Item Types in Inventory Software

This brief article is about Item Types as they relate to inventory systems. Item Types (also called Stocking Types) are an important setting in most inventory software. They are not just used to categorize inventory for reports. In most cases, there is system functionality behind them that controls how your inventory system handles them. For example, the item type may direct which accounts are used for specific transactions, or which programs and workflows are used for the item. Unfortunately, Item Types are not standardized, so the item types in one inventory system can be completely different than those in another. When evaluating inventory software, it’s a good idea to review the item types because they will tell you a lot about the functionality of the software product.

Item types are generally set up in the Item Master. Here are some examples of Item Types you may encounter.

Inventory. This is a very generic classification, but it likely means this item is tracked as inventory. This means the system will keep track of quantities, costs, bin locations, transactions, etc. Many systems would not use a generic classification like this because they will have something more specific. If your system has an item type called Inventory, it may be a sign that your system does not have significant functionality related to other item types.

Non-inventory. This one is a little unusual because if something is non-inventory, you generally don’t need an item-master record; therefore, you wouldn’t need to classify it as non-inventory. However, I have seen some systems that have an item type called “non-inventory”. In these cases, it probably means that even though it doesn’t keep track of quantities on hand, it does maintain some tracking capabilities related to these items. They probably wouldn’t track things like bin locations, but may track transactions in the transaction history file.

Purchased. These would be for items purchased from suppliers, and probably resold.

Raw material. These would be items that are purchased and consumed as part of a manufacturing process.

Floor Stock. Inventory consumed in production but not tracked in the perpetual inventory system. Floor stock is different from typical non-inventory because it does have an SKU and Item-Master record, but it is usually expensed when received. This would typically be for low-cost items used in production.

Dropship. These would include items that are not stocked, but are purchased when you get a customer order. You would then have the supplier ship directly to your customer. When an item is designated as Dropship, your system may automatically create the purchase order when a sales order is created for the item. There may be additional automation related to receiving the PO and shipping/invoicing the sales order.

Kit. An item designated as a KIT is generally an item that is picked and assembled as part of the Sales Order Process. See article on Kits.

Manufactured. A manufactured item would have a Bill of Materials and possibly a routing, and would likely require a production order to produce it.

Configured. A configured item is an item that has various options that would be selected as part of the sales-order process. This could include selecting certain components or things like color or size. These days, most configuration processing is conducted on your e-commerce site rather than your main inventory system.

Not Sold. These would be items not available for sale. Setting this item type would likely prevent you from adding these items to a sales order. This may also exist as a separate flag to turn this on for an item.

Service. A service item would not track anything related to inventory. It would mainly be an accounting function used to bill customers for services provided to them. These could include things like consulting services, repair services, etc.

MRO. Maintenance, Repair, and Operations (MRO) inventory is inventory you use internally to clean and maintain your facility and equipment. Many businesses will set MRO inventory as non-inventory and just expense it when it is received. But there can be value in tracking MRO inventory. For example, if you carry an extensive supply of repair parts for key equipment, it can be useful to know what you have in stock.

Outside Operation. Outside Operations are used in manufacturing operations when you send something to an external supplier to have something done to it. For example, specialized machining, plating, and heat treating, are often done by an external supplier. An Item Type for Outside Operations is probably not for physical items. Instead, I have seen it used to facilitate certain necessary tasks related to the processing of Outside Operations. For example, you need someplace to maintain vendor information related to the operation. And you often need a purchase order to receive the inventory when it comes back from the supplier and pay the supplier. However, the actual item being produced will be added into inventory later through the production-order process. So the outside operation item number never really goes into stock.

Download Items. Items like software that can be downloaded may need their own item type because you may want to sell them through your sales-order process, but you may or may not need to stock them. For example, if you are reselling software you purchased from someone else, you may need to track quantities of units you own and can sell, but if you are selling a software product you produce, you don’t really need to show inventory quantities. This is a good example of an item type that tells you something about the software product. If you saw an item type for download items, you can assume the software product caters to businesses that sell software or downloadable images, music, or videos.

Other. There are many other item types that may be used by some inventory systems. However, many of them are unnecessary since they don’t require special processing by the inventory system. For example, you may want to categorize your finished goods inventory items as ‘finished goods”, but you probably don’t need an item type for that if it doesn’t change how they are processed. There are almost always many fields available on your item master for category classifications like this. I have seen item types for serialized or lot-controlled items, but generally, that is handled by a flag (another field) on the items rather than a unique item type.

Work-in-process. This is always a confusing term. In manufacturing/accounting software, work-in-process is an account that holds the value of inventory, labor, and machine time that has been issued to production orders but has not yet produced complete items. That said, it is common for businesses to have items in stock that have undergone some manufacturing or assembly, but are not yet complete/finished items. They typically refer to these items as work-in-process. In that case, you would typically just use a category code to designate these items so you can report on them to meet your needs. See Article on Work-in-Process

Item Types in Inventory Software

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