Managing Inventory is often viewed as a hectic part of operating an eCommerce system. With so many factors involved in inventory management, it can be pretty tedious to keep track of stocks for your customers, particularly when you intend to dive into a multichannel inventory management system.
Inventory tracking can be even more complicated if you have your stocks split across multiple fulfillment centers. You will have to keep in mind about Inventory that is under the manufacturing process, the Inventory in movement, and the finished goods available for purchase.
It isn't easy to manage Inventory when you have all of these factors related to Inventory to keep track of. However, a particular tool can be of help to you, ‘The finished goods inventory formula.'
When you are aware of the amount of finished Inventory, your small-scale business can precisely predict stock levels for enhanced tracking of Inventory.
What is finished goods inventory?
Finished goods inventory is the stock that can be fulfilled for customers to purchase readily. With little help from the finished goods inventory formula, sellers can get an exact number for the Value of their goods that are for sale.
‘Finished goods' is a subjective term. Let me explain this briefly. A seller's finished goods might not be a buyer's finished goods. For example, a footwear factory may produce materials that can be used to make footwear, such as loafers and sandals. While materials to make this footwear might be the factory's finished goods, they will have to sell them as raw materials to footwear retailers, who will then create them into the new finished product like leather shoes or footwear of any kind.
The timeline of finished goods inventory
There are two other stages of Inventory involved before arriving at finished goods inventory. Here's how the finished goods timeline goes.
Step 1: Raw Materials stock
An inventory of raw materials consists of all the ingredients and essential components that are involved in the production process. These materials are considered as raw materials inventory till they have been incorporated with the working of manual labor. An inventory is not regarded as essential when manual labor is involved.
Step 2: WIP Inventory
WIP inventory (work in progress inventory) is the process that occurs to Inventory in the middle of raw materials and finished goods. The WIP phase is the phase where manufacturing happens. However, not all Inventory goes through this phase. Specific processes do not go through this phase, and they directly travel to the finished goods phase.
Step 3: Finished Goods Inventory
When materials go through the manufacturing process, the process comes to an end and becomes finished goods. Manufacturers rely on finished goods inventory to create revenue. Once finished, these goods can be shipped, and retailers can focus on tracking the shipping and Inventory.
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