From the above definitions, we can draw the inventory components. The various forms in which inventories exist in a manufacturing firm are, raw materials, work-in-process, finished goods, and stores & spares. The following Figure 12.1 gives the inventory components:
1. Raw Materials: Raw materials are those inputs that are converted into finished goods through a manufacturing or conversion process. These form a major input for manufacturing a product. In other words, they are very much needed for uninterrupted production.
2. Work-in-Process: Work-in-process is a stage of stocks between raw materials and finished goods. Work-in-process inventories are semi-finished products. They represent products that need to undergo some other process to become finished goods.
3. Finished Products: Finished products are those products, which are completely manufactured and ready for sale. The stock of finished goods provides a buffer between production and market.
4. Stores and Spares: Stores and spares inventory (include office and plant cleaning materials like soap, brooms, oil, fuel, light, bulbs etc.) are purchased and stored for the purpose of maintenance of machinery.