Inventory consists of raw materials, work in progress (WIP) and finished goods held within the organization. Raw material is used to make products. Work in progress (or work in process) is any product between raw materials and finished goods. Work in progress is not necessarily being worked on – it is usually sitting in bins or storage areas awaiting processing.
Inventory may be visible in the workplace or it may be hidden in stores. In lean operations inventory is very undesirable. Inventory extends lead times (see Little’s Law) so reducing responsiveness to customers. Inventory costs money to manage and increases complexity. The vision for lean is to have just enough WIP for the processes to work and no more. See also Flow Production.
In office processes inventory is more difficult to see but may be present as batched orders and invoices for example. In service functions (such as a call centers) inventory is less relevant and has little meaning.
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