Work in process: Difference between revisions

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{{Short description|Partially finished goods waiting for completion and eventual sale or value of these items}}

{{redirect|Work in progress}}

'''40609509641461Work in process''' or '''work-in-process''', ('''WIP'''),<ref name="yourdictionary">{{cite web|url=http://business.yourdictionary.com/work-in-process|title=Work-in-process dictionary definition &#124; work-in-process defined|publisher=business.yourdictionary.com|access-date=2014-07-12}}</ref><ref name="ventureline">{{cite web|url=http://www.ventureline.com/accounting-glossary/w/work-in-process-definition/|title=WORK IN PROCESS DEFINITION|publisher=ventureline.com|access-date=2014-07-12}}</ref><ref name="businessdictionary">{{cite web|url=http://www.businessdictionary.com/definition/work-in-process.html|title=What is work in process? definition and meaning|publisher=businessdictionary.com|access-date=2014-07-12|archive-date=2019-12-05|archive-url=https://web.archive.org/web/20191205005123/http://www.businessdictionary.com/definition/work-in-process.html|url-status=dead}}</ref><ref name="thefreedictionary">{{cite web|url=http://financial-dictionary.thefreedictionary.com/work+in+process|title=Work in Process financial definition of Work in Process|publisher=financial-dictionary.thefreedictionary.com|access-date=2014-07-12}}</ref> '''work in progress''' ('''WIP'''),<ref name="collinsdictionary">{{cite web|url=http://www.collinsdictionary.com/dictionary/english/workinprogress|title=Collins English Dictionary &#124; Always Free Online|publisher=collinsdictionary.com|access-date=2014-07-12}}</ref><ref name="investopedia">{{cite web|url=http://www.investopedia.com/terms/w/workinprogress.asp|title=Work In Progress (WIP) Definition &#124; Investopedia|publisher=investopedia.com|access-date=2014-07-12}}</ref><ref name="ventureline2">{{cite web|title=What Is Work-In-Progress (WIP)? {{!}} Finance Strategists|url=https://www.financestrategists.com/terms/work-in-progress/|access-date=2020-11-11|website=Finance Strategists|publisher=financestrategists.com}}</ref> '''goods in process''',<ref name="yourdictionary"/> or '''in-process inventory''' refers to a company's partially finished goods waiting for completion and eventual sale, or the value of these items.<ref name="tuition">{{cite web|url=http://www.tuition.com.hk/dictionary/w.htm|title=W - Wage to WTO (World Trade Organisation) - Dictionary|publisher=tuition.com.hk|access-date=2014-07-12}}</ref> The term is used in [[supply chain management]], and WIP is a key input for calculating inventory on a company's balance sheet. In [[lean thinking]], inappropriate processing or excessive processing of goods or work in process, "doing more than is necessary", is seen as one of the seven wastes (Japanese term: ''[[Muda (Japanese term)|muda]]'') which do not add value to a product.<ref>EKU Online, [{{cite web|title=The Seven Wastes of Lean Manufacturing|url=https://safetymanagement.eku.edu/blog/the-seven-wastes-of-lean-manufacturing/ The Seven Wastes |archive-url=https://web.archive.org/web/20230326031300/https://safetymanagement.eku.edu/blog/the-seven-wastes-of Lean Manufacturing]-lean-manufacturing/|archive-date=2023-03-26|url-status=dead}}, ''Eastern Kentucky University'', accessed 6 March 2023</ref><ref>McDonald, M. P., [https://blogs.gartner.com/mark-mcdonald/2009/10/09/inappropriate-processing-muda-matters-in-it/ Inappropriate Processing: Muda matters in IT], ''Gartner'', published 9 October 2009, accessed 7 March 2023</ref>

== WIP inventory in supply chain management ==

WIP inventory calculations can help a company assess their supply chain health and guide in supply chain planning.<ref name=":0">{{Cite web |date=2021-08-25 |title=What is Work in Process (WIP) Inventory & How to Calculate It |url=https://ware2go.co/work-in-process-inventory/ |access-date=2022-07-13 |website=Ware2Go |language=en-US}}</ref> In most cases, it is ideal to have low WIP inventory levels,<ref name=":0" /> and companies that manage their inventory level efficiently tend to have lower costs.<ref name=":1">{{Cite web |date=2019-04-23 |title=What is Work in Process (WIP) in logistics? - SCM EDU |url=https://scmedu.org/workinprocess_wip_/ |access-date=2022-07-13 |language=en-US}}</ref> Managing WIP inventory requires coordination between several functions within a company, as well as with suppliers and customers.<ref name=":1" /> Higher WIP inventory levels are advantageous in that they can support a surge in demand, as well as improve cycle time since there is more material in production. However, this can also increase storage costs and obsolescence risk, as well as lead to waste if demand is lower than expected.<ref>{{Cite web |date=2020-10-26 |title=WIP Inventory {{!}} Advantages and Disadvantages of WIP Inventory |url=https://www.educba.com/wip-inventory/ |access-date=2022-07-13 |website=EDUCBA |language=en-US}}</ref> To mitigate these risks, companies are increasingly turning to demand forecasting software.<ref>{{Cite news |last=NetSuite.com |title=Manufacturing Financial Statements Explained |url=https://www.netsuite.com/portal/resource/articles/accounting/manufacturing-financial-statements.shtml |archive-url=http://web.archive.org/web/20240621232627/https://www.netsuite.com/portal/resource/articles/accounting/manufacturing-financial-statements.shtml |archive-date=2024-06-21 |access-date=2025-02-08 |work=Oracle NetSuite |language=en}}</ref> These tools analyze historical data, market trends, and customer behavior to predict future demand with greater accuracy. This allows companies to optimize WIP levels, ensuring they have enough material to meet anticipated demand without carrying excessive inventory that could become obsolete.<ref name="Demand Forecasting Software">{{cite web |last1=Dekhne |first1=Ashutosh |last2=Lange |first2=Tim |last3=Magnus |first3=Karl-Hendrik |last4=Scheringer |first4=Isabell |last5=Vincken |first5=Simon |title=Retail and Consumer Packaged Goods:Better service with connected inventory |url=https://www.mckinsey.com/~/media/McKinsey/Industries/Retail/Our%20Insights/Better%20service%20with%20connected%20inventory/Better-service-with-connected-inventory.pdf |website=McKinsey.com |publisher=McKinsey & Company}}</ref>

== WIP inventory in accounting ==