Understand the difference between supply and inventory (2023)

Every e-commerce operation relies heavily on shipping and inventory, but each serves an entirely different function.

While it's easy to merge the two, a clear distinction between them helps small businesses keep proper records for accounting andInventarverfolgung— two roles that are absolutely critical in larger rolessupply chain operationssuch as inventory management,demand planning, estock forecast.

By carefully recording, tracking and managing supply and inventory, companies can lay a foundation for smoother and more efficient business operations.

In this post, we'll delve into the differences between supply and inventory, and how to manage and charge for both.

What is the difference between supplies and inventory?

Supplies are the items you use for your daily tasks. They are not necessarily part of the finished products sold to customers, but they play an essential role in your business function.

Inventory, on the other hand, refers to the raw materials that are converted intofinished products, and the finished products themselves, which are sold to the final customer.

What counts as inventories?

Items you use to support your daily operations are considered supplies. The consumables you need will vary depending on the nature of your business, but will almost always include common office supplies such as:

• paper
• stationery shop
• Toner
• boxing
• shipping labelsebarcodes
• bubble wrap
• present paper
• Scotch tape

Consumables should also be distinguished from equipment. Equipment is a tool used to convert raw materials into finished products and is typically used repeatedly, while supplies are used to support business operations and are usually depleted and have a finite lifespan after serving their purpose.

For example, at a clothing retailer, price tags would be considered supplies (since they are needed to run the business but are only used once) and a washing machine used to prepare many clothing items for resale would be considered an equipment.

What counts as stock?

Items that you purchase or manufacture to sell to your customers are considered inventory. In addition to finished goods ready for sale, inventory may include:production stockthat ends up being incorporated into finished products, items that are still in the manufacturing process (orWork-in-Progress-Inventar) and finished products.

For example, if you manufacture and sell soap, the finished soaps you store in your warehouse could be considered inventory.

Additionally, the raw materials needed to make the soaps – such as oil, dyes, lye, fragrances and distilled water – can be considered inventory as they become part of the final product.

And even when these raw materials are turned into finished products, the soaps remain a work in progress as they sit in the mold waiting to be cured and cut.

However, the bubble wrap, masking tape, and boxes you use to ship your soaps to your customers are considered consumables. Because they are not part of the final product and are not used as raw material for the manufacture of soap.

Likewise, anything you use to clean and prepare your finished products for packaging is considered consumable as it is not part of the final product and is 'consumed' during the manufacturing process.

Your finished goods are considered inventory as long as they are not sold. Even if you still keep them in your warehouse, they are not "inventory" once customers buy and pay for them.

“We use ShipBob's Inventory API, which allows us to programmatically pull real-time data on how many units of each product are currently in ShipBob's warehouses. We currently use this API to create custom reports to link this inventory data to our accounting platforms.”

Waveform lighting team

Manage inventory x shipments

Just as it is important for companies to differentiate between inventory and supplies, it is equally important to manage inventories and supplies differently. Here's a breakdown of how inventory management and purchasing management differ.

inventory management

inventory managementinvolves monitoring a company's stocked products and ensuring they are in orderinventory recordsand accurate inventories are maintained.

While inventory management activities can be performed anywhere you store your inventory, most businesses choose to store and manage inventory in a large storage room with dedicated shelves and aisles.

Inventory management is a multifaceted endeavor made up of many distinct processes. Some of these processes include:

• Receipt of goods in a warehouse
• Organize and store (with maximum use of space)
• Inventory control measures such as B. periodicallyinventory checks
• monitoringstock levelsand inventory turnover
• inventory control
• demand forecast
• Calculationrearrange pointsit's greatreorder quantities
• restock stockhow necessary

Good inventory management helps ensure that you maintain optimal inventory levels and move inventory through the supply chain as smoothly as possible. This helps streamline warehousing and fulfillment operations, making it easier to run your business.

