An important gateway for effective management is understanding the difference between inventory and stock and how to manage these time-consuming tasks efficiently to ensure customer fulfillment. Learn how inventory accuracy, stock control, and inventory optimization contribute to profitability as well as how to improve these pillars of a retail business.
Briefly, inventory is a detailed statement of the elements comprising the assets of a company, although companies typically limit focus on marketable assets. In general, these products include raw materials (production inventory and work-in-progress inventory), and merchandise that will be used to make a finished item or that will be sold directly to the company’s end user.
What is Stock?
Stock has to do with all raw material or merchandise—those products that are already in the warehouse ready to be delivered to consumers or fulfill their commercial purpose. It does not include furniture, machinery and other objects of value to the company. It has nothing to do with a stage in the supply chain, as is the case with inventory. It is, basically, what is available to serve customers and put products in their hands.
In summary, stock is the supply of finished goods available for sale, and inventory includes both finished goods and components that create a finished product. In other words, all stock is inventory, but not all inventory is stock.
Case in Point: Categorizing Inventory and Stock Items
Here is how some items pertaining to production of a ballpoint pen would be categorized in inventory or stock.
- All raw materials used to create the pen, such as metal and plastic to produce the parts, as well as ink.
- Finished product parts such as ink tubes, pen exteriors, and open and close pieces (that have completed production and quality checks).
- Packaging materials to create packages for pens.
- Materials required for maintenance, repairing, and operating of machines required for pen production.
BP Pen Company also sells its pens to end users, so it uses ‘stock’ to refer to finished pens that are stored and ready to be sold in packages. These packages are tied to SKU numbers and a barcode that can be scanned to identify and locate finished items for quick fulfillment.
Major Differences between Inventory and Stock
In the previous example, a group of stocks of different products (raw materials and finished items ready to be delivered to customers) make up inventories. Stock seems to be a more subjective concept, while inventory is more concrete and controlled, normally requiring a physical storage structure. Other major
Inventory Management vs. Stock Management
- Inventory refers to products that are sold as part of the day-to-day operations of the business, including products that are sold, and products and materials that are used to manufacture them. For example, cars, car parts, and accessories are sold as part of a dealer’s normal business practice, but not diagnostic machines that test cars.
- Inventory takes into account all the assets used to manufacture the goods to be sold and determines the selling price of the inventory. Stock determines the amount of revenue a company generates. The more stock you sell, the higher your earnings.
- For accounting purposes, inventory items are normally counted once a year, but inventory count is tracked daily. This is primarily because inventory is replenished as needed to ensure that the company has enough inventory to keep the door open. For example, you don’t need to count the number of tires a dealer has every day, but it’s very important to know how many cars are left in the parking lot. Money can flow into your business through the sale of assets, but that money is not considered revenue. Sales include only the sale of the stock itself.
More inventory management information is available here.
How to Manage Inventory and Stock Efficiently
The complex nature of inventory management requires an inordinate amount of time when done manually. What’s more, manual calculation is prone to errors: Insufficient stock causes stock outs that erode customer loyalty; overstocks erode profitability. So what’s the answer?
Software that delivers real-time inventory status across a retail ecosystem. Configurable, automated inventory management enables omnichannel brands to track inventory, manage SKUs, optimize product allocation across regions and stores, and expand into new fulfillment/distribution center locations based on current demand. Additional benefits include:
- Increased productivity
- Decreased loss of merchandise and raw materials
- Improved distribution
- Streamlined processes
- Labor cost savings
- Real-time insight into sales
- Greater control over entry and exit of products
- Warehouses will no longer be huge, expensive locations to store products; they will become true distribution points adaptable to the real needs of the organization.
How OneView Nails Inventory Management
Rapidly shifting consumer demand makes clear and precise inventory visibility vital to omnichannel retail success. To execute fulfillment across channels, retailers must be able to locate, confirm, allocate, and promise inventory without a margin for error. OneView’s cloud-native, Inventory Management system, the Unified Retail Accelerator, safeguards against inaccurate fulfillment, out of stocks, and delivery delays. In essence, it turns every store into a warehouse, moves valuable inventory to fast-moving locations, and consistently allocates stock to customers.
- Ensures omnichannel sales success with accurate real-time stock balances, incoming deliveries’ availability, and fulfillment options.
- Unburdens dependency on siloed legacy systems that can’t efficiently share data across their omnichannel ecosystem of stores, warehouses and distribution centers.
- Works with an existing ERP system that acts as the system of record and repository for inventory data, while OneView tracks the real time stock trading data (sales, returns, transfers, etc.), enabling precise and accurate stock counts, locations and availability.
- OneView’s Unified Commerce Platform Dashboard consumes and analyzes product, prices, barcodes, unit of measurement, and other detailed information from the ERP with its cloud-native, API-first microservices.
- Leverages weighted average costing right out-of-the-box to support the most common method used by retailers.
- Continuously monitors each store’s digital order flow for instant updates to ERP inventory, alignment of substitutions and notification of stock issues.
- Tracks returns in real time to avoid unnecessary replenishment that causes overstock and shrinking margins.
- Stock that falls below determined business rules engages the replenishment engine to automatically create and send a purchase order to ERP for DC or vendor fulfillment.
In addition, OneView’s Inventory Management system delivers real-time information that makes retail personnel more efficient and effective:
- Empowers associates to deliver orders where, when, and how customers expect them.
- Makes it easier for associates to learn and use stock tracking features, especially important for seasonal and part time employees.
- Simplifies counting processes to reduce or eliminate the need for a costly third-party counting service.
- Manages store replenishment with the agility to modify rules in response to changing trends and consumer behaviors.
- Data fuels timely decision making for planners and merchandisers.
- Data fuels embedded Key Performance Indicators (KPIs) that gauge performance by store, region and system.
Learn how OneView’s unique risk-free, cost-free trial program gives your development team a deep-dive, hands-on experience in developing a successful trial use case. See how our approach delivers incremental success and ROI along the path of digital transformation without having to disrupt legacy systems.
Here are some of the most common questions about the differences between inventory and stock:
Are stock and inventory the same?
For most ecommerce brands, the use of inventory and stock are used interchangeably.
However, there are minor nuances based on context and industry. For instance, stock can mean one thing to a manufacturer and something different to a business accounting (since inventory is more encompassing of raw materials, where stock is what’s available to be sold today.
How should inventory vs. stock be accounted for?
Inventory is typically accounted for with the FIFO, LIFO, and weighted average methods, while the value of stock is determined at the lower of acquisition cost or market price.
When should stock and inventory be replenished?
Stock and inventory replenishment are crucial parts of supply chain management. There are tools and calculations, such as the reorder point formula that can help you make solid inventory decisions.
What are inventory management tools?
Inventory management tools are used to complement a brand’s logistics operations. By implementing inventory technology and automation, online brands can expand their logistics network while tracking inventory in real time. This provides brands full visibility into current inventory data without the need to be involved in the day-to-day operations.