An Introduction to Examples of Inventories

Inventory, often known as merchandise, refers to items and commodities that a company keeps on hand to sell to clients. Stock is divided into various subgroups required for a business to perform to its total capacity.

Let us look at inventory and the different types of stocks and their examples.

What Is Inventory?

Inventory is recorded as an asset on a balance sheet of a company. As a result, the meaning of inventory in bookkeeping considers the various stages of production because the inventory value is documented and corrected based on where it is in the production flow. In that sense, inventory refers to all of a company’s raw materials, work-in-process stock, decoupling stock, and completed goods inventory. Each of these forms of industrial lists can be recorded separately on the balance sheet.

13 Types of Inventory

Inventory, which refers to any products available for sale, directly impacts a company’s financial health and success. The 13 types of merchandise are listed below:

Raw Materials Inventory

Raw materials are the primary materials or stocks a company needs to manufacture its goods.

Direct raw materials are used straight in manufacturing, such as timber for a piece of furniture. Indirect raw materials aren’t included in the finished product but are used extensively throughout the manufacturing process. The valuation of the raw material is shown as a current asset on the balance sheet.

Components Inventory

Product Inventory comprises component pieces (e.g., lids, tags, containers, packing) and is called component inventory.

Work in Progress Inventory

If the raw material is combined with direct labor but is not ready to be sold, it counts as WIP inventory and serves as a work-in-progress inventory example.

Maintenance, repair, and operations (MRO) Goods Inventory

The consumable components, tools, and materials required for maintenance, repair, and procedures are included in the MRO inventory. MRO refers to elements utilized in the manufacturing process but are not included in the final product, unlike raw resources.

Packing Material Inventory

Any items your company uses to load the goods it sells are included in the packing materials inventory.

Safety Stock and Anticipated Stock Inventory

Items acquired by a company in case of an increased consumption or market swings.

Decoupled Inventory

Inventory managers retain a fraction of the inventories for every manufacturing node to decouple inventory.

Cycle Inventory

The stock that a company uses and replaces regularly is cycle inventory. Understanding the magnitude of a business’s cycle inventory can help with the floor plan, as a company needs enough space to hold and access its cycle stock regularly.

Service Inventory

The capability of a facility over time is called service inventory. This notion in sales, expense, and business management has nothing to do with financial reporting.

Transit Inventory

Any inventory in transit is referred to as transit inventory. When merchandise is paid for but not yet delivered by the supplier, it frequently becomes transit inventory.

Book Inventory

The company’s book inventory, also known as speculative stock, is the documented stock level. The genuine stock may vary from the book inventory because of errors in counting or faults in recording sales.

Excess Inventory

Any unused items or raw materials can be considered excess inventory. Extra material that businesses cannot use in other products or promotions may become outdated or dead inventories.

Finished Goods Inventory

The whole stock accessible for customers to buy that can be delivered is referred to as finished products inventory. Because a seller’s finished goods might become a buyer’s raw materials, “finished goods” is a relative term.

Examples of Inventories

Raw Materials

Raw material inventory examples are oil, lumber, natural gas, minerals, corn, plastic, steel, and natural gas.

Component Inventory

A jewelry manufacturer creates a piece of jewelry by combining various materials with a pendant or bracelet. In this instance, a small ruby or sapphire stone is a component needed to complete the jewelry.

Finished Goods

A textile factory, for example, may manufacture organic cotton or linen that the factory could use in garments. Although these are the finished items of the textile plant, they can be sold as raw resources to clothing merchants who will turn them into new refined products: clothing.

Work in Progress

If a company offers coffee bags, its WIP inventory would contain pouches, labeling, coffees, and shipping cases, for example.

MRO Goods

Machine oil, lights, compressors, valves, slicing fluids, and replacement parts such as engines and gears are among the maintenance and repair materials inventory examples for manufacturing machines.

Packing Materials

The jar or container you use to put pickles in could be categorized as packing materials if you make your pickles. Packing materials include any cartons or wrapping to transport or hold your products.

Safety Stock

A winter wear manufacturer understands that interest rates are low during the summer months but can vary wildly during the winter, depending on various difficult-to-predict weather factors. As a result, the inventory management system can set aside a certain amount for each type of winter wear accessories the company sells to ensure that requirement is met across the platform.

Anticipated/Smoothing Inventory

Stocking more sports jerseys or football shoes right before a significant event such as a Football World Cup is an anticipated inventory example.

Decoupled Inventory

For instance, a computer manufacturer might set aside a certain amount of the parts required at each laptop manufacturing process stage to cushion against node stock disruptions.

Cycle Inventory

For example, a bakery looking to relocate might look for retail locations with large enough cabinets to store all of the products used in baking.

Service Inventory

In the case of the movie theater, unutilized seats might be regarded as merchandise where there is no demand.

Theoretical Inventory Cost

A restaurant’s theoretical vegetable stock might be 50 bags per week. Still, they might purchase more as a backup or if some vegetables aren’t up to par.

Book Inventory

For example, due to a sales system issue when they sold the ten refrigerators, a refrigerator retail chain may have a book inventory of 2000 refrigerators but an actual stock of 1990 refrigerators.

