What Is WIP Inventory?
WIP (work-in-process) inventory is stock that has left the raw-materials stage but isn't yet a finished, sellable good. Here is the definition, why it's hard to track, and how to track it by shop-floor location.
Free Starter plan · BOM included · No credit card
01 — Overview
WIP inventory, defined
Work-in-process inventory is the value and quantity of goods that are partway through a manufacturing process — raw materials have been issued and work has started, but the item is not yet a finished, sellable good. A car with an engine installed but no wheels yet, or dough that's been mixed but not yet baked and packaged, are both WIP.
Mid-transformation
Materials issued, work started, not yet a finished good.
Carries added cost
Labor and overhead applied so far, beyond raw material cost.
No natural resting point
Unlike a shelf, WIP moves through stations, not a fixed location.
Easy to lose track of
Without checkpoints, the recorded number drifts from reality.
WIP (work-in-process, sometimes "work-in-progress") inventory is stock that has started production but is not yet a finished good — it has left the raw-materials stage but isn't sellable yet.
WIP is harder to track than raw materials or finished goods because it exists mid-transformation: partially consumed components, partially built assemblies, sitting on the shop floor rather than a shelf.
A system that only tracks raw materials and finished goods, with nothing in between, effectively makes WIP invisible until a production order completes and updates final stock.
02 — Why it's hard to track
Why WIP is harder to track than raw materials or finished goods
Raw materials sit on a shelf with a stable quantity until they're used. Finished goods sit on a shelf, ready to sell. WIP exists in between — neither fully consumed nor fully realized as a product.
Accurate at the start and end, invisible in between
A production order that consumes raw materials and adds a finished good when it completes — rather than tracking every intermediate step — effectively treats WIP as a black box. That's often good enough for fast production cycles, but a poor fit when a build sits partially complete for days or weeks.
- No natural checkpoint marks "raw" → "in process" → "finished"
- The number on paper drifts from reality without one
- Fast cycles tolerate this better than slow ones
03 — WIP cost
WIP carries more than material cost
The labor and overhead already applied to a partially-built item add real cost to it, beyond the raw material cost alone.
Raw material cost
The components and materials already issued to this build.
Labor applied so far
Time and wages spent on the build up to its current stage.
Allocated overhead
A share of factory costs assigned to the build in progress.
That value needs to be accounted for on the balance sheet even though the item can't be sold yet. If a partially built unit is scrapped instead of finished, that cost comes off the books as an inventory write-off rather than staying recorded as WIP.
04 — Formula
How to calculate WIP inventory
Ending WIP inventory is what was already mid-production at the start of the period, plus what got added to it, minus what left as finished goods.
Ending WIP = Beginning WIP + Manufacturing Costs − Cost of Goods Manufactured (COGM)
Beginning WIP
The value of partially built units still in production at the start of the period.
Manufacturing costs
Raw materials, labor, and overhead added to production during the period.
Cost of goods manufactured
The value of units that finished production and moved out of WIP into finished goods.
Worked example: a shop starts the month with $10,000 of beginning WIP. It spends $300,000 on materials, labor, and overhead during the month, and completes $250,000 worth of finished goods. Ending WIP is $10,000 + $300,000 − $250,000 = $60,000 still on the shop floor, not yet sellable.
05 — Shop-floor staging
Tracking WIP by shop-floor location
A "WIP box" or staging location turns an invisible in-between state into a countable spot on the floor.
Every station becomes a checkpoint
Instead of one black box between start and completion, WIP tracked by staging location shows exactly how many units are waiting at cutting, at assembly, or at paint and finish — right now, not just at the end of the shift.
