STUDENTS' CORNER - 151
Work-in-process refers to an incomplete work; that is, the product the company is marketing is in the making; production has begun but not completed and therefore the incomplete product is waiting for completion for marketing. The production process has commenced but not been completed; the work of production is in process.
As a driver of the supply chain, the inventory of the work-in-process must be mindful of the cost involved in the work-in-process. The cost of the raw materials in use for the production process, the cost of the labor to the extent the product is in process, the factory overhead, the inevitable expenditure—all these costs must be taken into consideration while reporting for some specific period; it is advisable that a monthly review must be undertaken so that the finance already involved in the work-in-process must be known to monitor further process towards the completion of the production.
Every stage of the work-in-process must be closely monitored so as to avoid wasteful expenditure; incomplete products must not be allowed to pile up; the process must be always on; the incomplete units must be moved to the next phase of production. This has another great advantage; in case, some fault, some flaw has crept in the manufacturing process at this phase, not piling up leads to instant discovery of the fault making room for immediate correction, thus saving a lot of money.
The incomplete unit must quickly move on to its next phase of production process; this is a must because any delay in the process might result in grave consequences like delay in manufacturing the product; this delay will end up short supply of the product which will end up dissatisfied customer. An unsatisfied customer is a potential threat to business and profit. Therefore, constant alertness to all minor and major details of production must be exercised lest neglect burns the fingers.
We will look into the next type of inventory: Finished Goods in our next session.