In this stock vs inventory article we will explore inventory and stock in detail and highlight their key differences.
What is Inventory?
Inventory refers to the assortment of goods and materials that a company holds for various purposes. It can be commonly found in warehouses, storage facilities, and retail stores.
Unique Characteristics of Inventory
Diversity: Includes raw materials, work-in-progress, and finished goods.
Longevity: Held for extended periods for production and supply chain support.
Valuation: Reported on the balance sheet at cost, which can change.
Purpose: Acts as a buffer against supply and demand fluctuations.
Main Types of Inventory
Raw Materials: Materials used in the production process.
Work-in-Progress (WIP): Partially completed products in the production pipeline.
Finished Goods: Completed products ready for sale.
MRO (Maintenance, Repair, and Operations): Supplies for daily operations.
What is Stock?
Stock, often called "stock on hand," represents goods available for immediate sale or use. It is commonly found in stores, warehouses and shelves.
Unique Characteristics of Stock
Immediately Available: Stock is readily available for sale or consumption.
Constantly Updated: Stock levels change frequently due to sales and restocking.
Customer-Facing: Meets immediate customer demand.
Shelf-Ready: Ready to be placed on shelves without additional processing or preparation.
Differences between Inventory and Stock
Although inventory and stock may seem similar, they have some key differences. We will explore these below.
Inventory: Inventory includes raw materials, work-in-progress (items in the process of being made), and finished goods.
Stock: Stock primarily comprises finished products ready for sale or immediate use.
Inventory: Inventory is typically kept for the long term, supporting production and supply chains.
Stock: Stock is geared toward immediate customer demand and quick rotation.
Inventory: Inventory is valued based on its cost, subject to fluctuations.
Stock: Stock is valued at its current market price, reflecting real-time demand and supply.
Inventory: Inventory serves various roles, including production support and risk mitigation.
Stock: Stock primarily fulfills customer orders and drives sales revenue.
Duration of Storage
Inventory: Inventory can be stored for extended periods, even months or years.
Stock: Stock is intended for rapid turnover, with shorter on-hand durations.
Inventory: Inventory management often operates behind the scenes in the supply chain.
Stock: Stock is customer-facing, visible, and accessible in stores or online.
We hope that our Inventory vs. Stock article has given you a better understanding of the main differences between Stock and Inventory.