Work-in-Process (WIP) Inventory
4 min read
By
TranZact Solutions Team
· Published
Work-in-process (WIP) inventory is everything currently mid-process on the shop floor: material that has left raw material but has not yet reached finished goods. It carries partial cost from whatever labor and processing has been applied so far, and it is the inventory category manufacturers most often undercount.
This guide covers what WIP actually includes and how it is different from semi-finished goods. It also covers why getting a WIP number wrong throws off both your inventory valuation and your production plan.
What Is Work-in-Process Inventory?
Work-in-process inventory is material that has entered production but has not yet reached its final finished-goods state. It sits somewhere between raw material and a sellable product.
It carries partial cost: the raw material cost plus whatever labor and processing has been applied so far. That is what makes it harder to value than raw material or finished goods.
WIP is a snapshot, not a fixed stock. It changes constantly as material moves through each production stage, which is exactly why it is the easiest inventory category to lose track of.
WIP vs Semi-Finished Goods vs Finished Goods
These four states describe different points in the same production flow:
Raw material. Unprocessed input, no labor or processing cost added yet.
Work-in-process. Currently mid-process on the shop floor at this exact moment, a real-time snapshot.
Semi-finished goods. Completed one or more stages and stocked as inventory rather than actively sitting on a machine right now.
Finished goods. Fully processed, packaged and ready for dispatch, carrying full cumulative cost.
Are your jobs, their stages and their costs still tracked across Excel and WhatsApp?
Tracking WIP starts with a work order for each job, with its stages mapped out. TranZact's manufacturing AI software includes production management with work orders, process routing, multi-level BOM and production costing.
Why WIP Tracking Breaks Down
The same patterns repeat across manufacturing SMEs:
No stage-level visibility. Without tracking which job is at which stage, WIP becomes a rough estimate instead of a real number.
WIP treated as either raw material or finished goods. Some systems skip the WIP state entirely, which understates true inventory value sitting on the shop floor.
Manual updates lag reality. If WIP status is updated once a shift or once a day, the system is always showing stale progress.
No link between WIP and job costing. Labor and material already sunk into WIP does not get reflected in job cost until the job is marked complete, hiding true in-progress cost.
Year-end valuation gaps. WIP is the inventory category most commonly missed or estimated roughly during stock valuation, since it is the hardest to physically count.
WIP on the patchwork vs on TranZact
Tally, Excel and WhatsApp | With TranZact | |
|---|---|---|
Job steps | Tracked in Excel or memory | Work orders and process routing |
Material per job | Rough estimate | Multi-level BOM |
Material out for job work | Phone calls to vendors | Sub-contracting |
Job costing | Worked out in Excel | Production costing |
Accounts | Re-entered by hand | One-way Tally sync |
How to Count WIP by Stage
A WIP count works best job by job, not as one lump number. A simple method:
List every open job. Take each job that has drawn material but has not reached finished goods.
Note the stage of each job. Record which step it is on and how far that step has got.
Add up material issued. Use what was actually issued to the job, not what the BOM planned.
Add conversion cost to date. Include direct labor and allocated overhead for finished steps and the part-done current step.
Check against net realisable value. Under AS 2 / Ind AS 2, carry WIP at the lower of cost and net realisable value.
The same lower-of-cost-and-NRV rule applies to finished goods.
What TranZact's Production Module Includes
In TranZact, each job runs on a work order with process routing and a multi-level BOM. Sub-contracting and production costing sit in the same production module.
Production management is on the Scale and Dominate plans. Accounting stays in Tally, with a one-way sync and no double entry.
TranZact does not replace your cost accountant's judgment on how to value WIP for financial reporting. That call stays with your accountant.
If WIP on your floor is still a guess between physical counts, book a demo. See work orders and process routing for yourself.
