Work in progress (WIP)
Work in progress (WIP) is inventory that has entered production but is not yet finished product: machined castings staged for assembly, boards through reflow but not yet tested, subassemblies queued between lines. WIP is valued at accumulated cost (material plus the labor and overhead applied so far), so it represents cash already spent on goods that cannot yet be invoiced.
Examples
Little's Law: A line ships 200 units a day and carries 3,000 units of WIP: cycle time is 15 days. Cutting WIP to 1,200 at the same throughput drops it to 6 days, the entire difference between quoting 3-week and 1-week lead times.
Suspect queue: A solder paste printer drifts on Monday; the defect is caught at functional test on Thursday. The 1,900 boards sitting between the two operations all require retest, and 240 need rework.
Cash in the aisles: A contract manufacturer carries $2.3 million of WIP. Material was paid on net-30 terms, but assemblies invoice at shipment five weeks later, a financing gap that shows up in its margins and, eventually, its quotes.
Definition
WIP sits between raw materials and finished goods on the balance sheet, but operationally it is a measure of flow. Little's Law makes the relationship exact: average WIP equals throughput multiplied by cycle time. At a fixed output rate, more WIP means proportionally longer cycle time. That is arithmetic, not a tendency, and it is why a plant drowning in WIP always quotes long lead times.
WIP also hides problems. Large queues let a drifting process keep producing for days before a downstream station notices, and every unit sitting between defect creation and defect detection becomes suspect. A fault introduced Monday and caught Thursday means three days of production to quarantine, retest, or scrap.
The fix sequence matters: improve flow first (smaller transfer batches, fewer queues, balanced stations), then drain the WIP, because cutting WIP without fixing flow just starves workstations. Lean plants cap it explicitly with kanban or CONWIP limits, and inventory reviews should track WIP turns by routing, not just plant-wide totals.
Related Terms
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