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Work in Progress (WIP)

Inventory value of partially completed products between operations — a key indicator of production flow efficiency and working capital health.

Formula

Sum of all in-process inventory values

Benchmarks

World-class: Minimal WIP, high turns (>30× per year) Good: Controlled WIP, turns 15–30× per year Typical: Moderate WIP, turns 10–15× per year Poor: Excessive WIP, turns <10× per year

What Is Work in Progress?

Work in Progress (WIP) measures the inventory of partially completed products sitting between operations. It represents working capital tied up in the production process — cash that has been spent on materials and labour but hasn’t yet been converted into a finished, sellable product.

The Formula

WIP Value = Sum of all in-process inventory values
WIP Turns = Cost of Goods Sold ÷ Average WIP Value

Higher WIP turns means faster flow through the production system.

Data Requirements

SourceRequiredWhat You Need
ERPYesMaterial and labour costs accumulated, inventory values
MESYesWork order status and location, in-process inventory tracking

WIP is a Phase 3 metric — it requires ERP and MES integration.

Why It Matters

  • Working capital — WIP is cash tied up; reducing it frees cash for other uses
  • Flow efficiency — high WIP signals poor flow, bottlenecks, or unbalanced lines
  • Storage costs — WIP consumes floor space and handling effort
  • Quality risk — the longer material sits in process, the greater the risk of damage, degradation, or obsolescence

Best Practices

  • Minimise WIP while maintaining throughput — the lean principle of flow
  • Identify WIP accumulation points to find bottlenecks
  • Implement pull systems (kanban) to limit WIP at each stage
  • Track WIP by product and location for targeted improvement
  • Lead Time — high WIP directly extends lead time
  • Throughput — WIP and throughput are inversely related (Little’s Law)
  • Cycle Time — faster cycle times reduce WIP at each station