An inventory item is a product that a business can buy and sell. These products are physical items and can be touched and felt. It does not include services offered by companies. These items are stored in inventory and shipped quickly after processing.
Like all business assets, all products the company produces are tracked and managed for better inventory operations. Inventory items have a dual meaning. One of the meanings is the asset itself, and the other is the asset's entry into the inventory management system.
In this article, you will learn what an inventory item is and its importance.
What Is an Inventory Item?
Inventory items are those goods that are physically present, which the company can count and measure. Simply put, an item represents the products a business can produce or buy and then sell to get profits. These items are important building blocks of inventory management software and are necessary for supply chain operations.
Various inventory item categories include raw materials, work-in-progress, and finished goods. These are the types of inventory that manage sellable goods. Different industries need different inventory goods that help businesses run operations more smoothly.
Types of Sellable Inventory Items
Here are the types of inventory that are sellable items:
1. Raw Materials
Raw materials are the elements required to be processed into finished goods. For a bakery, eggs, flour, or sugar are natural materials; industries have raw materials like bolts, screws, etc.
2. Work-In-Progress
It refers to items that are in between the manufacturing and packaging processes. It includes things that still need to be sold and are in the process of packaging. For example, a laptop-making company waiting for software upload is a work-in-progress item.
3. Finished Goods
The items that go through the production process are called finished goods. These items are ready for distribution. These goods are stored on store shelves, ready for sale.
4. MRO Inventory
MRO stands for maintenance, repair, and operating items in manufacturing industries. These are responsible for operations that keep machines running during production. It includes screws, nuts, and bolts.
5. Buffer Inventory
It is also called safety stock. It is kept in storage to avoid out-of-stock situations. It is used during higher demand seasons when suddenly a product is sold in large quantities.
6. Cycle Inventory
Cycle inventory is items that businesses order in huge quantities quite often. For example, a bakery will need eggs, milk, or flour regularly. That's why everyday inventory items are cycle items.
7. Decoupling Inventory
This inventory puts work-in-progress goods from one machine into another to avoid a low-stock situation. It also presents problems, such as delays if the machine breaks and stops working.
8. Transit Inventory
Inventory items moved from one place to another are called transit inventory. The transit can be due to better processing or lack of proper machinery.
9. Excess Inventory
The unsold and non-moving inventory items are called excess inventory. These goods in storage might not sell or stay in demand.
How to Describe Inventory Items?
An ideal inventory is a list of items in stock according to the market's demand. It is easier to identify goods with the correct inventory description. Here are a few ways to generate detailed inventory items to help businesses manage inventory properly:
1. Simple and Clear Naming
Naming items with common nouns cannot be helpful. Using words like large or small will only save the time of business managers as a warehouse must have 500 plus objects in large or small sizes. Managers should use item names, like Italian marble 5x5 feet, as names, as it is easier to find things with proper nouns.
2. Avoid Extra Information
Providing excess information also harms businesses as it will take longer to find the object in warehousesdue to the long checklist managers must fill in each time. Information like expiry date and country of origin are optional for the description in the inventory list.
3. Keep It Formal
Writing usage of applications of products needs to be corrected. The description should be functional information that will help managers to identify the products with ease quickly.
4. Align With the Business
The inventory list and its description should help to make the identification of goods in warehouses easy. With all important data such as SKU, quantity in stock, and price in the report, managers can quickly find the item and deliver the order more effectively.
Manage Inventory Items With Software
Inventory management helps businesses to balance supply and demand. With the right strategy for inventory lists, companies can reach their targeted goals and help with correct demand forecasting.
Demand-based inventory planning can help companies balance inventory levels and boost profits. Inventory management has benefits such as reduced costs, less production wastage, and fewer out-of-stock moments.
Improve Inventory Items Management With TranZact
TranZact helps businesses to maintain inventory successfully with the right inventory management strategy. Inventory items are vital to successful production operations. With Tranzact, Indian SMEs can improve inventory management and develop their relations with suppliers, retailers, and customers.
FAQs on Inventory Items
1. What is an inventory item card?
Inventory item cards hold all the information about the products in inventory. It contains data from buying, selling, and delivering the item at the desired location.
2. What is the inventory item numbering system?
The inventory item numbering system is a method to allot serial numbers for each item. These numbers are unique and help to locate items.
3. What is an inventory item?
Inventory items are products in physical form that a company uses to process and convert into finished goods. These products are physical items and can be touched and felt. It does not include services offered by companies. These items are stored in inventory and shipped quickly after processing.
4. What are inventory item description standards?
Inventory items should begin with a noun followed by the adjective describing it. It is essential only to share enough data required to identify products quickly.
5. What is the full form of SKU?
SKU stands for stock-keeping unit.
6. What are deadstocks?
Deadstocks are products that have no demand or are non-selling products.
7. What is demand-based inventory planning?
Inventory planning based on demand forecasting is called demand-based inventory planning.
8. What are tangible products?
Products that anyone can touch, feel, or buy are called tangible products. For example, the laptop is a tangible product.
