Inventory vs. Stock: Why the Difference Matters (2024)

Inventory vs. Stock: Why the Difference Matters (1)

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. This blog article will lay out how inventory accuracy, stock control, and inventory optimization contribute to profitability as well as how to improve these pillars of a retail business.

Without proper inventory accuracy, control, and consistency, retailers face critical challenges enabling the operational efficiency to meet consumer demands and create satisfied, loyal customers. Not to mention, without a clear plan and effective use of inventory systems and assets, retailers face the high cost of stock outs, overstock and dissatisfied customers.

Does your retail business struggle with real-timeinventory management? Are you looking for a way to improve inventory accuracy without disrupting legacy systems?

Learn About OneView’s Inventory Management System

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 systemsafeguards against inaccurate fulfillment, out of stocks, and delivery delays. In essence, it turns every store into a warehouse, enables you to easily move valuable inventory to fast-moving locations, and consistently allocates stock to customers. OneView’s key differentiators include:

  1. ‬‬Ensure omnichannel sales success with accurate real-time stock balances, incoming deliveries’ availability, and fulfillment‬‬ options.
  2. Unburden dependency on siloed legacy systems that don’t efficiently share‬‬ critical inventory data across the omnichannel ecosystem of stores, warehouses and distribution centers.‬‬
  3. Work with your existing ERP system 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.
  4. Leverage OneView’s Unified Commerce Dashboard as it uses cloud-native, API-first microservices to consume and analyze product,‬‬ prices, barcodes, unit of measurement, and other detailed information from the ERP system.
  5. Leverage weighted average costing right out-of-the-box to support the most common method used by retailers.
  6. ‬‬‬Continuously monitor each store’s digital order flow for instant updates to ERP inventory, alignment of substitutions and notification of stock issues.
  7. Track returns in real time to avoid unnecessary replenishment that causes overstock and shrinking margins.
  8. Automatically engage the replenishment engine when stock falls below determined business rules to instantly create and send a purchase order to ERP for DC or vendor fulfillment.

Inventory vs. Stock: Why the Difference Matters (2)

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 team a deep-dive, hands-on experience in executing 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.

Inventory vs. Stock: Why the Difference Matters (3)

Understanding the pain points of legacy systems and the value of modern, real-time inventory management systems, let’s learn more about what inventory is, what stock is, the differences, and what to know in order to ensure retail success.

The Concepts

What is Inventory?

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.

To learn more about the types of inventory management, read our guide:Types of Inventory Management: A Complete Guide.

What is Stock?

Stock has to do with all raw material or merchandise—those products that arealreadyin 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.

Inventory Stock
  • Refers to the value of parts and raw material used for manufacturing, work in process goods, and the final product
  • Helps you arrive at the sale price of the stock
  • Needs to be updated and managed on a quarterly or yearly basis (end of accounting period)
  • Term used in both retail and manufacturing
  • Arrive at the value of inventory using methods, such as FIFO, LIFO, and weighted average methods
  • Refers to the value of all items that are available and directly sold to the customers
  • Helps you determine business revenue
  • Needs to be updated and managed on daily (maybe even multiple times a day)
  • More common in production and manufacturing
  • Value of stock is based on the current market value or the price at which goods are sold to the customer

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.

Inventory

  • 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.

Stock

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.

Inventory vs. Stock: Why the Difference Matters (4)

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 differences are:

Inventory

Stock

  • Inventory management is much more complex and dynamic, since it has accounting and equity implications
  • Inventory is closely linked to a company’s warehouses operational cycles, in addition to control of existing items, damage and loss, and replacement—in other words, logistics flows
  • Stock is related to customers and suppliers, involving administrative issues, cash flows, strategies, and marketing and sales management
  • Stock includes everything that is for sale, while inventory includes all assets comprising the company’s assets.

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.

Curious to learn more about inventory management? Read our blog article:

Inventory Management: Your All-in-One Guide | OneView Commerce.

How to Manage Inventory and Stock Efficiently & Why It’s Important

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.

Inventory vs. Stock: Why the Difference Matters (5)

Inventory/Stock FAQs

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.

Inventory vs. Stock: Why the Difference Matters (6)

Lexy Johnson

Go-to-market and thought leadership strategist empowering OneView teams to bring exceptional products to market

Inventory vs. Stock: Why the Difference Matters (2024)

FAQs

Inventory vs. Stock: Why the Difference Matters? ›

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.

