Inventories can be classified into five major categories:

- Raw Material: It is the basic and the most important part of inventories. These are goods directly or used in the production process, and the expenses incurred for the procurement of raw materials are reflected to the cost per unit of product. - Work in Progress: These include those materials which have been committed to production process but have not yet been completed. - Consumables: These are the materials which are needed for smooth running of the manufacturing process. - Finished Goods: These are the final output of the production process. - Spares: It is also a part of inventories, which includes small spares and parts. - Transaction costs