Work in Process Inventory: Count, Cost and Control

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Estimated reading time: 9 minutes

Work in process inventory (WIP) is goods that have entered production but are not yet complete. It includes parts being processed and unfinished work waiting between operations. In accounting, WIP also refers to the manufacturing costs accumulated in those unfinished goods.

Those two views answer different questions. A count tells you how much is unfinished. A cost figure tells you how much manufacturing cost is tied to it. Neither, on its own, tells you why a batch has been waiting since Monday or when it can finally leave production.

For a production manager, that is the useful next question. SkyPlanner APS connects the remaining operations with capacity, material readiness and priorities, helping you finish work instead of repeatedly adding to queues. Better timing reduces unnecessary work in process and the capital it ties up.

What counts as work in process?

Think of inventory at three points in the manufacturing flow:

• Raw materials: materials and purchased components awaiting use in production.
• Work in process: goods whose production has begun but still requires manufacturing, assembly or required final checks.
• Finished goods: completed products, even if they have not yet been sold or shipped.

A machined housing waiting for coating is WIP. So is an assembled unit awaiting the final inspection required for completion. A completed, accepted unit waiting for the delivery truck is finished goods, not WIP.

Waiting does not make an unfinished item disappear from the count. Queues, transfers and holds can account for much of the time a product spends inside production, even though no machine is working on it at that moment.

You will also hear work in progress. Usage varies between businesses and industries; in this guide, WIP means unfinished manufacturing inventory, not a project billing calculation or the number of tasks on a software team’s board.

How to measure the physical amount of WIP

Start with a clear boundary: a product family moving from its first manufacturing operation to final acceptance, for example. Count unfinished pieces within that boundary at a stated time. For bulk production, the appropriate unit might be kilograms or litres rather than pieces.

Imagine a factory following one family of identical housings. At the end of Friday’s shift, it finds:

Current position	Unfinished housings	What remains
In machining	20	Complete machining, finish and inspect
Waiting for finishing	60	Finish and inspect
Awaiting final inspection	20	Inspect and accept
Total WIP	100	Different amounts of work remain

Count each housing once, at its current position. Do not count the same batch again for every operation still listed on its route.

You can also reconcile the movement across the boundary. Suppose the week began with 120 unfinished housings, another 480 entered production and 500 became finished goods. With no scrap or other movements:

Ending WIP = 120 + 480 − 500 = 100 housings

If that result disagrees with the physical count, investigate missing completions, unrecorded transfers, scrap or the cut-off time before drawing a conclusion about production performance.

Pieces are not the same as remaining workload

The table contains 100 unfinished pieces, but the 20 awaiting inspection need far less work than the 20 still in machining. Two queues of equal size can therefore make very different demands on capacity.

In a mixed-product factory, a count of work orders is even less informative: one order may need a short inspection, another several days across multiple resources. Keep quantities by product or meaningful family, and use the remaining operation durations to understand the load. Label that load in hours; it is not another name for WIP units or WIP value.

The work in process inventory cost formula

For a simplified period cost reconciliation:

Ending WIP cost = beginning WIP cost + manufacturing costs added − cost of goods manufactured

The added manufacturing costs include direct materials used, direct labour and allocated manufacturing overhead. Cost of goods manufactured (COGM) is the cost transferred out when production is completed. It is not the selling price or the cost of goods sold during the period.

Imagine a separate monthly cost example. Opening WIP is $18,000, manufacturing adds $72,000, and completed goods costing $65,000 move into finished inventory. With no other adjustments:

$18,000 + $72,000 − $65,000 = $25,000 ending WIP cost

That is a cost balance, not 25,000 units or $25,000 of future profit. The example is separate from the housing count above.

Why a unit count does not give you the value

An unfinished item has accumulated only the costs assigned to it so far. Multiplying every unfinished piece by its full finished-product cost can overstate the balance. Nor does “halfway through the route” necessarily mean half the total cost: expensive material may enter early, while labour and processing costs accumulate later.

Use the costing records and accounting policy applied by your finance team. The roll-forward explains cost movement; financial reporting may also require valuation adjustments under the applicable accounting framework.

