Is there a difference between inventory and stock, or are the words interchangeable? Learning to differentiate the terms will help you accurately account for the items your business has on hand, and capturing these details in your inventory system can help you streamline business processes to become more profitable and productive, too.
Stock vs. Inventory: What's the Difference?
The Difference Between Stock and Inventory
In general, stock includes finished products, parts, materials, or whatever else you sell to customers. The more stock you sell, the more revenue your business generates.
Inventory, on the other hand, includes these finished products (stock) and all the other inventory and assets a business owns or uses to complete production.
There are four main types of inventory, and they don’t all include sellable, finished stock. Here’s more about each type:
1. Raw materials
Raw materials are parts or components used to make a final product. For example, if your company manufactures HVAC parts, the raw materials used to make fan motors, compressors, or thermostats might include:
- Metal
- Plastic
- Fiber or other materials
Keep in mind that if your business sells raw materials to, say, construction companies, than your raw materials aren’t truly raw materials. They’re, in essence, finished goods—also known as stock.
2. Work in Progress (WIP)
Work-in-progress, or work-in-process, inventory is inventory that’s still in production. Some examples are incomplete goods that require time to dry, seal, bond, or ferment before they are ready to be packaged and sold.
Work-in-process inventory is always inventory, never stock. It simply isn’t ready to be consumed or sold.
3. Maintenance, Repair, and Operating Supplies (MRO)
Items that support production but are not part of the finished product are MRO supplies. For example, if you’re tracking medical inventory for a company that manufactures continuous glucose monitors, production might be supported with these MRO supplies:
- Adhesives
- Calibrators
- Computers
- Gloves
- Packing materials
- Safety glasses
The only instance where items that seem like MRO inventory might become stock is if a business sells these items. In that case, such items need to be reclassified as finished goods because they no longer serve as MRO supplies.
4. Finished Goods
Finished goods are completed products that are packaged and ready to be sold. They are, without nuance, classified as stock. Remember that items that may be considered raw materials or MRO supplies for one business may be finished goods for another.
Selecting an inventory management system to track stock and inventory
Now that you understand the difference between inventory and stock, it’s time to consider which inventory management system is best for tracking these items. Typically, one of three inventory management systems is used to keep track of inventory in stock. The first option is a sheet of paper or a digital document. The second is an inventory spreadsheet. The third is inventory management software, which today is often an app on a smartphone or tablet.
Manual inventory systems
Typically, only very small businesses succeed in using a document to keep track of inventory. There’s simply too much room for error and too many chances for information to be lost or corrupted. What’s more, the process is tedious, and it’s virtually impossible to monitor inventory levels in real time. Plus, for businesses that track all four types of inventory, a manual system typically lacks enough detail to identify what production stage an item is currently in.
Spreadsheet inventory systems
The natural upgrade from keeping track of inventory on paper is to start using an inventory spreadsheet. These systems are often simple and free, making them an easy choice for a business that’s beginning to grow. That said, there are drawbacks to using inventory spreadsheets.
Spreadsheets are, like pen and paper, extremely prone to human error. It’s easy to jumble numbers during data entry, and having multiple people work on the same spreadsheet simultaneously result in confusion and inaccurate data. Furthermore, while spreadsheets offer some assistance with data analysis and formulas, they are not designed to scale with growing businesses—especially not those with significant inventory moving through different stages of production. Inventory spreadsheets are also not optimized to feature inventory photos or barcodes and QR codes, all of which are essential for automating inventory management and reducing the risk of human error.
Inventory management software systems
These are some of the reasons why more and more businesses are turning to inventory management software to keep track of their inventory throughout every production stage. In the past, businesses that tracked large amounts of inventory may have chosen software, while smaller and medium-sized businesses may have settled for a sheet of paper or a spreadsheet. Sortly inventory software is so intuitive and affordable that businesses of all shapes and sizes can reap the benefits of inventory automation.
With inventory management software, it’s easy to create a centralized, organized database of all the inventory and stock your business has. Sortly users can create folders, tags, and other custom notes to differentiate items as they move through the production process, including separate folders for inventory and stock. This makes it easier for employees to know what’s available and provides clearer, more accurate inventory information for accounting.
With smart features like mobile barcoding, low stock alerts, pick lists, purchase orders, and more, businesses can optimize their entire inventory workflow, freeing teams up to focus on completing projects and delivering quality work.
About Sortly
Sortly is an inventory management solution that helps you track, manage, and organize your inventory and stock from any device, in any location. We’re an easy-to-use inventory software that’s perfect for large or small businesses. Sortly builds inventory tracking seamlessly into your workday so you can save time and money, satisfy your customers, and help your business succeed.
With Sortly, you can track all four types of inventory, from raw materials to finished goods. Sortly comes equipped with smart features like barcoding & QR coding, low stock alerts, customizable folders, data-rich reporting, and much more. Best of all, you can update inventory right from your smartphone, whether you’re on the job, in the warehouse, or on the go.
Whether you’re just getting started with inventory management or you’re an expert looking for a more efficient solution, we can transform how your company manages inventory—so you can focus on building your business. That’s why over 15,000 businesses globally trust us as their inventory management solution.
Start your two-week free trial of Sortly today.
