What is Work in Process (WIP)? Simple Explanation in 5 Minutes

In the manufacturing industry, Work in Process (WIP) is a crucial element that significantly impacts production processes, product costs, and organizational resource planning. Therefore, having a clear understanding of WIP data and its details can help organizations efficiently manage production, reduce waste, meet market demands, and enhance competitiveness.

In this article, we explain the meaning of Work in Process and provide examples to help you easily understand key concepts in the production process.

What is Work in Process (WIP)? The Heart of the Production Process

Work in Process (WIP) refers to raw materials, goods, or products that are in the process of being manufactured but are not yet finished products. WIP plays a key role in the production process by allowing organizations to assess the quantity of unfinished goods on the production line and manage the production flow effectively.

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Why WIP is important for Your Business

Understanding and properly managing Work in Process is essential for reducing factory costs caused by excess in-process inventory, defective products, or substandard goods. It helps ensure production flows according to plan.

Moreover, the amount of WIP is a key indicator of Overall Equipment Effectiveness (OEE). A high volume of WIP can indicate bottlenecks in the production line, which may reduce equipment performance or cause operational delays. Therefore, monitoring and planning WIP effectively is a critical step in analyzing and developing your business for sustainable growth.

The Difference Between Work in Process and Finished Goods

Inventory management in manufacturing involves clearly distinguishing between Work in Process (WIP) and Finished Goods (FG). This classification is vital for cost control and production efficiency. Below are the core characteristics of these 2 inventory types.

	Work in Process (WIP)	Finished Goods
Product Status	Components or products that are in the production process and not yet completed	Products that have completed all production processes and are ready for sale or delivery to customers
Accounting Record	Recorded as inventory under Work in Process (WIP)	Recorded as inventory under Finished Good
Product Cost	Includes the cost of raw materials, direct labor, and a portion of factory overhead	Includes the total cost of production, including raw materials, direct labor, factory overhead, and other expenses
Storage Location	Stored in the production area or on the factory floor	Stored in the warehouse, ready for sale and delivery

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7 Benefits of Managing Work in Process in Manufacturing

Managing Work in Process (WIP) is a vital part of controlling the production process. It enables businesses to manage costs, improve speed, and reduce waste as follows:

1. Improve Production Efficiency

Systematic WIP management reduces bottlenecks, one of the main issues that prevent machines or workers from proceeding smoothly. Proper control of WIP levels leads to steady workflow, smoother operations, and shorter cycle times.

2. Increase Consistency and Completeness in Product Output

Excessive WIP can result in unstable product quality or inability to meet market demand, leading to waste. Efficient WIP management enables continuous production aligned with plans, ensuring timely delivery, standardized quality control, and improved brand credibility.

3. Accelerate Product Flow

Maintaining an appropriate WIP level helps products move through production stages faster and more efficiently. This is a key factor in enhancing market competitiveness, especially in make-to-order manufacturing.

4. Increase Customer Satisfaction

Effective WIP management contributes to smooth production, accurate delivery schedules, and reduced process loss. This results in higher customer satisfaction, trust, and future repeat purchases.

5. Reduce Overall Production Costs

Excess WIP is a financial burden, representing unsellable goods waiting for further processing. It increases labor, storage, and spoilage risks—directly impacting overall costs and long-term profitability.

6. Minimize Obstacles and Improve Workplace Safety

Systematic WIP storage reduces clutter in production areas and enhances safety. A tidy and organized workspace makes it easier for personnel to access raw materials efficiently.

7. Reduce Waste in the Production Process

Effective WIP control helps minimize waste in unfinished goods, unnecessary handling, and workpiece accumulation—improving operational efficiency across the factory.

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Examples of Work in Process in Various Industries

Understanding WIP characteristics across different industries provides a broader view of the production process and helps implement more effective management strategies. Below are examples of WIP in specific sectors.

Industry	Material	WIP (Work in Process)	Finished Goods
Plastic	PE or PP plastic pellets	Plastic parts that have been injected but have not been cut or printed.	Plastic box, plastic packaging
Metal	Steel bars, steel coils	Hot rolled steel sheet, waiting for cutting or galvanizing	Steel bars, galvanized steel sheets ready for delivery
Automotive Part	Steel, engineering plastics, aluminum	Components such as door frames, consoles that are not fully assembled	Auto parts ready for delivery to manufacturers
Chemical	Precursor chemicals, solvents	Mixed chemicals in tanks during mixing or waiting for filling	Cleaning agents, bottled industrial chemicals
Food	Meat, fresh vegetables	Marinated food, sliced and prepared food, dried ingredients	Sausages, frozen food
Beverage	Water, sugar, flavoring, preservatives	Fruit juice that has been extracted but has not been pasteurized or packaged	Fruit juice, soft drinks or packaged drinking water
Packaging	Corrugated paper, plastic film	A box has not been folded or printed yet.	Box, packaging
Furniture	Wood, MDF, Fabric, Foam	Sofa frame	Table, chair, sofa
Bicycle	Steel/aluminum frame, wheels, handlebars	Bicycle frame	Bicycle

Summary: Best Practices for Managing Work in Process

To manage WIP effectively, you need software tailored to your business. A Manufacturing Execution System (MES) is a powerful tool for real-time tracking of in-process goods, reducing manual entry errors, and supporting systematic planning for materials, production, and delivery. It helps minimize delays in WIP and boosts productivity while enhancing the manufacturing process.

ARES Company, a leader in ERP and MES systems, provides complete solutions across all departments—from WIP and production management to in-depth data analytics. We help your organization take a confident step toward becoming a Smart Factory.

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