How to Track Raw Materials and Work-in-Progress Inventory

Nigerian manufacturers face a critical challenge in tracking materials from supplier delivery through production to finished goods. Raw materials arrive from Lagos, Apapa, or international sources, are transformed through production processes into work-in-progress inventory, and are eventually converted into finished goods. At each stage, materials consume cash and represent value that must be accurately reflected in the FIRS financial statements.

Most Nigerian manufacturers cannot answer basic questions with confidence. What's the true cost of materials in your warehouse when forex fluctuations affect every import? How much value is tied up in partially completed products? Where did defective products originate?

These visibility gaps cost millions of Naira annually through production delays, excess inventory, and inaccurate financial reporting. This guide provides practical approaches for Nigerian manufacturers to track raw materials and work-in-progress inventory effectively.

Understanding Manufacturing Inventory Types

Raw Materials Inventory

Raw materials represent the basic inputs your production processes transform into finished goods. For a food manufacturer in Lagos, this includes flour, sugar, preservatives, and packaging. A pharmaceutical company in Onitsha manages active ingredients and containers. A furniture maker in Aba tracks timber, hardware, and finishes.

Effective tracking requires knowing not just quantities but supplier details, purchase prices, landed costs for imports, receipt dates, batch numbers for NAFDAC compliance, and storage locations.

Work-in-Progress Inventory

Work-in-progress (WIP) represents products that have entered production but aren't yet complete. These partially finished items have consumed raw materials and labour, but cannot be sold until manufacturing finishes. A garment factory in Kano has fabric cut and partially assembled. A plastics manufacturer in Port Harcourt has compounds mixed but not moulded.

WIP is the most challenging inventory to track because it changes constantly. Materials get added at various stages, labour accumulates, and quality issues may require rework or scrapping.

The Financial Impact

Inaccurate tracking creates substantial consequences. Balance sheets misrepresent actual values, cost of goods sold calculations become unreliable, and FIRS tax reporting suffers. Operational decisions based on inaccurate data produce poor outcomes. Purchasing orders materials you already have, production schedules fail when materials aren't where expected, and customer deliveries are delayed.

Challenges in Tracking Manufacturing Inventory

Complex Material Flows

Manufacturing involves constantly changing inventory positions. Raw materials enter through receiving, move to storage, transfer to production, get consumed in manufacturing, accumulate as WIP through production stages, and become finished goods. Each movement should update inventory records immediately.

This complexity overwhelms spreadsheets. The time lag between physical movements and record updates creates the inaccuracy that undermines operations.

Multiple Production Stages

Most manufacturing involves multiple sequential or parallel stages. Each stage consumes materials, adds costs, and outputs materials that feed subsequent stages. A food processor has mixing, cooking, cooling, filling, and packaging stages.

Tracking WIP requires knowing quantity and value at each production stage. Manual tracking cannot maintain this detailed visibility across multiple concurrent production runs.

Batch Tracking Requirements

NAFDAC requires pharmaceutical, food, beverage, and cosmetic manufacturers to track batch numbers throughout production. You must trace any finished product back to specific raw material batches used in manufacture.

Batch tracking demands systematic recording at every transaction. Manual tracking struggles to maintain this detailed traceability as production volumes increase.

Costing Accuracy

Manufacturing costs accumulate progressively. Raw material costs transfer to WIP when consumption occurs. Direct labour charges as workers process materials. Manufacturing overhead, including utilities, equipment depreciation, and facility costs allocated to WIP.

Accurate WIP valuation requires capturing all cost components. PHCN power costs and generator fuel expenses must be allocated properly. Manual calculations produce unreliable profitability analysis.

Waste and Scrap Management

All manufacturing generates waste and scrap. Damaged raw materials, defective WIP, trim waste, evaporation, and spillage all reduce usable inventory. Without systematic waste tracking, you cannot distinguish normal losses from excessive waste, indicating problems.

Manual Tracking Methods and Limitations

Spreadsheet-Based Systems

Many manufacturers attempt tracking through spreadsheets. Separate sheets track raw material receipts, issues to production, WIP by production order, and consumption. Formulas calculate WIP values based on standard costs.

These systems fail as complexity increases. Real-time updates are impossible, version control becomes chaotic, and formulas break. Spreadsheets cannot automatically link raw material issues to specific production orders or track WIP movement through stages.

Manual Production Records

Traditional manufacturing uses paper documents to record material consumption and labour hours. Workers record information on production order documents. Supervisors review and approve before the office staff enters data.

