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Inventory (also called stock) includes all the raw materials, work-in-progress (WIP), and finished goods that a business holds at any given time. Effective inventory management is essential — holding too much stock wastes resources and ties up cash, while holding too little risks production stoppages and lost sales.
Key Definition: Inventory management is the process of ordering, storing, and using a company's inventory, including the management of raw materials, components, work-in-progress, and finished goods.
| Type | Description | Example |
|---|---|---|
| Raw materials | Inputs that have not yet entered the production process | Flour, steel, fabric, electronic components |
| Work-in-progress (WIP) | Partially completed goods currently being processed | A car on the assembly line with engine installed but no interior |
| Finished goods | Completed products ready for sale or dispatch | Packaged smartphones in a warehouse |
| Consumables | Items used in the business but not incorporated into the product | Lubricants, cleaning materials, office supplies |
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