Understand the difference between supply and inventory (2023)

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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.

(Video) Supply Chain Management In 6 Minutes | What Is Supply Chain Management? | Simplilearn

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.

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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.

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Frequently asked questions about delivery and stock

Here you will find answers to the most common questions about delivery and inventory.

What are the four types of inventory?

Understand the difference between supply and inventory (3)

The four types of inventory are raw materials or components, work-in-progress inventory, finished goods inventory, and maintenance, repair, and operations (MRO) inventory.

How do you keep an inventory of stocks?

Understand the difference between supply and inventory (4)

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You can maintain an inventory of consumables by keeping an inventory log, performing an initial item count, and recording new consumable purchases as they are made, allowing you to accurately record inventory levels for each item.

Are inventories considered inventory?

Understand the difference between supply and inventory (5)

no Consumables are the day-to-day items used by a business (such as paper, labels, or boxes), while inventory items are the end products that you will eventually sell to your customers.

Does ShipBob track and manage inventory?

Understand the difference between supply and inventory (6)

ShipBob tracks inventory in real time and provides tools to help you manage your inventory, including notification of reorder pointsautomationit's greatstock distributionMetrics.

What deliveries does ShipBob offer its customers?

Understand the difference between supply and inventory (7)

ShipBob offers standard packaging materials such as boxes, bubble wraps, polythene envelopes, poster tubes and book folds. These deliveries are unbranded and completely free for merchants.

(Video) How To Predict Inventory Demand: Supply Chain Management


What is the difference between supply and inventory? ›

Inventory is items subject to sale, rent or leases. Supplies are things consumed in your normal course of business. Inventory will lose its exemption if used by the owner in the course of the business or trade.

What are examples of supplies and inventory? ›

For example, a clothing boutique's inventory includes the different clothing items it sells. The shop's supplies may include the items employees use to clean the store after hours and the bags they put customers' purchases in as they leave the store.

What is the difference between supplies management and inventory management? ›

The supply chain manager will manage flows and inventory taking into account all sort of capacity and productivity issues along the way. The inventory manager will concentrate on his local stocks and place orders to suppliers taking into account supplier leadtimes and tariffs.

What is the difference between supply and supplies? ›

As a noun, supply means an amount of something that has been stored up or stockpiled. For example, almost everyone keeps a supply of food in their house. The plural of supply is supplies and is used when more than one type of thing is being stored.

What is inventory in simple words? ›

Inventory refers to all the items, goods, merchandise, and materials held by a business for selling in the market to earn a profit. Example: If a newspaper vendor uses a vehicle to deliver newspapers to the customers, only the newspaper will be considered inventory. The vehicle will be treated as an asset.

What is supplies vs inventory Turbotax? ›

Supplies are items your business uses for infrastructure and operations; they aren't necessarily part of the finished physical product your customer purchases. Inventory describes items that you will sell or will use to create the products you sell to your customers down the line.

What is difference between supply and stock with examples? ›

Stock refers to the number of goods that is available to the producers at a particular point in time. Supply is defined as the actual quantity of the goods that a seller is willing and able to sell to consumers at a given price and at a particular point in time.

What is production supplies and inventory? ›

Production inventory refers to your level of materials and supplies on hand for use in manufacturing production. This is different from work-in-process inventory, which is the value of goods in the middle of the production process, and finished goods inventory, which is the value of products to your customers.

What are included in supplies? ›

Office supplies expenses include items such as staples, paper, ink, pen and pencils, paper clips, binders, file folders, and markers. All of these items are 100% consumable, meaning that they're purchased to be used.

How do you manage inventory of supplies? ›

Here are some of the techniques that many small businesses use to manage inventory:
  1. Fine-tune your forecasting. ...
  2. Use the FIFO approach (first in, first out). ...
  3. Identify low-turn stock. ...
  4. Audit your stock. ...
  5. Use cloud-based inventory management software. ...
  6. Track your stock levels at all times. ...
  7. Reduce equipment repair times.
Jan 28, 2023

How do you keep inventory of supplies? ›

To get started, here are some tips for managing your office supply inventory.
  1. Limit Access to Supplies. The first thing you should do is to limit access to the supply closet. ...
  2. Have a Written Procedure. ...
  3. Track and Group. ...
  4. Set a Reorder Point. ...
  5. Attention is Key.
Jan 24, 2022

What is an example of supply management? ›

Supply chain management is the practice of coordinating the various activities necessary to produce and deliver goods and services to a business's customers. Examples of supply chain activities can include designing, farming, manufacturing, packaging, or transporting.

What is an example of supply? ›

The noun means an amount or stock of something that is available for use. That stock has been supplied. A mother, for example, may take a large supply of diapers (UK: nappies) with her when she goes on vacation with her baby. This means a large amount that is available for use.

What is supply one word answer? ›

sup·​ply sə-ˈplī supplied; supplying. transitive verb. : to make available for use : provide.

What words mean a supply? ›

synonyms for supply
  • amount.
  • fund.
  • inventory.
  • number.
  • quantity.
  • stock.
  • stockpile.
  • accumulation.

What is the main purpose of inventory? ›

The purpose of the inventory is to provide a buffer between production and sales, smoothing out the flow of goods and ensuring that products are available when customers order them. To achieve this goal, companies must carefully manage their inventory levels, investing in an appropriate system if necessary.