- Quantity visible per station, not just per work order
- Bottleneck stations show up immediately
- A "WIP box" is a physical version of this same idea
06 — Vs. related terms
WIP vs. raw materials vs. finished goods
Three tiers of manufacturing inventory, each behaving differently.
| Term | What it means |
|---|---|
| Raw materials | Unmachined components and parts, held in storage until requested by production — stable quantity, easy to track. |
| Work-in-process (WIP) | Partially completed units on the shop floor — materials consumed plus labor and overhead applied so far. |
| Finished goods | Fully manufactured units ready for shipment — stable quantity again, on a shelf. |
07 — Reducing the blind spot
Making WIP visible instead of invisible
Three changes turn WIP from a black box into something you can actually see.
Track by staging location
Treat each shop-floor station as a checkpoint, not a black box between start and completion.
Log intermediate checkpoints
Materials issued, moved to next station, build complete — each a logged event, not an assumption.
Separate WIP value from raw and finished
Report it as its own line so labor and overhead already applied are visible, not buried.
Checkpoints instead of a single start-to-finish gap
Logging materials issued, movement to the next station, and build completion as separate events gives WIP a visible trail — instead of one number that's only trustworthy right after a production order opens or closes.
08 — Software
How StockFlow handles WIP
For fast production cycles, treating WIP as a single step between start and completion is often enough.
Production orders
Consume raw materials and add the finished good in one recorded action when a build completes.
BOM-driven
Component consumption is calculated from the bill of materials, not tracked manually.
StockFlow's production orders (part of the Production module, included on Professional and above) treat the time between start and completion as a single step rather than tracking granular intermediate WIP stages.
Frequently asked questions
What is WIP inventory?
Work-in-process inventory: stock that has started production (raw materials issued, work begun) but is not yet a finished, sellable good. It carries added cost from labor and overhead beyond the raw materials alone.
What does WIP stock mean?
"WIP stock" is the same concept as WIP inventory — the quantity and value of goods currently mid-production, past the raw-materials stage but not yet finished goods. "WIP" stands for work-in-process (or work-in-progress).
What is work-in-progress inventory tracking on the shop floor?
Shop-floor WIP tracking means logging where partially built units sit — which station or staging location — as they move through production, rather than only knowing what went in (raw materials) and what came out (finished goods). Without it, a unit "in process" for days has no visible location or status in between.
What is a WIP box?
A WIP box (or WIP bin) is a physical staging location on the shop floor where partially completed units wait between production steps — for example, parts that have been cut but not yet assembled. Tracking quantity by WIP box turns an invisible in-between state into a countable location.
Why is WIP inventory difficult to track accurately?
Unlike raw materials or finished goods, WIP exists mid-transformation with no natural resting point, which makes it easy for the recorded quantity to drift from reality without a clear system marking the transition between production stages.
What is the difference between WIP and finished goods?
Finished goods are fully manufactured units ready for shipment — a stable quantity sitting on a shelf. WIP is still mid-production: materials have been consumed and labor applied, but the item cannot yet be sold or shipped.
What is the WIP inventory formula?
Ending WIP inventory = beginning WIP + manufacturing costs (materials, labor, and overhead added during the period) minus the cost of goods manufactured (the value of units completed and moved out of WIP). For example, $10,000 beginning WIP plus $300,000 in manufacturing costs minus $250,000 of goods manufactured leaves $60,000 in ending WIP.
How do you calculate WIP inventory on the balance sheet?
Take the beginning WIP balance, add the raw materials, labor, and overhead costs incurred during the period, then subtract the cost of goods manufactured — the value of units that finished production and left WIP as finished goods. The remaining figure is the value still mid-production, reported as part of inventory on the balance sheet.
How is WIP inventory valued?
WIP value includes the raw materials already consumed plus direct labor and allocated factory overhead applied up to that point in production — not just the material cost. That value sits on the balance sheet as inventory until the item is finished and, later, sold.
Does StockFlow track WIP inventory as a separate stage?
StockFlow's production orders (part of the Production module, included on Professional and above) consume raw materials and add the finished good when a build completes, treating the time in between as a single step rather than tracking granular intermediate WIP stages.
See what's actually on the shop floor
StockFlow's production orders tie raw materials, WIP, and finished goods to one live stock count — free to start.