What does the term 'WIP inventory' refer to in manufacturing?

The term 'WIP inventory' refers specifically to products that are currently in the process of being manufactured. This includes items that are at various stages of production but are not yet completed. WIP inventory encompasses everything from the raw materials being worked on to components that may be in assembly but have not yet reached the final product stage. It's a critical element for manufacturers because managing WIP effectively can help optimize production flow, reduce lead times, and improve efficiency.

In contrast, finished products awaiting shipment would fall under a different category of inventory, known as finished goods. Raw materials refer to the unprocessed inputs that have yet to enter the production process, while final assembly pertains to the last phase of production where the product is being completed. Thus, the best definition for WIP inventory aligns with products actively in the manufacturing journey.