Differentiating Stock and Supply: Essential Concepts in Inventory Management
The gamut of inventory management is vast. From keeping track of various operations to successfully executing every step requires awareness and planning. Stocks and supplies are important differential concepts that every inventory manager must be aware of. Especially for effectively managing larger organisations, discerning the difference between stock and supply is crucial for companies, concerned managers and personnel. The mixing of concepts can lead to mismanagement, increased costs, undue pressures of work, and impact customer service ultimately.
While the difference between stock and supply exists, they are both correlated, too. For example, finished stock always calls for new supplies. In this blog post, we will discuss the key differences between stock in inventory and supplies with examples and other related aspects.
Stock in Inventory vs Supply
Stocks refer to the raw materials that will be transformed into finished goods and the finished goods that are awaiting sale to customers. Supplies refer to inventory that has yet to be purchased from the manufacturer, which will ultimately replenish inventory. However, in its broad sense, supplies also refer to the sum total of items used by a company in its daily internal operations.
Stock in inventory includes not only the finished goods awaiting sales but also production inventory that will become finished products and work-in-progress inventory. The total stock of a company at any point in time includes these.
Let’s substantiate the difference between stock and supply through an example:
For example, in a soap manufacturing company, the finished soaps come under the stock in inventory. Similarly, raw materials used in production– oils, fragrances, colourants, and other materials– are part of the stock. Soaps under manufacturing are also part of the overall stock owned by the company. But items used for packaging, like tapes, bubble wrap, and boxes, are part of supplies. Moreover, finished soaps will be in stock until they’re sold and bought by customers.
Related read: 9 Efficient Ways to Manage Stock Inventory
Difference between Stock and Supply
| Meaning | Represents ownership in the company. Owning stock makes you a shareholder. You are eligible for dividends if the company pays them. You might also get voting rights in company decisions. | Supply is the quantity of goods or services companies offer in a market. The law of supply and demand determines the price at which transactions occur. |
| Function | Stocks help generate revenue. | Supply meets sudden or unexpected increases in market demand for a product. |
| Timeframe | Measured at a specific point of time. | Supply extends to a particular period of time. |
| Total Quantity of Goods | The total amount of products/services available for sale by a company at a specific time. | The total quantity of goods in supply is the quantity of a product or service producers can sell at a specified price within a timeframe. |
| Cost and Time | The price of a stock can change over time due to factors like company performance, economic conditions, and investor sentiment. | The price of goods or services supplied can change over time due to the interaction of supply and demand. |
| Measurement | Stock is measured as the total amount of a product or service available for sale at a specific point in time. | Supply is the quantity of a product or service that producers can offer for sale at various prices over a period of time. |
| Interdependence | The amount of stock replenishment depends on the existing stock. It is always less than the existing stock. | A supply can be greater or less than the existing or previous supply. |
| Changes With | Price | Production |
| Nature | Dynamic | Static |
| Point of Sale | Stock is traded on stock exchanges where investors buy and sell shares. | Supply is sold in a market where buyers and sellers interact to establish the price and quantity of goods and services. |
| Product/Service | Stock refers to company shares traded on a stock exchange. | Supply is the available quantity of a product or service for sale in the market. |
| Proportionality | Increases with increase in market demand. | Increases with increase in production. |
| Demand Influence | Historical sales data and demand forecasts influence stock levels. | Existing customer orders and market demands can influence supply levels. |
| Risks | Subject to obsolescence, damage, or expiration.Impacts inventory turnover and inventory holding costs. | Lost sales and defying customer demands.Impacts supply chain costs and lead times. |
Other Differences Between Stock and Supply
Stock: Represents inventory already purchased by the business.
Supply: Represents inventory yet to be purchased by the business.
Stock: Stored within the business premises or warehouses.
Supply: Provided by suppliers or manufacturers external to the business.\
Stock: Owned by the business and recorded as an asset.
Supply: Owned by the supplier until purchased by the business.
Stock: Buffer against supply chain disruptions.
Supply: Dependent on supplier reliability and lead times.
Stock: Depleted through sales or wastage.
Supply: Replenishes stock levels when stock is ordered.
Stock: Impacts cash flow and working capital.
Supply: Does not affect cash flow until purchase.
Stock: Requires inventory management and control systems.