Transit Inventory

A confectioner, for example, may have a monthly contractual obligation for a staple component like sugar. The product is considered transit stock from the time purchase is processed until the sugar reaches the confectionery shop.

Excess Inventory

A cosmetics firm, for example, might have spare palette packing for a limited run. This surplus packing could be defunct or outdated inventory if companies don’t use it again. They could repurpose the packaging by putting a new label on it and announcing a new item.

How Can You Manage Your Inventory?

Inventory management aids businesses in determining which goods to order and when to order them. It tracks inventory from procurement to sale. The practice monitors and adapts to trends to maintain a sufficient inventory to meet client needs and detect shortages early.

Inventory management’s primary goal is to guarantee that enough items or materials are on hand to meet customers’ needs without generating surplus or excessive stock.

What Are the Benefits of Inventory Management?

Implementing technology for a critical company operation like inventory management has a slew of advantages, including:

Automated Inventory Management

Automation is one of the most significant advantages of an inventory management system. Automation eliminates mistakes, saves you countless hours, and assures you do not make errors. Once a set of rules has been established, this system can perform repetitive work with little human assistance. Automation gives you real-time insight into your stock levels and instantly changes your stock count. This functionality is essential for accurate estimates.

Automated inventory management provides real-time insight into where your goods are located, which is critical if you store products in several locations, such as a storage facility and a retailer, or sell through various channels.

Holiday And Peak-Season Inventory Forecasts

Because of effective demand forecasting, when order volumes grow significantly due to festivities or occasions year-round, such as a big advertising push from an endorser, the quantity of stock you have will ramp up production. Businesses can also use historic and seasonality statistics to determine if any sales trends necessitate stock level modifications at different year periods.

Avoids Overselling And Stock-Outs

Overselling is a crucial issue for e-commerce organizations. An inventory system keeps track of orders and inventories across your distribution channels, letting you know when it’s time to restock. When you don’t keep track of stock, it’s easy to run out of things without realizing it, resulting in stockouts. Your consumers would be less likely to come back, wasting advertising budget and client acquisition expenditures, but you may also be banned from specific markets.

Business Cost Reduction In E-Commerce

Advanced inventory control reports show you exactly what you have in inventory, so your warehouse staff doesn’t waste time searching for a product that isn’t there. Cost reduction ensures a perfect pick, pack, and ship procedure, allowing you to complete more orders quickly.

You can also save money by avoiding purchasing too much of a low-volume item. Thanks to reliable information and analytics reports, you’ll have explicit knowledge of products that your consumers are buying.

Speedy Addition Of New Selling Channels

Adding new channels is easier with an inventory management system since it consolidates your inventory control into a single area, keeping a realistic idea of your stock even if it’s being supplied in numerous locations. When you may sell your merchandise in multiple places simultaneously, real-time inventory synchronization and prediction become even more critical for managing inventory.

What Is the Importance of Taking Inventory?

Inventory is a crucial component of every organization. Companies keep track of stock to recognize precisely how much they have available at any given time. Some of the other benefits of taking inventory are as follows:

Inventory Tracking

A robust system can help you keep track of inventory and provide a consolidated view of inventory throughout all sales channels, including how much inventory you have and where it is stored. It will also enable you to distribute goods to specific retail channels, making warehouse management feasible, which is crucial if you have multiple warehouses and fulfillment centers.

Cost Control

Maintaining inventory records helps you identify which products are doing well and which aren’t. Delayed orders, excess stock, and other problems may arise from the lack of a proper supply at the right moment, and costs rise.

Enhance Your Delivery

You’ll have a terrible reputation if you supply late due to stockouts. Knowing when the seller delivers the item and when it will arrive in order to track it is crucial. Improving your deliveries empowers you to manage consumer demands by providing what they want when they want it and wherever they want it.

Manage Your Forecasts And Planning

Good forecasting and planning reduces your storage and carrying costs, boosts your income, and frees your profitability. By analyzing data patterns from high-performing assets, the technology can help you optimize demand forecasts. You can also meet client expectations better with greater control and planning.

Inventory Management Takes Less Time

You may be able to save time by using a smart stock management solution to track your inventory and on request. Furthermore, if your data is organized, you will save time on inventory recounts.


You can enhance e-commerce inventory control and avoid stockouts by analyzing your inventory and making sure each inventory type you hold can be helpful to your business. This will keep your customers pleased and your firm prosperous.

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Incomplete goods in the process of being developed into finished goods for sale are referred to as work-in-progress inventory. Unfinished goods or parts in development but not yet available for sale to consumers are considered work-in-progress inventories.

An example of a work-in-progress inventory is the furniture industry since all incomplete components are considered work-in-progress inventories before assembling the final product.

Five types of inventory are MRO Goods, finished goods, raw materials, decoupled inventory, and service inventory.

An inventory item represents commodities a company sells or the ingredients required to make those goods.

By using inventory analysis, you can decide how much goods to keep on hand to meet demand without going overboard with storage costs.

The procedure of placing orders, storing them, using them, and then selling them is referred to as inventory management.

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