What is WIP (Work in Process)?
The value and quantity of partially completed goods that have entered production but are not yet finished.
Definition
Work in process (WIP), sometimes called work in progress, refers to products that have started but not finished manufacturing, along with the accumulated cost of the materials, labor, and overhead consumed so far. WIP is both an operational state, units sitting between raw material and finished goods, and an accounting balance representing the value tied up on the shop floor. Excessive WIP signals waste in lean terms, ties up cash, lengthens lead times, and hides quality problems, so reducing it is a common improvement goal. Accurate WIP tracking is essential for valuing inventory, calculating job cost, and understanding true production status.
How WIP Works in ERP
When a production order is released and consumes materials and labor, the ERP moves that value into a WIP account and tracks the partially completed quantities by operation. As the order progresses, additional issues and labor postings increase WIP, and on completion the value transfers to finished goods, with any difference from standard posted as variance. Real-time WIP visibility lets managers see where inventory and cost are sitting on the floor and identify stalled or bottlenecked jobs.
ERP Vendors with Strong WIP
Frequently Asked Questions
Why is reducing work in process important?
High WIP ties up cash, lengthens lead times, consumes floor space, and can hide quality defects within large queues of partially finished goods. Lean manufacturing treats excess WIP as waste and uses pull systems like kanban to limit it. Lower WIP generally means faster flow, quicker problem detection, and better cash flow.
How does ERP value work in process?
As a production order consumes materials, labor, and overhead, the ERP accumulates those costs in a WIP account tied to the order. The balance reflects the value invested in unfinished goods at any point. When the order completes, that value moves to finished-goods inventory and any variance from standard cost is posted to the general ledger.