Also called in-process inventory
What is work in process?
Everything started and not yet finished, sitting between operations.
What else it is called
- Other names
- in-process inventory
- In French
- en-cours de production
Related entries
Understanding work in process
Material you have already paid for, that has absorbed labour, and that cannot yet be invoiced. It is simultaneously an accounting figure and a physical thing occupying floor space, and the two views cause arguments between finance and operations that are really arguments about whether inventory is an asset or a symptom.
Only the operations view leads to any improvement. Every pile marks a place where the upstream step is faster than the downstream step, so the floor is a map of its own imbalances if you walk it and count. Work in process also delays the discovery of defects: a problem found in a batch of four hundred has already been made four hundred times.
The arithmetic is unforgiving and worth knowing. Throughput time equals work in process divided by output rate, which means that for a fixed output rate the only way to shorten lead times is to carry less unfinished work. Plants under delivery pressure usually do the opposite and release more.
How it is calculated
Average throughput time = work in process ÷ output rate
Known as Little’s law. It means lead time is a consequence of how much you have in the queue - so releasing more work into a plant to go faster reliably makes it slower.
In practice
Walk the floor and count the piles. Each one marks a place where the upstream step is faster than the downstream step, which tells you more about the plant than the production report does.
Frequently asked
Is work in process an asset or a problem?
Both, which is why the two departments disagree. It is capitalized on the balance sheet, so it improves reported profit in the period it is built. It also lengthens lead times, consumes cash and hides defects. Treating the accounting treatment as the whole picture is how plants end up rewarded for building inventory they cannot sell.
How much work in process should we carry?
Enough to keep the constraint from ever being starved, and as little as possible everywhere else. The protective inventory goes in front of the bottleneck deliberately; elsewhere it is accumulation rather than a decision.