“One of the greatest features of the ShipBob software is the inventory management feature, which allows us to track inventory changes and rates over time. Being able to monitor which styles are selling quickly helps us keep our best selling products in stock at all times.

(Video) Inventory Management in Supply Chain

Between shipping new wholesale collections at the start of the year and the fourth quarter's craziness for direct-to-consumer sales, we've managed to weather our toughest seasons by using ShipBob's inventory forecasting tools to stay one step ahead of production - even as our order volume has exceeded fourfold in less than a year.”

Ryan Casas, COO voni love plum

supply management

Inventory management is the process of managing consumables and other items that are not tracked as inventory. While supply management can be tricky in and of itself, it generally involves smaller amounts of materials than inventory management and doesn't directly affect customers.

You usually have a dedicated storage room, closet, or storage room to store your supplies. It is in these spaces or closets that most companies use appropriately labeled closets, shelves, and boxes to organize supplies.

As with inventory, you still need to keep track of how you're using your supplies, how much is left, and when you should restock supplies.

keep inventory

It is important to keep a supply of consumables for two reasons – i. H. Track and record which consumables were purchased and when.

Firstly, it provides information on stock levels at all times, helping to ensure you don't run out of essential supplies at critical times.

Second, keeping an inventory of consumables helps your business accurately reflect expenses on your balance sheet, and recording consumable purchases as they occur facilitates year-end accounting.

To maintain a consumables inventory, start by creating an inventory log to record all available consumables. You can then group all available consumables by type and location. For example, you might want to group packaging materials in one group while keeping printed materials in another group.

Then write down how many units you currently have available. Based on these records, you can make appropriate plans to reorder consumables at the right time to avoid stock-outs.

Don't forget to calculateMinimum Order Quantityand transit time (so you canshopping logisticsproperly) and plan to keep someintermediate stockalways at hand.

Accounting for supplies versus inventory

In an accrual accounting system, consumables are typically treated as expenses incurred in connection with operating your business. In consumer accounting, unused consumables are initially recognized as an asset, but later deducted as an expense when they are used.

inventory accountingon the other hand, it treats parts of the stock as assets and records how the value of the total stock changes over time. There are several methods of calculating NAV, including weighted average, specific identification,LIFO(last in, first out) andFIFO(first in first out)

Regardless of which method you use, it is important to accurately record all inventory, including finished goods inventory,goods in transit,Pipeline-Inventarand work-in-progress inventory.

Including all inventory in your calculations is the best way to accurately calculate your profit margins and cost of goods sold at the end of any accounting period.

What does ShipBob do?

ShipBob is a leader3plProvider that allows you to outsource the entire e-commerce service process. Once you ship your inventory to one (or more!) of our fulfillment centers, ShipBob takes care of it.stock positioning, SKU-Organization,store, picking, packing and shipping for you.

You can also simplify many aspects of your inventory management with ShipBob's dashboard technology. our propertystock management systemcomes with advanced features that make it betterInventory visibilityon stock levels in different warehouses from a single platform.

comreal-time inventoryTracking and reporting, you can accuratelyOptimize your inventoryManagement process for productivity and profitability.

Our software allows you toTrack inventory at the SKU level, so you can identify SKUs and fast and slow selling timesreplenishmentperfect to avoid overstocking and highHaltekostenas well as expensivescarcityelate orders.

From ShipBob's dashboard, you can use analytics tools to track historical data across your distribution network to forecast demand, prepare for peak periods, and respond to trends.

If you want to expand your business reach and lower your averageShipping, you can use ShipBob's Optimal Inventory Allocation Tool to calculate which locations are most strategic to use based on common order goals and how much inventory to store in each.

With the right mix of experience, optimization and technology, ShipBob can help your company differentiate by streamlining your business operations - large and small.

“Having ShipBob's dashboard is very helpful, especially when you can check how many have sold today and how many you can sell. It really helps to know that this is a reliable inventory source! It's very convenient and I love that new changes are easily implemented automatically.”

Nakisah Williams, founderCraft Clube Co.