generally converted into components or a finished product.
Finished goods are products or end items that are sold as a complete item or unit. These items are commonly subject to a customer order, sales order or purchase order that is linked directly to a customer. Finished goods and products are an extension of your inventory. They are materials or products that have reached a point in either the manufacturing or transformative process where they are available for consumption. You can calculate finished goods using a formula that will also help create an inventory ratio which determines the value of your goods for sale. Finished goods inventory is generally considered a short term asset. Short term assets are expected to sell in less than a year as opposed to long term assets which are typically investments that will be kept for longer than a year. Let’s look at an example of finished goods.
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