What are the various forms in which a company may carry the inventory?
Inventory management is a very important aspect of business as timely supply of inventory is vital for the regular and planned course of production. It is an art of managing inventory in order to meet customers’ needs. Also investment in inventory constitutes one of the major investments in current assets. Inventory level falling below the specified level or inventory in excess has their own consequences on the production process. Thus, the prime objective of management of the inventory is to determine/control stock levels in order to balance the need for product availability against the need for minimizing stock holding and handling costs. The various forms in which a company may carry the inventory are:
Raw Materials: These are the basic inputs in the process of production. In manufacturing company first raw materials are purchased, stored and then through various manufacturing process converted into finished products.
Work in Progress: These are the products which are still in process. These are also known as semi- manufactured products.
Finished Goods: These are the goods which are ready to sale in the market.
Stores and Supplies: These represent that part of inventory which are not a part of final product but are required for the production process. E.g. cotton waste, soaps, oil and lubricants etc.