Procurement Glossary & Terminologies

Glossary / Letter F / Finished goods

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.

  1. 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.

  1. 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.

  1. 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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