Procurement Glossary & Terminologies
Finished goods
What is Finished goods ?
Products that have finished the whole production process and are being kept for sale are referred to as finished goods. Work-in-process inventory relates to goods that are still being produced.
The finished items of a supplier may serve as the buyer’s raw material in a supply chain management flow.
Characteristics of Finished Goods
Several traits of finished goods are mentioned. The weight assigned to these attributes varies according to the chosen business model.
- Storage space required
Keeping a sizable inventory of finished items on hand may be necessary for a business with an immediate delivery plan to fulfill all requests as quickly as feasible. On the other hand, a company with a rock-bottom pricing strategy would opt to manufacture only when orders are received and have absolutely no finished goods inventory on hand.
- Shelf life
A business could desire to reduce its completed goods inventory if the stock has a limited shelf life and is, therefore, susceptible to spoiling or obsolescence. On the other hand, producing in large batches and maintaining a sizeable amount on hand can make more sense if the inventory can be kept viable for extended durations.
- Collateral
Since finished goods may be quickly auctioned off to pay for finishing labor, they are regarded as having great value as collateral for a lender.
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