Manual records introduce substantial delays and errors. Workers recording hours after production introduces inaccuracies. Paper documents get lost. Time lag means inventory information is always outdated.

Periodic Physical Counts

Manufacturers using manual tracking conduct periodic counts to correct accumulated errors. This periodic correction means knowingly operating with inaccurate data between counts. Your inventory records progressively diverge from reality until the next count forces reconciliation. Physical WIP counts also disrupt production.

Technology Solutions for Manufacturing Inventory

Manufacturing ERP Systems

Modern ERP platforms designed for manufacturing provide integrated tracking of raw materials, WIP, and finished goods through centralised databases. When raw materials arrive, the receiving staff update the system, which automatically reflects the new inventory. When production begins, material issues update raw material inventory while creating WIP records. As production progresses through stages, WIP values and locations update systematically.

Odoo's manufacturing module delivers comprehensive functionality for Nigerian manufacturers at accessible price points. The system tracks raw materials by batch number for NAFDAC compliance, manages multi-level bills of materials, records actual material consumption against standards, values WIP at each production stage, and maintains complete transaction histories. Integration with financial modules ensures inventory valuations automatically reflect in FIRS-compliant financial statements.

Barcode Scanning for Transactions

Barcode scanning eliminates manual data entry errors during material movements. Warehouse staff scan raw materials during receiving, automatically updating inventory records with exact quantities and batch information. Production workers scan materials issued to production orders, creating accurate consumption records linked to specific manufacturing jobs. This scanning accuracy dramatically improves inventory data quality while reducing administrative labour.

Real-Time Production Tracking

Modern manufacturing systems capture production data in real-time rather than through delayed manual reporting. Digital work order systems track when production starts, which materials get consumed, labour hours applied, and quantities completed at each stage. As production progresses, WIP values and locations update automatically based on actual transactions.

This real-time visibility enables proactive management rather than reactive problem-solving. When material consumption exceeds standards, alerts notify supervisors immediately rather than weeks later during variance analysis. When production schedules slip, management sees delays as they occur rather than learning about problems at scheduled completion times. This immediate awareness enables faster responses that minimise impact.

Lot and Batch Traceability Systems

Automated batch tracking maintains complete traceability from raw material receipt through finished goods without manual record-keeping. The system automatically links raw material batches to production orders that consume them, tracks those batches through WIP at various production stages, and connects to specific finished product batches. If quality issues emerge, you can instantly identify all affected products and trace them back to specific raw material suppliers.

This automated traceability satisfies NAFDAC requirements while supporting quality management and continuous improvement. Complete batch histories enable root cause analysis when defects occur. Efficient recalls based on systematic batch tracking minimise both costs and customer impact when problems require product retrieval.

Implementing Effective Tracking Systems

Bill of Materials Management

Accurate raw material and WIP tracking requires detailed bills of materials (BOMs) defining exactly what materials each product needs and in what quantities. Multi-level BOMs accommodate products with subassemblies or intermediate stages. Version control maintains historical BOMs while updating current specifications. This BOM foundation enables the system to calculate expected material consumption and WIP values automatically.

Nigerian manufacturers should include all materials in BOMs, including packaging that's often overlooked. Costing accuracy demands capturing every component from primary raw materials to labels and cartons. Periodic BOM reviews ensure documentation matches actual production practices as processes evolve.

Standard Costing vs Actual Costing

Choose between standard costing, which uses predetermined costs or actual costing that captures real costs for each production run. Standard costing simplifies WIP valuation by applying consistent costs, while variance analysis reveals when actual costs diverge from standards. Actual costing provides precise costs per batch but requires more detailed transaction capture.

Most Nigerian manufacturers benefit from standard costing with regular variance analysis. Standard costs establish baseline expectations while variances highlight when material prices, consumption rates, labour efficiency, or overhead allocation differ from plans. This variance visibility drives continuous improvement by identifying specific areas requiring attention.

Production Order Management

Organise production around discrete production orders that authorise making specific products in defined quantities. Each production order becomes the focal point for tracking material consumption, labour hours, machine time, and costs. WIP values by production order provide detailed visibility into what's in process and its status.

Production order tracking enables precise costing by batch and supports customer-specific requirements. When customers order products with special specifications, separate production orders maintain cost isolation. This granularity helps identify which products and customers generate the most profitability.

Cycle Counting Programs

Replace disruptive annual physical inventories with ongoing cycle counting programs that continuously verify accuracy. Schedule frequent counts of raw material subsets and periodic WIP verification. The system generates count sheets, staff verify physical quantities, and records are updated immediately when discrepancies appear.

