Glossary

A repository of acronyms, jargon, and useful definitions perfect for eCommerce founders & marketers like yourself.

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Inventory

Inventory

Inventory is the total quantity of stock that the business owns. It includes its stock of finished goods, work-in-progress items, and raw materials. A company’s inventory is classified as an asset for accounting purposes. 

Inventory is usually taken at the end of the financial year or daily so the business always has the latest numbers on hand. Inventory is crucial to a business as it affects their capability to respond to customer needs and demands, hence businesses adopt inventory management systems to help control and manage their stock.

Types of Inventory 

 The four main types of inventory are 

  1. Raw materials - Raw materials consist of all the components that go into manufacturing the finished products. For example - wood for a furniture company and leather for a bag company would be considered raw materials. 
  2. Work-in-Progress - These are goods that are partially completed and are still going through the manufacturing process. Work-in-progress goods typically exist for products that have a long manufacturing time such as building construction. It includes all of the raw materials, labor costs, and overheads that have gone into producing the product at each stage of the manufacturing process. 
  3. Finished Goods - This is the final, completed product that is ready to be sent out and sold to customers. 
  4. Maintenance, Repair, and Operating Supplies (MRO) - These are all the tools and equipment that are needed to manufacture a product, but aren’t a part of the product itself.  

Inventory Management 

Inventory management refers to the practice of acquiring, storing, and tracking a business’s inventory. In doing so, there is complete clarity about how much inventory a business has at any point in time. This allows them to make accurate purchasing decisions so they are able to deliver on orders placed, save money, provide accurate product reports and be able to quickly identify any potential problems in their inventory levels.

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Inventory is the total quantity of stock that the business owns. It includes its stock of finished goods, work-in-progress items, and raw materials. A company’s inventory is classified as an asset for accounting purposes. 

Inventory is usually taken at the end of the financial year or daily so the business always has the latest numbers on hand. Inventory is crucial to a business as it affects their capability to respond to customer needs and demands, hence businesses adopt inventory management systems to help control and manage their stock.

Types of Inventory 

 The four main types of inventory are 

  1. Raw materials - Raw materials consist of all the components that go into manufacturing the finished products. For example - wood for a furniture company and leather for a bag company would be considered raw materials. 
  2. Work-in-Progress - These are goods that are partially completed and are still going through the manufacturing process. Work-in-progress goods typically exist for products that have a long manufacturing time such as building construction. It includes all of the raw materials, labor costs, and overheads that have gone into producing the product at each stage of the manufacturing process. 
  3. Finished Goods - This is the final, completed product that is ready to be sent out and sold to customers. 
  4. Maintenance, Repair, and Operating Supplies (MRO) - These are all the tools and equipment that are needed to manufacture a product, but aren’t a part of the product itself.  

Inventory Management 

Inventory management refers to the practice of acquiring, storing, and tracking a business’s inventory. In doing so, there is complete clarity about how much inventory a business has at any point in time. This allows them to make accurate purchasing decisions so they are able to deliver on orders placed, save money, provide accurate product reports and be able to quickly identify any potential problems in their inventory levels.

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