There can be stocks of items at every stage of production. There is not just the raw material or the finished goods but stock of the semi-finished goods as well. Even semi-finished goods can be further divided into various stages of completion. Therefore, inventory occurs at every stage of the business. Even the goods returned or the defective goods are a type of inventory and needs to be taken care of.
Efficient inventory management results in the best utilization of resources. Properly managed goods result in less wastage. A company can lower its cost by efficiently managing the inventory at all stages.