Types of Inventory

Are you interested in learning about the different categories of inventory? Then you have came to the right place.

Inventory is divided into three different categories:

Raw Materials

The first type of inventory are the raw materials. These are the products that have not gone into the production process yet. Raw materials are divided into two different types:

• Direct Materials
  These are the materials that are in the final product and can easily be traced such as the fabric used to make a blanket.
• Indirect Materials
  These are the materials that are used during the manufacturing process but are not easily traceable. Examples of indirect materials would be lightbulbs, any cleaning supplies, lubricants, and oil.

Work in Progress (WIP)

The second type of inventory is the work in progress inventory. These items are the products that have started to go through production or manufacturing process but have not yet made it all the way to the finished product. Costs that are considered to be work in progress inventory are the raw materials, labor and overhead costs.

Finished Goods

The third and last type of inventory is finished goods.  These are also referred to as merchandise. These are the goods that have finished the manufacturing process and are then sold to the supplier or customer directly.