Why is inventory important explain? ›

Inventory management helps companies identify which and how much stock to order at what time. It tracks inventory from purchase to the sale of goods. The practice identifies and responds to trends to ensure there's always enough stock to fulfill customer orders and proper warning of a shortage.

What is the role of inventory? ›

Inventory is the accounting of items, component parts and raw materials that a company either uses in production or sells. As a business leader, you practice inventory management in order to ensure that you have enough stock on hand and to identify when there's a shortage.

Does inventory count as supplies? ›

No. Supplies are the items used to run the daily operations of a business (such as paper, labels, or boxes), whereas inventory items are the end products that you will eventually sell to your customers.

What does the IRS consider supplies? ›

The regulations define materials and supplies as tangible items that are used or consumed in the taxpayer's operations, not considered inventory and that: Are components acquired to maintain, repair or improve another. Consists of fuel, lubricants and similar items that will be consumed in 12 months or less.

What does the IRS consider inventory? ›

Inventory is made up of all the items that a business has on hand to sell, as well as all of the goods that the company will use to manufacture income-producing goods. While inventory is not directly taxable, it is used to calculate a business's cost of goods sold, or COGS.

What is the relation between inventory and supply and demand? ›

The law of supply and demand dictates the equilibrium price of a property. A low supply or housing inventory may drive prices up, which is what tends to result in bidding wars. A specific property may be in demand by multiple parties who all try to outbid each other by increasing their purchase price offer.

What is supply in business example? ›

The definition of supply is the quantity of product or service a business has to offer to its client at a particular point in time. For a physical, brick and mortar store this means the inventory a business holds on their premises and within warehouses that it can sell to customers.

What is the difference between supply and production? ›

While supply is obtained from stock, the stock is the result of production. In other words, the total quantity of finished goods present with the seller is stock whereas that part of the stock that is offered for sale is a supply.

What are the types of supply? ›

The types of supply are:
  • Market supply.
  • Long term supply.
  • Short term supply.
  • Joint supply.
  • Composite supply.

What are the 2 types of supplies? ›

Under the GST, supply of goods and/or services can be classified into two major categories - Taxable supplies and Non-taxable supplies. These are further classified into different types based on the nature of supply made. Taxable Supplies - These refer to supply of goods and/or services that are taxable under GST.

How to calculate inventory? ›

The first step to calculating beginning inventory is to figure out the cost of goods sold (COGS). Next, add the value of the most recent ending inventory and then subtract the money spent on new inventory purchases. The formula is (COGS + ending inventory) – purchases.

What are supply expenses? ›

What is Supplies Expense? Supplies expense refers to the cost of consumables used during a reporting period. Depending on the type of business, this can be one of the larger corporate expenses.

What is the simplest way to manage inventory? ›

Tips for managing your inventory
  • Prioritize your inventory. ...
  • Track all product information. ...
  • Audit your inventory. ...
  • Analyze supplier performance. ...
  • Practice the 80/20 inventory rule. ...
  • Be consistent in how you receive stock. ...
  • Track sales. ...
  • Order restocks yourself.

What are the 3 key measures of inventory? ›

We've put together a list of four crucial metrics that you should keep a close eye on over the course of the year: inventory turnover, average days to sell, return on investment, and inventory carrying costs.

What are the 3 main methods of taking inventory? ›

There are three methods for inventory valuation: FIFO (First In, First Out), LIFO (Last In, First Out), and WAC (Weighted Average Cost). In FIFO, you assume that the first items purchased are the first to leave the warehouse.

What is supply inventory system? ›

An inventory management system (or inventory system) is the process by which you track your goods throughout your entire supply chain, from purchasing to production to end sales. It governs how you approach inventory management for your business.

What are the 4 basic reasons for keeping an inventory? ›

Four very good reasons to hold inventory
  • Expecting the unexpected. By far the greatest adversary any inventory manager is expected to overcome is fluctuating consumer demand. ...
  • A time to buy and a time to buy more inventory. ...
  • Capitalizing on low cost offers. ...
  • Putting on bottom-line body armor.
Oct 19, 2015

What is meant by inventory management? ›

Inventory management, a critical element of the supply chain, is the tracking of inventory from manufacturers to warehouses and from these facilities to a point of sale. The goal of inventory management is to have the right products in the right place at the right time.

Why is supply management important? ›

Supply chain management is vital to society, providing the mechanism for getting products into the hands of consumers, from essential staples such as food and medicine to luxury items. In business, supply chain management allows manufacturers to make as many products as needed to meet market demand.

What is a good example of supply and demand? ›

If there was only one pizza restaurant in a town and then a new pizza place opened, the demand for pizza from the first restaurant would drop. The price of gasoline often changes with the demand throughout the year. As people drive more in the summer, gasoline prices tend to rise.

What is inventory in supply? ›

Inventory is the goods or materials a business intends to sell to customers for profit. Inventory management, a critical element of the supply chain, is the tracking of inventory from manufacturers to warehouses and from these facilities to a point of sale.

What is the main difference between stock and supply? ›

Stock refers to the number of goods that is available to the producers at a particular point in time. Supply is defined as the actual quantity of the goods that a seller is willing and able to sell to consumers at a given price and at a particular point in time.

What are the 3 types of supply? ›

The types of supply are: Market supply. Long term supply. Short term supply.


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