Inventory management is valuable to businesses. The main purpose of this is to cut down the inventory cost from the company's budget. In simple terms, inventory management is a system to control a business's inventory. It informs about the required inventory and its quantity at a specific time, combined with the inventory cost.

There are online inventory management software systems that assist in executing various operations. However, it is essential to determine the type of inventory management system that will be right for your business. For this purpose, we bring you a list of all kinds of systems for managing your inventory.

Types Of Inventory Management Systems

Inventory management is an essential part of the supply chain that assists businesses in monitoring inventory at different levels. Various inventory categories include raw materials, unfinished goods or work in process, MRO, and end products.

These categories of your inventory will play an essential role in grouping and arranging various stock items and tracking them for future requirements. By learning about these categories, you can find the online inventory management software system you should invest in.

Raw Materials

Just as a painting requires a palette of different colors to bring the art to life, manufacturing a product requires interweaving various components into one. These articles of an inventory are available on the shelf but are not playing a part in work-in-progress inventory or end products inventory. This inventory category further distinguishes into:

Direct: These take an active part in the making of a finished product.

Indirect: These play an indirect role in helping your business operate and belong to the manufacturing overhead cost.

Work In Progress

Work in progress or work in process (WIP) refers to an ongoing process that involves your raw material (direct and indirect) to produce an end or finished product. When we think about product expenses, this process involves the costs of raw materials (direct and indirect) and workers. This inventory category also involves packaging and will be known as WIP until a customer buys it.

MRO (Maintenance, Repair & Operations)

Another online inventory management software system is MRO, short for maintenance, repair, and operations. These inventory types are an essential element for putting a product together and selling it as a finished good. However, these components are not a part of the product but support goods production and business maintenance.

End Products

As understood by the name, finished or end products are a simple inventory category. The result that an artist sees after finishing the painting is what a finished good is after the completion of the manufacturing process. A product seen in a shop or on an e-commerce site will be your finished good. Therefore, this inventory category is packed and ready to be sold to the customers.

These were the different types of inventory categories that can help you choose the software type you want for your business. The right inventory management solution will enable your business to streamline its distinct operations.

Additional Inventory Types

Other than the main inventory categories, there are other classifications of inventory. These are as follows:

Packing Materials

Packing materials are of three types- primary, secondary, and tertiary. The purpose of primary packing is to protect the product and keep it usable. The stock-keeping unit information or labels makes the secondary packing of a product. And the packaging used for shopping goods falls under tertiary.

Pipeline Inventory

The inventory that moves the site from manufacturers to warehouses to distribution centers is pipeline or transit inventory. Your system enables you to keep track of these goods. The moving of this stock takes up to weeks.

Obsolete Inventory

Some goods and materials are not sold out or may not have any usage. These types fall under excess or obsolete inventory. Generally, a company will not sell these products or use them in the process of manufacturing but must pay for the storage cost.

Conclusion

Management software for your inventory will keep track of inventory counts, initiating from purchasing the materials to selling the end products. Small and big businesses can benefit from incorporating inventory management software into their business.

These systems have different categories to choose from, including raw items and materials, WIP, MRO, and end products. You must pick the best option for your business to streamline the inventory processes.