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Work in process, also known as WIP, is a term usually used in supply chain management. It refers to a product that has been created from raw material, but that is not ready for sale for one of many reasons. Examples of work in process could be a chair that has been formed but has not been finished, or a pile of dolls in storage that have not been properly packaged for sale. This term differs slightly from another term, work in progress, which refers to any work that has been started and has not been finished. When something is referred to as a work in progress, it is meant in this general sense, outside the realm of supply chain management.
Reasons that a product might be a work in process include unfinished manufacturing, delayed release dates or problems within the supply chain. For instance, a product can be a work in process because the company handling the packaging has become backlogged, delaying the completion of the manufacturing process that allows a product to ship to the seller. A motorcycle that has been partially assembled but that is waiting for parts on order is also a work in process, as is a brand new automobile that has not yet been painted. Most of the time, a company should try to avoid having work in process.
Work in process can cost a company money in storage and handling, so it is best to have as little product in this state as possible. Ensuring that WIP is kept to a minimum is part of supply chain management, which focuses on aspects of communication and transactions among the many companies involved in creating a finished product. Coordinating deliveries between a raw materials manufacturer and a delivery service is a part of supply chain management, as is dealing with distributors who sell the finished product to retailers.
Proper supply chain management helps companies avoid excess WIP. Supply chain management may seem like it applies just to big businesses, but even the smallest of businesses handle supply chain management on some level. As an example, a balloon twister who runs a one-woman operation practices supply chain management when she researches and decides on a vendor for her balloons. In this case, a work in process might be a balloon she has inflated for use but has not yet twisted into a shape because she noticed that her previous attempts resulted in broken balloons. If she calls her vendor to complain about low quality product, she is performing quality control, another important part of supply chain management.
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