Cycle counting distributes verification work throughout the year while maintaining continuous accuracy. Regular counting identifies problems causing discrepancies faster than annual counts allow. Root cause analysis and corrective actions progressively improve underlying accuracy rather than just periodically correcting symptoms.

Best Practices for Manufacturing Inventory Control

Minimize Work-in-Progress Inventory

WIP inventory represents cash invested in incomplete products that can't yet generate revenue. Minimising WIP through lean manufacturing principles and efficient production scheduling frees working capital while reducing complexity. Smaller production batches moving quickly through manufacturing stages keep WIP manageable compared to large batches lingering in the process.

However, optimisation must balance WIP reduction against changeover costs and quality considerations. Finding the right balance for your specific operations requires data-driven analysis rather than arbitrary rules. Track WIP levels, turnover rates, and associated costs to identify optimal production batch sizes and scheduling approaches.

Segregate Inventory by Status

Physically segregate raw materials by status—available for use, on hold pending quality inspection, rejected, or allocated to specific production orders. This physical organisation supports accurate tracking while preventing the use of materials that shouldn't enter production. Similarly, segregate WIP by production order and stage to maintain visibility and prevent mixing.

Clear labelling and designated storage areas make physical segregation effective. Raw materials awaiting quality clearance sit in inspection areas separate from released stock. WIP from different production orders stays distinct on the shop floor. This physical organisation reinforces systematic record-keeping.

Capture Actual Consumption Data

Track actual material consumption during production rather than relying solely on BOM standards. Record materials actually issued to production orders and any additional materials consumed due to waste, rework, or process variations. This actual consumption data supports variance analysis that reveals when real usage differs from expectations.

Make data capture easy for production staff through barcode scanning or simple transaction entry. If the consumption recording is burdensome, staff will skip it or record inaccurate information. Systems that integrate seamlessly with production workflows get better data than those that demand extra administrative effort.

Monitor Key Performance Indicators

Track specific metrics revealing raw material and WIP management effectiveness. Inventory accuracy percentage shows how well records match physical reality. Material yield rates indicate how much usable output results from raw material inputs. WIP turnover measures how quickly materials flow through production. Days of inventory on hand reveal whether you're carrying excess stock or operating lean.

Review these metrics regularly with trends over time rather than single snapshots. Improving trends demonstrate effective management, while deteriorating metrics signal problems requiring attention. Compare performance against industry benchmarks or internal targets to understand whether results are acceptable or need improvement.

Common Mistakes to Avoid

Ignoring Small-Value Items

Some manufacturers skip tracking low-value items like fasteners, adhesives, or small components, considering them immaterial. This practice creates inventory blind spots and enables shrinkage through theft or waste. While high-value raw materials deserve more attention, systematic tracking should cover all items for complete visibility.

Modern systems make tracking all items straightforward without excessive administrative burden. The marginal effort of including small items in systematic tracking prevents them from becoming unmanaged centres that slowly drain profitability.

Delayed Transaction Recording

Allowing delays between physical material movements and system updates guarantees inaccurate records. When receiving updates, records the next day rather than immediately, inventory positions lag reality. When production consumption records days after actual material use, WIP values become estimates rather than facts.

Implement processes requiring immediate system updates when transactions occur. Receive materials and update records simultaneously. Issue materials to production with contemporaneous recording. This real-time discipline maintains the data accuracy that effective management requires.

Inadequate Scrap and Waste Documentation

Failing to document scrap and waste systematically makes improvement impossible. When defective WIP gets scrapped without recording, you lose both the inventory value and the learning opportunity. Systematic waste tracking identifies which products, production stages, or shifts generate excessive scrap requiring attention.

Waste documentation should capture not just quantities but reasons. Was it a material defect, equipment malfunction, operator error, or design issue? This detail enables targeted improvements that progressively reduce waste rates rather than treating scrap as an inevitable cost of manufacturing.

The Path Forward for Nigerian Manufacturers

Effective raw materials and WIP tracking transform manufacturing from reactive firefighting to proactive optimisation. Nigerian manufacturers struggling with inventory inaccuracy and compliance challenges can achieve the operational control that industry leaders have

The manufacturers thriving across Nigeria have transitioned to integrated systems. They enjoy accurate costing enabling profitable pricing, regulatory compliance without manual effort, inventory optimisation freeing working capital, and operational visibility driving continuous improvement.

Ready to transform your manufacturing inventory management? Book a free consultation to discover how Nigerian manufacturers are using integrated ERP systems to achieve real-time visibility, accurate costing, and complete traceability from raw materials through finished goods.