1. Raw Material
A raw material is an item that is stored and whose quantity is tracked in inventory. It can be used as a component in manufacturing processes or composite items.
Raw materials cannot be sold directly from the sales screen unless they are linked to a sales product. When the linked product is sold, the system automatically deducts the corresponding quantity from the inventory item.
Uses:
Raw materials are used in the following cases:
As a component in a product manufacturing recipe
As a component within a composite item
Linked to a sales product to be consumed from inventory upon sale
Example:
Milk can be defined as an inventory item and then linked to a sales product called “Fresh Milk.” When “Fresh Milk” is sold at the cashier, the system deducts the corresponding quantity from the milk inventory item.
Impact on Inventory:
Raw materials are deducted from inventory when used in a manufacturing process, when sold as part of a composite product, or when a linked sales product is sold.
2. Manufactured Item
A manufactured item is produced through a manufacturing recipe (Bill of Materials). The input materials and required quantities are defined, and a production process is executed to convert these materials into a new inventory item.
The resulting item may be a semi-finished product used later in the production of other items, or a finished product linked to a sales item and consumed upon sale.
Uses:
Manufactured items are used when an item is not purchased ready-made, but is instead produced internally from raw materials or other manufactured items.
Example:
Flour, water, and yeast can be used to produce dough.
A pre-manufactured item such as dough can also be used with other components to produce another final or semi-finished item.
Impact on Inventory:
When a production process is executed, the system deducts the input materials from inventory and adds the produced item to stock.
In other words, manufactured items go through a production stage before being sold through a sales product or used in further manufacturing processes.
3. Composite Item
A composite item is defined as a group of components linked under a single item. It does not require a prior production process; instead, its components are consumed directly upon sale through the linked sales product.
Uses:
Composite items are used when you want to sell a single product to the customer while the system internally deducts multiple components from inventory based on predefined quantities.
Example:
A meal consisting of a burger, fries, and a drink can be defined as a composite item.
When the meal is sold at the cashier, the system automatically deducts its components from inventory, such as the burger patty, fries quantity, and drink.
Impact on Inventory:
When the linked product is sold, the system deducts the associated components from inventory according to the defined quantities.
In other words, composite items are not produced in advance; instead, their components are consumed at the time of sale.
Difference Between the Three Types
A raw material is a basic item that is purchased and stored. It can be used in manufacturing, included in a composite item, or linked to a sales product to be consumed upon sale.
A manufactured item is a product that is pre-produced through a manufacturing process, where input components are deducted based on the recipe, and the resulting item is added to inventory.
A composite item is an item made up of multiple components, where those components are consumed directly upon selling the linked product, without any prior production process.
Practical Example
If we have raw materials such as coffee, milk, and sugar, they can be used in different ways:
Linking milk to a sales product called “Fresh Milk”, where milk is deducted from inventory when it is sold.
Using coffee, milk, and sugar in a manufacturing process to produce a ready-made blend.
Defining a beverage as a composite item containing coffee, milk, and sugar, so these components are automatically deducted when the beverage is sold.
This approach helps the system manage inventory accurately based on the nature of each item and how it is used within the organization.