Types of Inventory | Guide to Inventory (2024)

FAQs

What are the 4 types of inventory? ›

There are four different top-level inventory types: raw materials, work-in-progress (WIP), merchandise and supplies, and finished goods. These four main categories help businesses classify and track items that are in stock or that they might need in the future.

In this article we'll dive into the three most common inventory management strategies that most manufacturers operate by: the pull strategy, the push strategy, and the just in time (JIT) strategy.

Two types of inventory are periodic and perpetual inventory. Both are accounting methods that businesses use to track the number of products they have available.

Inventory accounting methods are the ways in which revenue and expenses are recorded – more specifically, when they are recorded. The two main inventory accounting methods are cash basis accounting and accrual basis accounting.

First-In, First-Out (FIFO)

The FIFO valuation method is the most commonly used inventory valuation method as most of the companies sell their products in the same order in which they purchase it.

An inventory list provides an organized summary of every product a business has in stock, such as raw materials, components, works in progress and finished goods. It typically includes each item's SKU number, name, description, unit cost, quantity in stock and reorder point.

What are 5 primary categories of inventory and what are their characteristics? ›

Companies should pay equal attention to all five inventory types: raw materials inventory, work-in-progress (WIP) inventory, maintenance, repair, and operating (MRO) inventory, finished goods inventory, and packing materials inventory. An adequately managed inventory keeps a business humming along smoothly.

A good inventory level efficiently balances sufficient stock to meet demand without incurring excess carrying costs. It aligns with the company's sales velocity and storage capacity while providing a buffer for unforeseen supply chain disruptions.

ABC analysis is a method in which inventory is divided into three categories, i.e. A, B, and C in descending value. The items in the A category have the highest value, B category items are of lower value than A, and C category items have the lowest value. Inventory control and management are critical for a business.

ABC Analysis classifies inventory items into three categories based on their value and importance to the business: A (high-value items), B (medium-value items), and C (low-value items). The A items — typically the most expensive and most important — should be managed with extra care and attention.

The basic formula for calculating ending inventory is: Beginning inventory + net purchases – COGS = ending inventory. Your beginning inventory is the last period's ending inventory. The net purchases are the items you've bought and added to your inventory count.