What is Finished goods?

Finished goods are what you actually forecast, reorder and sell. If you track raw materials or components mixed in with finished goods, your stock counts and reorder numbers get distorted and you end up ordering too much or too little of the actual product customers buy.

Knowing your finished goods count separately from work in progress or raw materials lets you set accurate reorder points and safety stock. It also makes your cost of goods sold and inventory valuation numbers correct, since only finished goods should count as sellable inventory on your books.

Example

A candle maker has 40 unlabeled candle jars (raw materials), 15 candles mid-cure (work in progress), and 200 fully labeled and boxed candles ready to ship. Only the 200 boxed candles count as finished goods inventory for sales and reorder purposes.

Common mistakes

• Counting raw materials or components as finished goods when calculating available stock.
• Forgetting to move work in progress into finished goods once assembly or packaging is done, so reports understate real sellable stock.
• Including finished goods held by a supplier or in transit as if they are already in the warehouse and ready to sell.

Finished goods and SteadyShelf

SteadyShelf forecasts and reorders based on finished goods per variant, since that is the stock level that drives when and how much to order from suppliers.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Raw materials · Work in progress · Bill of materials · Inventory valuation · SKU

Full inventory glossary

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