Managing inventory efficiently is a crucial part of any business that deals with manufacturing, distribution, or logistics. Companies often handle two types of inventory:
Customer-Owned Inventory (COI) – Materials or products owned by a customer but stored and managed by a supplier or service provider.
Stock Items – Inventory that the company purchases, owns, and sells as part of its regular operations.
Each type of inventory requires different handling processes, tracking methods, and financial considerations. In this blog, we’ll explore the differences between customer-owned inventory and stock items, the challenges of managing each, and best practices for efficiency.
What Is Customer-Owned Inventory (COI)?
Customer-Owned Inventory (COI) refers to products or raw materials that a business stores on behalf of a customer. The company does not own the inventory but is responsible for handling, tracking, and sometimes processing it.
Common Examples of COI:
✔ Raw materials for manufacturing, supplied by a customer
✔ Finished goods stored in a warehouse before distribution
✔ Consignment stock, where a supplier stores inventory at a customer’s location
Advantages of COI:
✅ Lower financial risk – No upfront investment in inventory
✅ Stronger customer relationships – Provides value-added services
✅ Flexible storage options – Customers supply inventory as needed
Challenges of COI:
❌ Complex tracking – Requires separate records from owned inventory
❌ Responsibility for losses – Need clear agreements on damages or shrinkage
❌ Space management – Must ensure COI doesn’t take up too much warehouse space
💡 Example: A metal fabricator might receive customer-supplied aluminum sheets to process into components. The customer owns the material, but the fabricator must store, track, and manage it properly.
What Are Stock Items?
Stock items are materials or products that a company owns and sells as part of its regular business. These items are purchased, stored, and managed internally.
Common Examples of Stock Items:
✔ Raw materials (e.g., steel, wood, plastic)
✔ Finished products ready for sale
✔ Spare parts and accessories
Advantages of Stock Items:
✅ Full control over inventory levels and availability
✅ Easier tracking and accounting – No need to separate ownership records
✅ Potential for higher profit margins – Businesses can mark up prices based on demand
Challenges of Stock Items:
❌ Higher financial risk – Requires investment in materials and storage
❌ Risk of overstocking or obsolescence – Must manage inventory efficiently
❌ Storage and handling costs – Warehousing, insurance, and management expenses
💡 Example: A steel supplier buys large stock coils, cuts them into sheets, and sells them to customers. The company owns the inventory until it is sold.
Key Differences: Customer-Owned Inventory vs. Stock Items
FeatureCustomer-Owned Inventory (COI)Stock Items
OwnershipCustomerBusiness
Financial RiskLower (customer supplies inventory)Higher (business invests in inventory)
Tracking RequirementsSeparate records for COI itemsStandard inventory tracking
Responsibility for Loss/DamageTypically outlined in contractsFully owned by business
Storage ConsiderationsRequires dedicated space for customer inventoryManaged as part of warehouse stock
ProfitabilityRevenue comes from handling, storage, or processing feesRevenue comes from product sales
Best Practices for Managing Both Inventory Types
✅ 1. Use Clear Agreements for COI
Define ownership terms, liability, and usage limits in a contract.
Specify who is responsible for damaged, lost, or obsolete inventory.
✅ 2. Implement a Robust Inventory Tracking System
Use barcode or RFID tracking to separate COI from stock items.
Maintain real-time inventory visibility for both types.
✅ 3. Optimize Storage and Handling
Allocate dedicated storage areas for COI to prevent mixing with stock.
Implement FIFO (First-In, First-Out) or FEFO (First-Expired, First-Out) for perishable items.
✅ 4. Communicate with Customers About COI Usage
Provide regular reports on inventory levels.
Set minimum and maximum stock levels to avoid excessive storage costs.
✅ 5. Monitor and Adjust Inventory Levels for Stock Items
Use demand forecasting to prevent overstocking or shortages.
Conduct regular cycle counts and audits to maintain accuracy.
Final Thoughts: Managing COI vs. Stock Items Efficiently
Handling customer-owned inventory vs. stock items requires different management approaches. While COI reduces financial risk, it comes with tracking and storage challenges. Stock items provide more control and profit potential, but they require careful inventory planning.
By implementing clear policies, robust tracking systems, and efficient storage practices, businesses can manage both COI and stock items smoothly, improving customer satisfaction and operational efficiency.
🚛 Need to streamline inventory management? Use these best practices to keep operations running smoothly! 📦📊
