The world of economics and commerce has a big influence on our everyday life, as they maintain influence on the markets of various goods or services globally. There are two such terms, which seem very familiar in the markets, i.e., Supply and Stock. Both are related to the availability of goods but have different meanings. And both of them form a huge industry that employs millions. In this article, we will point out the essential differences between these closely related terms, individual explanations, roles in the economy, and how they are maintained.
Stock vs. Supply
As discussed earlier, Stock and Supply are closely related terms. Though, they have different roles in the market that influences a large number of individuals. Stock refers to the number of goods or services available at the moment, which it holds refers to any. In simple words, the inventory of goods produced and stored for use or sale. On the other hand, Supply maintains the whole flow of goods supplied or services provided in the market in a specific period, particularly a month or quarter. It is accompanied by all the resources available from the sellers and producers, plus the stock and the ones produced.
Difference Between Stock and Supply in Tabular Form
|Parameter of Comparison
|Stock refers to the quantity of goods available at a particular moment or time.
|Supply refers to the goods supplied in the market at a specific period, which were once in the inventory.
|It has a static nature, as it provides data on the amount of quantity available.
|It possesses a dynamic nature, as it changes over a time period.
|Stock is measured at a specific time. It is not measured in a time frame as year, month, quarter, and vice versa.
|Supply is measured at a particular period. It is measured in a time frame as year, month, quarter, and vice versa.
|Relation to demand
|It is not directly affected by the demands of the market.
|Supply gets directly affected by the needs of the market. Or, simply gets affected by the demand.
|Stock is not dependent on the supply at all. As the stock can be greater or lesser than the supply of goods.
|Supply is dependent on the stock of goods. Due to the markets, the supply remains lesser than the stock of goods.
|Stock is entirely dependent on the production of goods.
|The supply of goods varies when the price of a commodity changes in the market.
|The companies keep the stock of goods, to match the unexpected demand of the goods.
|The supply chain is important to form, as it generates revenue for the company.
|The stock of goods is a wider industry, as there are stocks in the sale and there are stocks in the warehouse. Both of which require enormous maintenance.
|The supply industry only involves the goods that will be in the sale.
|Factors Affecting Fluctuations
|The number of goods produced every month can influence the stock of goods.
|The decrease or increase in the stock of goods can affect the supply chain.
What is Stock?
The amount of goods available to the producers and offered to the consumers is known as Sta company holds refers to both types of commodity: the one supplied to the market for selling and the other stored to sell in the future. Talking mathematically,
The stock of a Commodity = Total Amount of Goods Produced in a particular period - Amounts of Commodity Sold
Not all parts of the stocks are sold. Some parts are kept in warehouses, and they are released when the prices are favourable. A company that has a good market hold and who gets its stock cleared in a specified amount of time must keep in their mind that it should create a strong supply source to refill the amount sold. In this way, the companies can sell a good amount of units and profit from them. And most importantly, some companies do have a proper supply and sell good amounts every time a stock rolls out. But, they lack warehouse maintenance, which fails to keep the stock in good condition. When they release that stock in not-so-good conditions, they lose customers.
Factors Affecting the Stocks
Multiple factors affect the stocks of goods, including:
- Demand and Supply- The importance of all the factors, the demand and supply of the commodity. Currently, the need for the commodity in the market decides whether the stock level will remain the same or face fluctuations.
- Seasonality and Trends- Some commodities in the market are seasonal. Multiple industries are active only in a particular season. And the stock levels depend on these seasonal variations. For example, in the farming industry, some plantations occur only in a particular period of a year. It causes variations in the stock. In the seasonal match, the stock level will be high while in the unseasonal period, the stock level will be low.
- Economic Conditions - There are multiple economic conditions that affect stock availability. Some of these factors include inflation, interest rates, and overall economic growth. Overall these factors impact consumer spending and the stock.
- Production- If the commodity has spared more time in production. It causes problems at the stock level.
- Distribution- There is also another factor that affects stock availability. And that is the distribution of the commodity. If the commodity spends extra time in the time of distribution then it might affect the selling of stock stored.
- Weather and Natural Disasters- Also, can be a huge factor in disrupting the supply chain. If there are natural calamities like Tsunamis or Earthquakes, it can affect the whole industry and can affect the stock levels regionally or nationally.
- Consumer Behaviour - The stock levels can also be affected by consumer choices. Like, what the consumer wants from time to time and how the marketing has been done for the product, both of which can alter consumer behaviour.
Strategies For Maintaining Stock
The stock of goods is maintained and rolled through various strategies to ensure inventory management, including:
- Just in Time (JIT)- It involves the ordering of the commodity at a particular time, to avoid the inventory holding costs.
