STUDENTS' CORNER - 150
‘Types of Inventory’ is the focus for this session. While dealing with components of logistics, we have already seen the basics of inventory. We shall see now the types of inventory.
Traditionally, it is said that there are four types of Inventory and they are Raw materials, Work in progress, Finished goods and MRO goods.
If you are a manufacturer, all things you need to manufacture a product are basically raw materials for you. You convert those raw materials into the product of your company. Supposing you partially assemble some part of a product, say a wheel for some two or three wheelers, this subassembly is your raw material. Your subassembly becomes a part of a finished product. Your subassembly is the component of the finished product. Generally a part that is used in making another product or even a part is known as component and the part that is taken into a finished product is called its parent.
The sole aim of the inventory is to keep the product available to meet the demand from a customer. A dissatisfied customer may prove an ‘exit’ customer for the company and the company loses revenue to the extent it faces exit customers.
Material Requirements Planning system, Manufacturing Resource Planning and Product Structure Tree are other popular and necessary aspects being discussed under inventory generally. All these concepts underscore one fact as earlier said: Things must be kept or managed in such a way that the customer’s need is met in the right time, in the right way and in the right place. At the same time, in order to make things available to the customer in time, overstocking materials, as much as under stocking, is not a right business strategy. Money spent in excess to the need is money wasted. Right business does not waste money at all; it cannot afford.
We will move on to the next type of inventory: Work in progress (WIP) in our next session.