Chances are you have used these terms interchangeably, and you would not be alone. After all, is stock and inventory the same thing? You may be surprised to learn they are actually not and have their own specific identity within the management of stock. Whether you are looking for pet toys, wedding accessories, or the best wholesale gift companies – you want to be looking for the right terms!
Let’s uncover how these terms are different, and why it matters to identify these items correctly.
The definition of stock and inventory
First things first, let’s start with clear definitions before we get into examples. Google defines stock and inventory as the below.
Definition of stock
The goods or merchandise kept on the premises of a shop or warehouse and available for sale or distribution.
Definition of inventory
A complete list of items such as property, goods in stock, or the contents of a building.
Did these definitions surprise you? Stock relates to the items that are found in a store, whereas every item of stock comes together to make a store’s inventory. It might seem like splitting hairs, but they are vastly different and it can be confusing to group them under the same banner as those who do know the difference might be seeking stock information, and not inventory information.
More complex still, all inventory is not made equal. While some industries may have their own unique inventory identification system, there are generally a few inventory definitions that are used most frequently. In fact, there are four different types of inventory, so let’s cover them.
- Work in progress inventory: this is inventory that is being partly processed, typically due to the inventory not being complete yet. This is an important delineation for supply chain managers as they need to know what inventory is on-site, what is coming, and what is technically the full picture.
- Finished goods inventory: unlike work in progress inventory, finished goods inventory are the items that the store has which are ready for customers to buy. This is important as it’s calculated by accounting teams looking to understand what value of inventory is at the store and available for sale at any given time.
- Maintenance, repair and operations (MRO) inventory: this is a very specific type of inventory and it includes the items and equipment that are used for maintenance, repair and products required to make an inventory (finished goods). The average store owner would not include this in their inventory management, but it is calculated by an accounts team.
- Raw materials inventory: as the name suggests, raw materials are the pieces that are used to create finished goods inventory. Raw goods can also actually be labelled as ‘stock’ if they are sold on to customers, but raw materials are a type of inventory that creates goods.
How is stock and inventory managed in modern times
There are some businesses that manage their stock and inventory manually, but as you can imagine by the intricacy of inventory types – this would be a full-time job. There are some online and cloud-based stock management systems if you want to bring some rigour to your store’s stock and inventory. Most of these systems will have a free trial period, so test out a few and see what system is going to work best for your niche and stock type.
There are some stores that are B2B (business to business), and B2C (business to customer). B2B will usually sell raw materials and MROs, whereas finished goods and work in progress inventory are more likely to be seen in the B2C retail space.
We hope this article has cleared up some questions you might have had when you asked ‘is stock and inventory the same thing’. If you own or manage a store, be sure to also educate your staff so that they can also learn the difference and report on each accurately.