Work in process (WIP) is a product that has been created from raw materials but is not yet ready for sale due to unfinished manufacturing, late release dates, or supply chain issues. Proper supply chain management helps companies avoid excess WIP and minimize costs.
Work in process, also known as WIP, is a term often used in supply chain management. Refers to a product that has been created from raw materials but is not ready for sale for one of many reasons. Examples of work in progress might be a chair that has been fashioned but not yet completed, or a pile of dolls in storage that haven’t been properly packaged for sale. This term differs slightly from another term, work in progress, which refers to any work started and not completed. When something is referred to as a work in progress it means, in that general sense, outside the realm of supply chain management.
Reasons a product might be a work in progress include unfinished manufacturing, late release dates, or supply chain issues. For example, a product may be a work in progress because the company handling the packaging has fallen behind schedule, delaying the completion of the manufacturing process that allows a product to be shipped to the seller. A motorcycle that has been partially assembled but is awaiting parts to be ordered is also in the pipeline, as is a brand-new automobile that has yet to be painted. Most of the time, a business should try to avoid work in progress.
Work in process can cost a company money in storage and handling; therefore, it is best to have as little product as possible in this state. Ensuring that WIP is kept to a minimum is part of supply chain management, which focuses on the aspects of communication and transactions between the many companies involved in creating a finished product. Coordinating deliveries between a raw material manufacturer and a delivery service is part of supply chain management, just as dealing with distributors who sell the finished product to retailers.
Proper supply chain management helps companies avoid excess WIP. It might seem like supply chain management only applies to large companies, but even the smallest companies deal with supply chain management at some level. As an example, a balloon twister who runs a one-woman operation practices supply chain management when she researches and decides on a supplier for her balloons. In this case, a work in progress might be a balloon that she has inflated for use but has not yet twisted into a shape because she has realized that her previous attempts have resulted in broken balloons. If she calls the supplier to complain about low-quality products, she is performing quality control, another important part of supply chain management.
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