Stock or Inventory? Know The Difference

Blog

It may seem as though businesses are relatively polished and smooth entities, but there’s much that goes on behind the scenes in order for them to appear that way. Companies like Amazon, ruthlessly efficient with their delivery protocols, have warehouse-size logistical networks and employ almost 1,300,000 people worldwide. 

 

While your business may not be quite there yet, the principles and basic knowledge behind the scenes when managing your products and their logistics is still the same. A great place to start is to know how to categorize and refer to your assets going forward so that you can plan with a greater degree of accuracy.

An important part of this is knowing the difference between both stock and inventory.

 

What Is Stock?

‘Stock’ includes any products or goods you have on-premises that can be either sold or contributed to a saleable product. So for instance, a box of cereal in a supermarket would be noted as ‘stock’, tracked differently to inventory at large.

The term ‘stock’ can also refer to individual ingredients that may comprise a total saleable product. For instance, a chef’s refrigerators would be filled with ‘stock,’ not ‘inventory,’ because they plan to use this to comprise a product on-site, in this case, a meal. Many people confuse restaurants as a full ‘service’ being sold, but that’s just one piece of the pie. They order in ‘stock’ to create ‘products’ (meals) to sell. In warehouses and various stores, ‘stock’ is anything that could be marked for sale. It must be managed, rotated, and counted each day to make sure your stock is suitable for sale.

 

What Is Inventory?

‘Inventory’ refers to any assets owned by a business, used to complete the production of their service or product cycle. So for instance, in our restaurant example, ‘inventory,’ would refer to the cooking supplies (as in the physical tools used to cook), cleaning supplies, tables, chairs, and more.

Inventory is a much wider definition than ‘stock,’ but it can also include stock as part of its categorization. 

There are four elements of inventory worth considering. They include:

 

  • Raw materials – materials used to comprise a final product. They often make the journey from classification as inventory to stock when the end product is ready for sale.
  • Work-in-process – some materials require extensive work, aging, or processing to become a product. That’s the kind of inventory WIP refers to.
  • MRO – maintenance, repair and operating supplies serve as inventory that contributes to the final product but isn’t part of it. For instance, disinfectant spray a chef might use to wipe down their station for hygiene during cooking.
  • Finished goods – finished goods are finished products in your inventory. If there for the purpose of sale, this is where they become stock.

 

Once you are certain how to divide inventory and stock, it’s important to think about logistics. From the sorting and shelving stages all the way to the shipping and delivery endpoints, be sure to contact ShipJoy for the most reliable consulting out there. You can find their reviews here.