What is the difference between stock and inventory? ›

The difference between inventory and stock is a subtle but important one. Stock items are the goods you sell to customers. Inventory includes the products you sell, as well as the materials and equipment needed to make them.

Why is keeping stock or inventory important? ›

One of the main reasons for keeping inventory is to provide customers with the best possible level of service. However, many business leaders still spend sleepless nights worrying about finding the balance between product availability and supply chain cost.

What is the difference between stock and inventory on a balance sheet? ›

Accounting Treatment

Stock is usually treated as an asset on the balance sheet and is typically reported at cost or market value, whichever is lower. Inventory, on the other hand, is treated as a current asset, and is reported at the lower of cost or market.

Why is it important to determine inventory? ›

Inventory management is vital because it allows businesses to understand how much inventory they have on hand, place orders correctly, and meet the needs of their customers.

What is the difference between inventory asset and stock? ›

Asset Stock refers to items which are used over a long period of time but are not tracked individually, e.g. cables and chairs. Inventory are items that are temporarily stored in a warehouse, or have a limited shelf life.

Is inventory a stock or a flow? ›

Inventory and Installed Base are examples of stocks. Flows, on the other hand, are entities that make stocks increase or decrease, like a faucet or drain affects the level of water in a bathtub. Production (which increases Inventory) and Purchases by Consumers (which increases Installed Base) are examples of flows.

What are 5 reasons for holding inventory? ›

Meeting customer demand promptly means you're better poised to reach your revenue and profit targets.
  • Reduce customer lead times. You can fulfill orders immediately without having to order from suppliers and wait for delivery. ...
  • Avoid stockouts. ...
  • Reduce costs. ...
  • Avoid supply chain disruptions.
May 9, 2023

What is the most important thing about inventory? ›

One of the most critical aspects of inventory management is managing the flow of raw materials from their procurement to finished products. The goal is to minimize overstocks and improve efficiency so that projects can stay on time and within budget.

What is the purpose of inventory? ›

The purpose of the inventory is to provide a buffer between production and sales, smoothing out the flow of goods and ensuring that products are available when customers order them. To achieve this goal, companies must carefully manage their inventory levels, investing in an appropriate system if necessary.

What is the difference between inventory and physical stock? ›

Here are the general definitions: Stock is the supply of finished goods available to sell to the end customer. Inventory can refer to finished goods, as well as components used to create a finished product.

Does inventory increase equity? ›

- Inaccurate inventory records can lead to overstated or understated inventory value. - This in turn affects the total value of assets and owner's equity. - High inventory levels increase the value of current assets, but can also indicate inefficiency or potential obsolescence.

Is inventory equal to closing stock? ›

Closing Stock is an amount of unsold stock lying in your business on a given date. In simple words, it's the inventory which is still in your business waiting to be sold for a given period. The closing stock can be in various forms such as raw materials, in-process goods (WIP) or finished goods.

Why is stock count important? ›

You should be doing regular stocktakes to ensure the following: That your stock levels are accurate which will ensure you avoid: Over-stocking. Identify any damaged stock or misplaced returns.

What are the 5 benefits of inventory management? ›

Benefits of inventory management
  • Lower costs and saves money.
  • Prevent overspending on warehouse storage.
  • Minimize storage needs.
  • Reduce losses to improve cash flow.
  • Forecast sales trends.
  • Satisfies customers with timely deliveries.
Feb 15, 2024

Why is inventory an important asset? ›

Product inventory is a tangible asset because it's a real-time evaluation of the revenue a company is generating. If an ecommerce store can't move product from it's inventory, it is clearly struggling to make sales and must adjust its operations, otherwise it won't obtain bottom-line revenue.

Is inventory the same as opening stock? ›

Opening stock is the cost of inventory of raw materials, WIP, and finished goods that an entity has on the initial day of its accounting year. Closing stock is the cost of goods inventory that an entity has on the last day of its accounting year.

What is stock in in inventory? ›

Stock, also used as a synonym of inventory, refers to all or the quantity of products that a company has stored. Both raw materials and finished products can be considered products in stock, provided these materials are stored ready for their entry into production or final sale.

Is inventory a synonym of stock? ›

noun as in list of stock; stock. Synonyms Antonyms. Strongest matches. backlog.

What is considered inventory? ›

Key Takeaways. Inventory is the raw materials used to produce goods as well as the goods that are available for sale. It is classified as a current asset on a company's balance sheet. The three types of inventory include raw materials, work-in-progress, and finished goods.

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