There are four main types of inventory: raw materials, work-in-progress, finished goods, and MRO supplies. Which ones you hold depends on whether you make products, sell them, or both.
A mudi dokan mostly holds finished goods. A garments factory holds all four types at once. Knowing the difference helps you track each one properly and see where your money is sitting.
If you're new to the idea, start with our simple guide: What is inventory?
Quick Takeaways
- Raw materials are what you buy to make your product, like fabric or flour.
- Work-in-progress is products that are half-made.
- Finished goods are products ready to sell to customers.
- MRO supplies keep your business running, like machine oil and spare parts.
- Shops and traders usually hold only finished goods. Manufacturers hold all four types.
1. Raw materials
Raw materials are the items you buy to turn into your own products. They haven't been changed or worked on yet.
Examples from Bangladesh:
- A garments factory: fabric rolls, thread, buttons, zippers
- A bakery: flour, sugar, eggs, butter
- A furniture workshop: wood, nails, foam, varnish
- A small food business making achar: mangoes, mustard oil, spices, glass jars
What to watch for
Raw materials often come in bulk, so a lot of cash can sit here. Buy too little and your production stops. Buy too much and it may spoil, get damaged, or lose value.
Some raw materials also go up in price quickly. Keeping a clear record of what you paid for each batch helps you price your final product correctly.
A quick note: what counts as a raw material depends on the business. Fabric is a raw material for a tailor, but finished goods for a fabric shop in Islampur.
2. Work-in-progress (WIP)
Work-in-progress means products that are partly made. You've started working on them, but they're not ready to sell yet.
Examples from Bangladesh:
- A garments factory: shirts that are cut and stitched but not yet washed, ironed or packed
- A furniture workshop: a sofa frame waiting for foam and fabric
- A bakery: dough that is rising, or cakes in the oven
- A tailor shop: a panjabi with the body stitched but no embroidery yet
What to watch for
WIP is easy to forget because it's not raw and not finished. But it still holds real value. It includes the materials used so far, plus the labour spent on it.
If too much WIP piles up, it can mean a slow step somewhere in production. For example, a stitching line may be fast, but the finishing section can't keep up.
3. Finished goods
Finished goods are products that are complete and ready to sell. For most shops, traders and online sellers, this is the only type of inventory they hold.
Examples from Bangladesh:
- A garments factory: packed cartons of shirts ready for export
- A mobile shop: boxed phones, chargers and earphones
- A pharmacy: medicine boxes and syrups on the shelf
- An online clothing page: sarees and three-pieces ready to ship
Merchandise: a special case
If you buy products and resell them without changing them, they're called merchandise. A grocery shop buying soap from a distributor is a good example.
Merchandise is treated just like finished goods. The only difference is that someone else made it.
What to watch for
Finished goods are the closest to cash, so they need the closest tracking. Watch for items that sell fast and could run out, and items that sit for months without selling.
4. MRO supplies
MRO stands for maintenance, repair and operating supplies. These items don't become part of your product, but your business can't run without them.
Examples from Bangladesh:
- A garments factory: sewing machine needles, machine oil, spare parts, cleaning supplies
- A bakery: oven gloves, cleaning liquid, gas cylinders
- A shop: carry bags, receipt paper rolls, price tags
- An online seller: packing tape, poly mailers, cartons
What to watch for
MRO items are usually small and cheap, so they're easy to ignore. But running out can stop work completely. A factory line can stand idle for hours over one broken machine part.
Some accountants record MRO as an expense rather than inventory. Either way, it's worth keeping a simple count so you reorder before you run out.
Other inventory terms you'll hear
Beyond the four main types, you'll often hear a few other terms. These describe the situation inventory is in, rather than a separate type.
| Term | What it means | Example |
| Goods in transit | Inventory you own that is still on its way | Phones shipped from China, still at Chattogram port |
| Safety stock | Extra stock kept in case demand jumps or a delivery is late | Ten extra cartons of oil before Ramadan |
| Seasonal stock | Stock bought ahead for a busy season | Panjabis and sarees before Eid, warm clothes before winter |
| Consignment stock | Goods placed in your shop that you pay for only once sold | A local brand leaving bags at your boutique |
| Dead stock | Items that haven't sold for a long time and probably won't | Last year's phone covers for a model nobody uses now |
Dead stock deserves special attention. It takes up space and holds your cash. Spotting it early lets you discount it before it loses all its value.
Which types of inventory does your business hold?
Most businesses fall into one of three groups. Find yours in the table below.
| Business type | Raw materials | Work-in-progress | Finished goods | MRO supplies |
| Retail shop or online seller | No | No | Yes | A few |
| Wholesaler or distributor | No | No | Yes | A few |
| Manufacturer or factory | Yes | Yes | Yes | Yes |
If you run a shop or trading business
Your focus is finished goods. The key questions are simple. What's selling fast? What's sitting still? When should you reorder?
If you make products
You need to track all four types and how goods move between them. Raw materials become WIP, and WIP becomes finished goods. Each step changes the cost of your stock.
Keep every type in one place
Tracking these types in a khata or spreadsheet gets hard as you grow. With PicoStore, you can track stock across multiple warehouses, record purchases and sales, and link it all to double-entry accounting.
Want to learn how to manage all of this day to day? Read our guide: What is inventory management?
Ready to see all your stock in one place? Start a free trial of PicoStore.
Frequently asked questions
What are the 4 types of inventory?
The four main types are raw materials, work-in-progress, finished goods, and MRO supplies. Shops usually hold finished goods, while factories hold all four.
Which type of inventory is most important?
It depends on your business. For shops and online sellers, finished goods matter most because they bring in cash. For factories, raw materials are often the biggest cost to manage.
Is packaging part of inventory?
Yes, if it becomes part of what you sell. A perfume bottle or a branded box counts as raw material. Carry bags and courier packets are usually treated as MRO supplies.
Are goods in transit counted as inventory?
Yes, if you already own them. Once you've paid for goods and they belong to you, they count as your inventory, even while still on a ship or truck.
What is dead stock?
Dead stock is inventory that hasn't sold for a long time and probably won't sell at full price. Clearing it with a discount frees up space and cash.
How is inventory shown in accounts?
Inventory is a current asset on your balance sheet. Each type may be shown separately. Learn more in our guide to inventory in accounting.