What Is Active Inventory?

Mary McMahon

Active inventory is an assortment of assets that will be used or sold within a year. These assets are in active use, in contrast with back inventory, which contains items in storage for future use or inventory control reasons. Robust management systems are necessary to keep track of active inventory, because it constantly changes and the records need to be accurate for employees to do their work. There are numerous ways to organize, control, and record a company's inventory.

Active inventory includes only items that will be sold within a year.
Active inventory includes only items that will be sold within a year.

One section of active inventory includes raw materials. The company plans to use these in the production of finished products within the year. Thus, a knitting company maintains a supply of yarn, thread, buttons, and other supplies it intends to use in garment production. Turnover may be very high, with some items remaining in stock only for a short period of time before they are consumed and the company must order more.

Man checking inventory with a portable device.
Man checking inventory with a portable device.

Projects in progress are also part of active inventory. As goods move through the production process, they are counted in inventory assessments, although they may not be salable. The number of goods in production can vary depending on the type of company, how many orders it has, and so forth. Shipbuilders may have two to three ships under production at any given time, for instance, while a candy bar factory may have hundreds or thousands of bars on the production line.

Finished goods comprise the final component of active inventory. These products are complete, and workers have checked them for quality and packaged them for shipment and sale. Companies typically try to minimize the amount of time finished products spend in active inventory because it costs money to store and maintain them. It tries to predict order needs to fill them as they come in without maintaining a large stock of goods.

Software programs are commonly used to manage active inventory, paired with tools like bar codes and tags on products and goods in inventory. This allows the company to maintain a constantly updated system and to take note of the location of various products and components. Every time materials are used in production, shipped out, destroyed, or otherwise changed, this can be recorded in the software to provide detailed and recent numbers on what the company is holding in inventory. Some companies may use generic inventory software for this, or could order a custom product.

Keeping track of active inventory with a barcode scanner.
Keeping track of active inventory with a barcode scanner.

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