Differences Between Inventory and Stock: Managing, Tracking and Accounting for Both


illustration of inventory vs stock storage

You must have come across the terms ‘inventory’ and ‘stock’ countless times in the world of eCommerce fulfillment, so how often have you wondered whether the two are synonymous? Although often used interchangeably, the two are somewhat different. Simply put, stock is a component of the broader and more inclusive term ‘inventory’.


While inventory refers to raw materials, work in-progress items as well as finished goods, stock strictly refers to finished products. Therefore, stock is always inventory but inventory is not always stock, so while you can easily refer to stock as inventory, you should refrain from doing the opposite especially when in doubt. This article is written with the intention of clearing any such ambiguities and provide a deeper understanding of the two terms.


What Is Meant By 'Stock' vs 'Inventory' in eCommerce?


The term ‘stock’ refers to the finished goods that are ready to ship and mail to the end user. For businesses dealing with selling raw materials, the number of raw materials at their eCommerce fulfillment warehouse will be the stock, as they won’t be further processed by the same eCommerce entity. Inventory consists of different types, for instance physical inventory or merchandise inventory. Inventory is a more inclusive term than stock, and it includes raw materials (whether ready for being sold, or kept for further processing prior to shipment), work-in-process (WIP) inventory, finished goods, as well as maintenance tools that are in possession of the business. For streamlined eCommerce warehousing and shipping and profitable business, optimized inventory management is of core importance.

How Is Inventory Different from Stock?


There is a minor difference between the two terms, but understanding the difference is important for avoiding ambiguities. For most eCommerce sellers, the two terms are synonymous, however, when dealing with a business accounting professional the two terms need to be differentiated for proper communication. Read on for a basic comparison between the two.

Inventory

  • Most commonly used in manufacturing and retail operations

  • Refers to the raw materials, work-in-process items as well as finished products\

  • Helps you set sale prices for your stock goods

  • Inventory updates need to be made on quarterly or annual basis

  • Value of inventory is calculated by weighted average methods, FIFO, and LIFO

Stock

  • Most commonly used in production and manufacturing domains

  • Refers to the value of items ready to be sold

  • Stock values help you determine your business revenue

  • Stock level updates need to be made multiple times on a daily basis

  • Value of stock is calculated based on the current market value of those goods


How Is Accounting for Inventory Different from Accounting for Stock?


The methods employed for inventory accounting are entirely different from the way the value for stock is determined. For the evaluation of inventory, we use FIFO, LIFO, and weighted average methods. FIFO stands for “first in, first out” and means that the first items entered into your inventory are the first ones you sell. LIFO stands for “last in, first out” and means that the most recent items entered into your inventory will be the first ones you sell. However, the value of stock of certain goods is based on the current value of those goods, picking the lower one from the choice of acquisition cost and market price.


How to Manage and Keep Track of Stock Levels?


Efficient warehouse storage with real-time updated information of stock levels is crucial for correct order fulfillment. This is normally done using software, RFID tags and barcodes. The inventory manager can use digital warehouse management systems and inventory management tools that make use of single, integrated dashboard providing information regarding the levels of stock as well as the sales performance of different items. This information is provided in real-time and across multiple channels to keep the manager equipped for making informed business decisions and avoid stockouts or carrying unnecessarily high volumes of inventory.


How Do 3PLs Facilitate in Timely Replenishment of Stock and Inventory?


While inventory management is essential for eCommerce fulfillment brands, it is also very time-consuming. Therefore, outsourcing fulfillment to technologically equipped third party logistics (3PL) fulfillment centers, such as ShipBots, ensures timely replenishment of stock and inventory fueled by accurate demand forecasting, in addition to order fulfillment services.


How Can ShipBots Facilitate Businesses in Managing Their Stock and Inventory?


More than distinguishing the two terms, what really matters is the ability of a business to foresee its stock and inventory related needs and to track and manage the two in every step of its supply chain. Making use of end-to-end eCommerce solutions and maintaining an optimized supply chain aid in efficient tracking and managing of inventory. However, organizing inventory and managing it is laborious, therefore partnering up with third party logistics companies such as ShipBots and splitting inventory across 3PL fulfillment centers is worth it. Once ShipBots handles your eCommerce fulfillment needs, you can focus on expanding and growing your business.


At ShipBots, we make use of our inventory management tools that optimize demand forecasting methods to prevent stockouts or unnecessary inventory carrying costs. By providing real-time updates of stock and inventory levels, ShipBots' tech-enabled 3PL approach facilitates retail fulfillment and merchandise fulfillment while maximizing dock-to-stock efficiency. You can contact us to learn more about our 3PL services.