Inventory Management for Job Work Units

Understanding Job Work Inventory

Job work inventory management differs from regular manufacturing because you handle materials that don't belong to you. You must track:

• Customer-supplied materials: Raw materials provided by clients
• Your consumables: Tools, lubricants, auxiliary materials you provide
• Work-in-progress (WIP): Partially completed jobs on the shop floor
• Finished goods: Completed items ready for return to customer
• Scrap and rejections: Defective materials to be returned or disposed

Receiving Customer Materials

Proper receiving process prevents disputes and ensures accountability:

1. Physical Inspection

• Count quantity against delivery challan or purchase order
• Check for physical damage or visible defects
• Verify material grade and specifications (if applicable)
• Measure dimensions if critical to processing
• Take photographs of condition at receipt

2. Documentation

• Issue Gate Entry Number (GEN) for traceability
• Create Goods Receipt Note (GRN) with quantity, date, and condition
• Get customer signature acknowledging any discrepancies found
• Store materials in designated area with proper labeling

Inventory Segregation

Maintain clear physical and accounting separation:

Physical Segregation

• Separate storage areas: Different racks or bins for each customer
• Color-coded tags: Use different colors to identify ownership
• Bin cards: Label each location with customer name and material details
• Job lot numbers: Assign unique identifiers to each job order

Accounting Segregation

Maintain separate stock registers for customer materials. These are off-balance sheet items—they don't appear in your company's asset inventory since you don't own them.

Material Issue Process

Issue materials to production only against authorized work orders:

1. Work order received: Customer places job order with specifications
2. Material requisition: Production supervisor requests materials with job order number
3. Store issues material: Storkeeper verifies authorization and issues materials
4. Record transaction: Update stock register with issue quantity, date, and job order
5. Signature acknowledgment: Receiving person signs issue slip

Work-in-Progress (WIP) Tracking

WIP represents materials that are on the shop floor being processed. Tracking WIP helps you:

• Know the status of each job order
• Calculate job completion percentage
• Identify bottlenecks and delays
• Respond accurately to customer inquiries

Simple WIP Tracking Methods

• Job card system: Each job has a card that travels with materials through operations
• Daily WIP register: List all active jobs with current operation stage
• Shop floor board: Visual board showing job status (Not Started, In Progress, Completed)
• Operation sign-off: Operators mark completion on job card after each operation

Finished Goods Management

Once processing is complete:

1. Quality inspection: QC team verifies specifications
2. Transfer to finished goods area: Move approved items to dispatch area
3. Update inventory records: Close WIP and add to finished goods
4. Notify customer: Inform that job is ready for pickup/dispatch
5. Prepare delivery challan: Document quantities being returned

Handling Scrap and Rejections

Defects and scrap require special handling:

Normal Scrap (Process Waste)

• Expected scrap rate should be agreed with customer in advance
• Segregate scrap and weigh/count accurately
• Return scrap to customer or dispose as per agreement (keep records)

Rejections Due to Defects

• Identify if rejection is due to incoming material defect or processing error
• Material defect: Return to customer with non-conformance report
• Processing defect: You are responsible—rework or replace at your cost
• Document with photos and written reports

Stock Reconciliation

Regular stock verification ensures accuracy:

• Weekly cycle counting: Count a portion of inventory each week
• Monthly reconciliation: Match physical stock with register entries
• Investigate variances: Find reasons for any discrepancies
• Update records: Correct entries and document adjustments

Inventory Key Performance Indicators (KPIs)

Monitor these metrics to improve inventory efficiency:

• WIP days: Average time materials spend in WIP (target: minimize)
• Material accuracy: Percentage match between physical and book inventory (target: >98%)
• On-time delivery rate: Percentage of jobs delivered by promised date
• Scrap rate: Scrap quantity as percentage of total material processed
• Space utilization: Storage area used vs. available

Inventory Documentation Checklist

Maintain these essential records:

• Gate Entry Register: All materials coming in
• Goods Receipt Notes (GRN): Receipt documentation
• Customer-wise Stock Register: Separate ledger for each customer
• Material Issue Slips: Materials issued to production
• WIP Register: Jobs in progress
• Delivery Challans: Materials returned to customer
• Scrap & Rejection Reports: Non-conforming material records
• Stock Reconciliation Statements: Monthly verification reports

Best Practices for Job Work Inventory

• First-In-First-Out (FIFO): Use older materials first to prevent spoilage
• Clear labeling: Every bin, rack, and material must be clearly identified
• Access control: Only authorized personnel can issue materials
• Daily stock updates: Update registers same day, not weekly
• Barcode/QR coding: Use for high-volume or high-value items
• Regular communication: Update customers on job status and material usage

Common Inventory Management Mistakes

• Mixing customer materials: Lack of segregation causes confusion and disputes
• No receipt inspection: Accepting materials without verification
• Poor WIP tracking: Don't know what's on the shop floor
• Delayed documentation: Recording transactions days later
• No scrap accounting: Can't explain material losses
• Ignoring stock reconciliation: Inventory records become unreliable

Upgrading from Manual to Digital

As your job work volume grows, consider digital inventory management:

• Real-time stock visibility across all locations
• Automatic updates when materials are received, issued, or returned
• Customer portal to view their material status
• Alerts for low stock, pending deliveries, or aging inventory
• Reports on material usage, WIP aging, and scrap rates

Next Steps

Start by implementing a simple customer-wise stock register and material issue slip system. Create clear storage areas with proper labeling. Conduct weekly stock verification for critical items. As you master these basics, gradually add more sophisticated tracking for WIP and automated inventory software. Good inventory management prevents disputes and builds customer trust.