Work In Progress (WIP)

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  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. 

To put it another way WIP is when an organization has possession of raw materials and they have moved those raw materials into production to begin the transformative process.  WIP can be located all throughout an organization from released raw materials up to the point just before inventory becomes a finished product.  Work in Progress May also include goods that are not complete.  Such as, partially finished goods, semi finished goods and items that have begun processing but not reached a finished state.  An example of partially finished goods is any product that is waiting, stored or in queue in a partially complete form.  These semi finished goods will not be considered complete until they complete their transformative process and have met the required specifications of a completed product.  Continuous Improvement strategies like lean and six sigma help to reduce inventory and work in progress.

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Examples:

• A company acquires some raw materials inventory.  It is waiting to be manufactured.  No value is being added in this waiting stage.  Now, let’s say the company releases a work order and this material is placed on a machine and begins the transformative process.  Value is now being added to it.  In the exact moment that these raw materials entered production they now become WIP. 
• How about parts that are sitting waiting to be finished?  Well, this depends entirely on whether they have started production or not.  If a supplier's finished product is received but has not started production it is still considered a raw material.  When that raw material enters production it now becomes WIP. 
• Let’s now consider a unique circumstance.  Let’s say that a company operates in an Assemble to Order environment.  In fact, let's say it’s a sandwich shop.  We have sliced turkey, roasted chicken and tuna.  We also have condiments such as Mustard, mayonnaise and a few others.  In addition to this there are many different types of sliced cheese.  All of the Sandwich supplies are prepared in the morning and then placed in various bins until a customer arrives.  Since the sandwich supplies are decoupled from the actual sandwich assembly process a customer can custom order what they want.  Now, let’s focus on the Roasted Chicken.  Is this item considered a raw material, work in progress or a finished good?  This item, like all the other items that were prepared in the morning, is considered work in progress.  Even though they are staged at different points in the process to decouple assembly, they were prepared in the morning and are therefore considered semi finished. 

You now know what work in progress inventory is.

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Challenge:

• What examples of work in progress do you have at your place of work and how do you manage WIP?  Share with us in the comments section below and receive a coupon for one of Lean Strategies International LLC's Training Courses.

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