Inventory Types and Effective Stock Management

Inventory: Key Products Waiting for Use

1. The STOCKS: key products in a situation of waiting for later use.

2. Types of Stock

Depending on the degree of transformation of materials

Depending on the degree of transformation of materials:

• Raw materials: Goods, parts or components found in the warehouse expected to be transformed into products suitable for final use or consumption.
• Work in progress (WIP): Materials in intermediate manufacturing stages that are undergoing transformation. These are ongoing products that will progress from raw material to finished product and usually require inspection or quality control before reaching the finished product stage.
• Semi-finished products: Manufactured materials used by the business that are not yet for sale; they are normally intended for further processing, incorporation into other products, or additional operations.
• Goods or finished products: Finished goods or industrial products of commercial companies that are expected to be stored, sold, or distributed.
• Parts: Parts whose purpose is to replace others, installed in equipment or company machines and used in the company's operating activities.
• Packaging and containers: Primary covers or wraps to protect products or merchandise during transportation. Secondary items are containers or vessels intended to contain the product for sale together with the product.
• Waste: Products obtained as by-products or residuals from production; these may have intrinsic value and can be reused or sold.

Depending on the destination

Depending on their destination:

• Existence destined for consumption: Raw materials, spare parts, and similar items intended for internal use.
• Existence destined for sale: Finished products and merchandise intended for commercial sale.
• Commercial companies: The variety of goods that make up a company’s inventory are collectively called "stocks" or "inventories".

3. Stocks and Company Performance

The fundamental objective for a company is to have an adequate product available at the right moment and in sufficient quantity to meet orders. By doing so, customers obtain satisfaction, which often leads to repeat orders and continuity—a positive cycle that benefits the business.

Profitability formula: Profitability = Profit / Invested Capital = Profit / (Fixed Assets + Working Capital).

Storage Administration

4.1 Minimum Stock

Minimum stock is the lowest acceptable inventory level determined for the warehouse. It is the amount that must be set aside so replenishment becomes compulsory when reached. Management determines these inventory levels in coordination with stores and purchasing according to the company's demand for the material.

4.2 Maximum Stock

Maximum stock is the upper ceiling for every item—the highest amount that can be stored safely in the warehouse. This limit recognizes the high costs of storage and seeks to avoid unnecessary overstocking. The maximum amount for each material should be set based on storage capacity and inventory management practices.