Supply: Requires supply chain management and coordination.
Stock: Requires appropriate storage conditions and facilities.
Supply: No storage requirements until received as stock.
Stock: Tied to specific product SKUs or identifiers.
Supply: This may be aggregate or bulk quantities from suppliers.
Managing Stock vs Supply
Managing stocks is known as inventory management, whereas managing supplies is part of supply management operations. Inventory management involves the following operations:
- Receiving inventory at the warehouse.
- Managing organisation and storage of stocks with efficient utilisation of space.
- Conducting periodic inventory audits as a control measure.
- Watching inventory levels and inventory turnover.
- Inventory control.
- Demand forecasting.
- Find out reorder points and ideal reorder quantities.
- Stock replenishment.
Supply Management
Supply management takes all supplies that are not part of stocks or inventory. The difference between stock and supply management again becomes striking here: Supply management is less complicated than inventory management as the former deals with fewer products. Moreover, supply management doesn’t impact customer experience.
Typically, businesses allocate a dedicated storage area such as a room, closet, or warehouse for storing supplies, where cabinets, shelves, and labelled boxes are commonly used for organisation. Like inventory management, it’s crucial to monitor supply usage and remaining stocks and determine when to replenish supply levels.
Difference between Stock and Supply with Examples
Example 1
Stock: An electronics store has 50 units of a particular TV model on the sales floor.
Supply: The TV manufacturer can produce and deliver 2,000 units of that model per month.
Example 2
Stock: An investor holds 500 shares of ABC Corporation in their portfolio at a particular point in time and is ready to sell them.
Supply: ABC Corporation has 10 million shares outstanding in the stock market.
Example 3
Stock: A sporting goods retailer has 75 units of a new baseball bat model in its inventory. They can quickly become zero after all sales.
Supply: The bat manufacturer can supply 10,000 units of that bat model to retailers each quarter.
Difference Between Expansion of Supply and Increase in Supply
The terms expansion of supply and increase in supply may seem similar. But they have differences. A company wants to expand its supply if it sees an opportunity for a price increase in the product. For example, a company was selling ten units of a product rated at ₹10 each. If the price of the product goes to ₹15 and the company now wants to sell more products (e.g. 15 units), it is known as an expansion in supply.
An increase in supply is caused by factors other than the price of the commodity. These can include increased demand, increased purchasing power, and an increase in the price of substitute or complementary products. Now, the company wants the manufacturer to increase the existing supply to meet the new demand. However, there is no change in the price of the commodity here.
For example, a company was selling 10 units of a product at ₹10 each. It also takes 100 products per month. There is a sudden surge in demand. Now, the company seeks to increase the supply to more than 100 products per month.
Conclusion
The difference between stock and supply might seem insignificant in the context of concepts. But in actual practice, they’re in charge of the biggest operations in any organisation. As mentioned, for scaling organisations, the distinction is crucial to allocate funds and other resources accurately. Learning the impact of both stocks and supplies ensures proper management in replenishing supplies and managing inventory during sales without delays or unexpected stockouts. Ultimately, both have a huge bearing on customer experience.
FAQs
What distinguishes money supply from the concept of stock?
The money supply is quantified by the money in circulation among the public at a specific time, making it a ‘stock concept’. Also, the money supply is measured at a particular point in time, reiterating its status as stock.
What is stock vs goods?
Goods refer to the objects or items traded by a merchant, while stock denotes a bulk of goods usually stored together and commonly kept in a warehouse. Goods represent items bought or sold for money.
What is the difference between stock and flow?
In economic analysis, variables are typically classified as either stock or flow variables. Stock refers to quantities measured at a specific point in time, while flow denotes quantities measured over some time. So, a supply is a flow concept.
What are 5 differences between stock and supply?
1. Stock is the quantity of goods held by a business for sale, and supply is the quantity of goods made available to the business for potential sales.
2. Stock represents inventory already bought by the business. Supply represents inventory yet to be purchased from suppliers.
3. Stock is stored in the business or warehouses. Outside suppliers or manufacturers provide supply.
4. Stock is depleted through sales or wastage, while supply replenishes stock levels when stock is ordered.
5. Stock incurs carrying costs from storage and handling. Supply has no such costs until the stock is purchased.