For production decisions, the important distinction is simpler: accumulated cost tells you what has gone into the work. The remaining route tells you what it still needs before completion. You need both views, not a substitute of one for the other.

What high or low WIP actually tells you

A large WIP figure is a reason to investigate, not a complete diagnosis. It may reflect higher demand, a different product mix, deliberately protected capacity or work accumulating behind an interruption. A small figure can mean smooth flow, but it can also mean a critical resource has too little ready work.

The objective is not zero unfinished production. It is enough of the right work to support reliable completion, without unnecessary early starts, waiting and handling.

Return to the 60 housings waiting for finishing. If they were machined this morning for a planned finishing slot this afternoon, the queue may be entirely reasonable. If they have been there for a week while the finishing resource processes other orders, the same count describes a different problem.

To interpret that queue, establish:

1. Its age: when did the batch enter production, and how long has it waited here?

2. Its next operation: what resource, material or approval does it need to proceed?

3. Its planned completion: when does the remaining route fit, and does that meet the order’s commitment?

4. Its reason for waiting: is it a planned buffer, capacity competition, missing material, a quality hold or another interruption?

That turns “we have too much WIP” into a decision someone can act on. A missing purchased component needs a different response from an overloaded finishing station. Moving another batch through machining will not solve either problem.

Review WIP alongside completed output and delivery performance. If more work enters production than leaves as completed goods, with no other exits, the unfinished inventory is building. If WIP falls only because production stops receiving orders, that is not evidence of a better process. Compare similar periods and product families so a change in mix does not masquerade as improvement.

Use SkyPlanner to give unfinished work a path to completion

Once you know where work is waiting, the scheduling question is concrete: how does its remaining route fit with everything else the factory needs to finish?

SkyPlanner brings workstations, shifts, operators, process steps and durations into a shared production schedule. Arcturus, its scheduling AI, places operations against the configured capacity, dependencies and priorities. The Gantt view shows the resulting sequence across resources, rather than leaving each department to maintain its own queue.

For the waiting housings, you can examine the finishing operation in the context of the work before and after it. Is the resource occupied by an earlier commitment? Does the inspection step fit afterwards? Would starting another housing batch now merely create more waiting work?

With material-aware scheduling enabled, Arcturus also considers inventory and incoming material availability. That matters when a later operation needs a purchased component: an available first machine is not enough if the order cannot continue through assembly.

Progress information keeps the plan useful. SkyPlanner’s Timer records work starts, stops and produced quantities, while its open REST API connects with any ERP or MES. As progress, availability or priorities change, Arcturus can recalculate the schedule around the updated information. You set the priorities; the AI handles the scheduling calculation.

The benefit is less daily work repairing separate machine queues and a clearer basis for deciding what should proceed. You can avoid committing more material and effort to orders too early, while focusing attention on the unfinished work needed for delivery.

Completion alone does not release cash: moving goods from WIP into finished inventory changes their status, but they are still inventory. The financial benefit comes from reducing unnecessary inventory and moving the right work through to customer demand, not simply making the WIP line smaller.

What better timing changed at Mamec

Mamec, a Finnish manufacturer of industrial mixing equipment and high-tech contract products, previously prioritised thousands of interdependent work orders using delivery dates on paper orders. Its ERP planning did not provide an overall picture, and management’s view of production load relied on subjective estimates.

With SkyPlanner integrated into its Oscar ERP environment, Mamec gained finite scheduling and shared visibility into where orders stood and how they were scheduled. Staff could look up an order rather than depend on separate interpretations of the situation.

Mamec reports more sensible lead times, a lighter planning workload and less working capital tied up unnecessarily in WIP because jobs start at the right time. That is the practical connection between unfinished inventory and scheduling: the factory still has work in production, but it has a better basis for deciding when that work needs to be there.

Start with one batch that has waited too long

Choose an unfinished order whose delay your team knows well. Bring its current position, remaining route, material needs and delivery commitment to a SkyPlanner demonstration. The useful test is whether you can see a connected plan for completing it, including the other orders competing for the same resources.

Book a SkyPlanner demo to explore that plan with your own production situation, or try SkyPlanner with demo data first. A better WIP figure starts with understanding the unfinished work. A better production schedule helps you do something about it.