Types of inventories: What are they and what are their characteristics?

Inventories are a crucial factor in the organization and management of any company. It is a tool with which the correct production flow is maintained, convenient sales prices are established and future projections are made. The reality is that there are different types of inventories, each with its own particularities and advantages. In this article we will see what types exist and how they are classified.

Types of inventories

Inventory is the stock, the product, material or stored element that the company has and that has not completed the sales cycle or simply has not been needed in the production chain. That a company has a well organized inventory will bring a great variety of advantages. Generating profits, productivity, and a correct relationship between supply and demand. The following is a list of the different types of inventories.

1. Inventory by product type

In this case, the inventory is subject to the type of product stored. A distinction is made between:

Raw materials inventory: This inventory establishes the available stock of raw materials used to manufacture a final product.

Supplies inventory: This is responsible for recording non-quantifiable materials in the production process of a product. This is the case, for example, of paint or maintenance tools.

Inventory of products in process: This includes all the processes that are still unfinished, in the middle of the production process. This may be the case of the storage of prototypes of a product.

Inventory of finished products: This is the inventory of products that have already finished their production process, those that are ready for sale.

Inventory of goods: These are goods acquired for subsequent direct sale, which are simply stored, without producing a new change.

2. Cycle Counting: One of the most used types of inventories

Cycle counting is one of the most widely used types of inventories today. It is carried out several times a year, and its periodicity can be weekly, monthly, bimonthly or quarterly depending on the company and the type of merchandise it handles. The more valuable the product is to the company, the more frequently the inventory will be updated.

This inventory method is designed to improve the accuracy and reliability of product control. It also seeks to detect general errors or failures in the products and then identify these causes. In this way, it is possible to have a permanent control over the products and also to satisfy the necessary demand on them.

3. Inventory on hand

This is the classic inventory, which shows which products are available at the moment they are needed for production. The objective is to be able to cushion any setback, any unpredictable change in product demand.

It is one of the most important types of inventories, because it is the one that sets the tone at the time of making decisions in the company. It allows adjusting the amount of product reserve in the inventory. In this way, shortages and setbacks are avoided.

4. Online Inventory: Types of Inventory 2.0

The online inventory is a document where all the lines and capitals of the company, active and inactive, are listed in a chronological historical way. In addition to this, each item is associated with specific data, relevant for decision making about the general stock.

It is in itself an inventory that details all the materials that are about to enter the company's production line.

5. Inventories according to their function

Inventory in transit: This type of materials inventory includes all the products that are on their way to customers or to the factories that ordered them. When they have already been shipped and their arrival has not yet been recorded.

Reserve inventory: It is intended to cover any kind of setback in the normal stock. It is an example of the type of inventory that should always be present, because it is the one that will save any kind of delay or general failure. When this inventory is not carried out, it effectively generates losses.

Decoupling inventory: Among the different types of inventories, this is the one that is responsible for separating inputs and outputs according to the stage to which each one belongs. In this way, it is possible to know if the nearest productive stage has enough input, enough material.

6. Other examples of inventory types

Inventory of obsolete, dead or lost stock: this is one of the types of inventories that will record all those products that can no longer be sold due to certain circumstances. It can be due to expiration date, failure, breakage or simply deterioration.

Quarantine inventory: it takes control over all the references that must first remain in storage to be sold, used or marketed in general.

Software to manage different types of inventories

All types of inventories need to be heavily tracked, controlled and surveyed. Doing this can take a lot of time and resources, that's when inventory software can really make a difference. Offering advantages such as:
  • Running a complete sales process.
  • Performing total enterprise resource planning.
  • Implement customizable inventory management. Include personal customer data based on their product preferences.
  • Split records by time periods.
  • Build parametric charts based on statistics.
  • Create databases in the cloud for later analysis and comparison.

Some of the most widely used ERP software recommended by users are: MaxPanda CMMS, Netsuite ERP and Nodum.

Types of inventories: Conclusion

After having shown all the different types of inventories, from the most specific to the most popular, we can say that whatever your business is, having a properly built inventory can be vital.

In addition to this, it is worth mentioning that whatever the type or method of inventory valuation used, having a good ERP software will be a great help when it comes to having it constantly updated, up to date and in shape.