Based on your product mix, an important question is “How do I know how much of each product I should have in inventory?” Inventory is the stock of materials held for future use. Thus, inventory is a resource needed to transform inputs into outputs. Inventory control, also called materials control, is an important responsibility of the operations manager. Inventory control is the process of managing raw materials, work in process, finished goods, and in-transit goods.

Raw materials are input materials that have been received but have not yet been transformed in any way by the operations department, such as eggs at a restaurant or steel at an automaker. Work in process is material that has had some transformation but is not yet an output, such as an egg that is being cooked or a car on the assembly line. Finished goods are transformed outputs that have not yet been delivered to customers, such as cooked eggs sitting on a plate waiting to be served to a customer or a car sitting at the factory waiting to be shipped to a dealer.

In-transit goods are finished goods being delivered to the customer, such as eggs being carried to the table by a server or cars being delivered by truck to the dealer. The objective of inventory control is to have the correct amount of all four types of inventory available when and where they are needed while minimizing waste and the total cost of managing and storing inventory. With Just-in-time (JIT) inventory, necessary parts are delivered shortly before they are needed.