- First-In-First-Out (FIFO)- It involves the selling of old goods as early as possible, to avoid spoiling.
- Last-In-First-Out (LIFO)- It involves the selling of new stock, it impacts the taxes and it does not suit the perishable goods.
- Minimum Order Quantity (MOM)- It follows a rule, where the sellers set a minimum amount of orders, to achieve discounts and reduce the shipping bills.
- Economic Order Quantity (EOQ)- It involves the calculation of optimal order, which reduces the inventory costs and ordering expenses.
We have talked enough about the Stock. Now, we will talk about Supply.
What is Supply?
The quantity of goods and services available in the market is called Supply. It is available only if the producers are willing to keep it and are able to offer it to the consumers. The goods and services have varying price ranges. Then it is influenced by various factors like → how much it is produced, what the costs are employed, what the market wants, and how much technology has advanced. So, to understand how much supply must be given to the market, a consumer must keep in mind factors like price volatility, and overall market equilibrium.
Elasticity of Supply (Supply in Economics)
It is a concept in Economics that says how much the supply varies with the change in the price of the services or goods provided. There are various types of Elasticity in Economics, those are:
- Elastic Supply- Under this type of Supply, a small change in the price leads to a higher change in the number of goods or services. Agricultural Products show Elastic Supply. For example, a farmer grows wheat on his land. If the price of wheat increases, then he will put more land under wheat cultivation. Thus, resulting in a rise in the quantity of wheat.
- Inelastic Supply- It is the complete opposite of Elastic Supply. Under this supply, the change in price shows little effect on the change in quantity. Prescription medicines are the best example. Drugs are available in limited quantities. So, if the price increases it causes a little difficulty in increasing the supply.
- Unitary Elastic Supply- The most simple and easy-to-calculate form of Supply Elasticity. Under this supply, the change in quantity and the change in price are directly proportional to each other. Or the ratio of these two entities is unity (exactly one). Luxury watches can show this type of Supply Elasticity. If the prices increase for this category then the supply will decrease. Thus, results in similar profits for the producers.
This was all about the Supply Introduction. Let's talk about the Components or Variables of Supply.
Factors Affecting Supply (Determinants of Supply)
There are multiple factors or determinants that affect the Supply. All these factors are interconnected to each other. These factors together shape the goods and services in the market. So, let's not waste time and start understanding these factors:
- Price of the Good or Service - The most important of all, is the price of the good. If the prices of the goods are increased, then the supply will also be increased. And if the prices are decreased, then the supply automatically decreases.
- Production Costs - These directly influence the supply of goods. In the simplest case, if the production cost of a good decreases then supplying more goods becomes affordable and cheaper.
- Advancements of Technology - Technology has changed the world of producing goods. If the production of costs of the goods is eliminated through increased technology uses, it also increases the efficiency of goods production. Thus, the overall supply of goods increases.
- Number of Producers - The number of Producers and Supply of goods are proportional terms. If the producers increase in the market then the supply of goods also gets increased.
- Expectations of Future Prices - The anticipation of higher expected prices by the producers, make them stop the supply for a while. Or if they expect a decline in prices, then they might increase the supply.
- Government Policies and Taxes - This factor also impacts the supply. If there are multiple subsidies introduced by the government, then the producers must reduce the cost and increase the supply. Or, if the government imposes taxes on the production of goods then the producers must reduce the production, hence declining supply.
We have talked enough about the Supply of goods and services provided by the various industries. Now let's talk about the differences between Stock and Supply in multiple points.
Difference Between Stock and Supply In Points
- The Stock is a static quantity, as it represents a constant amount of goods at a particular period. Whereas, supply changes are based on marketing demands, inventory availability, and production capabilities.
- Supply is measured over a period of time, whereas the stock is measured at every moment.
- The stock of goods is not directly influenced by the demand, it depends upon the production. Whereas, the supply is directly influenced by the demand. The fluctuations in marketing needs can directly affect the supply chain.
- The purpose of supply is to meet the overall market demand and maintain a balanced environment. Whereas, the stock serves the immediate availability of commodities for sale or use.
- Supply of goods is important to be maintained to meet the current market needs. And the same time, the stock requires inventory management. Overall both of these things creates a balance in the market.
In conclusion, both stock and supply play essential roles in the world of economics and commerce. Stock is completely dependent on the production of goods. And the supply of goods changes when the price of a commodity changes in the market.
Overall both are distinct concepts in the market, but are interdependent. Where stock represents the immediate quantity of goods available. And supply gives the flow of goods over a specific period that is influenced by the market dynamics and production capabilities. Both play essential roles in maintaining a balanced market environment and meeting the consumer demands.