Physical Inventory Examples Explained for Ecommerce Businesses

Understanding the Different Types of Inventory

Tracking inventory is crucial for the success of any business, especially those operating in the digital and ecommerce space. This article delves into the different types of physical inventory that ecommerce businesses need to manage, with a focus on direct-to-consumer (DTC) brands and manufacturers. We’ll explore raw materials, work-in-process (WIP) inventory, finished goods, and maintenance, repair, and operations (MRO) supplies.

Raw Materials: The Foundation of Product Manufacturing

Raw materials are the initial unprocessed materials or primary commodities that manufacturers use to produce finished products. These materials can often be considered sellable items themselves. For instance, flour, sugar, wood, and metal can be used to manufacture various goods like bread, furniture, and more. A design house might also require bolts of textiles and fabrics for their production process.

Work-In-Process (WIP) Inventory: Partially ManufacturedGoods

Work-in-process (WIP) inventory refers to the goods that are currently undergoing the manufacturing process but have not yet reached their completed, finished goods status. These items have been altered and are ready for further production stages. An example would be a reusable drinking bottle that is being molded using materials such as plastic and stainless steel. While these products are in the early stages of production and not yet ready for sale, they are still considered part of the manufacturing inventory.

Finished Goods: Vital to Ecommerce Success

Finished goods are the products that are ready for sale to the end consumer. In the context of a DTC brand, finished goods are the company’s most important asset. These are categorized by stock-keeping unit (SKU) codes and represent the products that have been received, stored, and are awaiting shipment to the customer.

Maintenance, Repair, and Operations (MRO) Supplies: Behind-the-Scenes Inventory

MRO supplies refer to the tools, equipment, and consumables used for maintenance, repair, and running operations necessary to produce finished goods. Although MRO supplies do not directly tie to revenue generation, they play a crucial role in the overall production process and can significantly impact profit margins by reducing downtime and increasing efficiency. Examples include maintenance equipment, cleaning supplies, and inspection tools.

Conclusion

Accurate tracking and management of these different types of inventory are vital to the success of an ecommerce business. From raw materials to finished goods, and from WIP inventory to MRO supplies, each type of inventory has a unique role in ensuring that a business can operate efficiently and meet the needs of its customers. By keeping a careful eye on inventory levels, ecommerce businesses can optimize their supply chain and improve their overall profitability.