A number of policies can be used to bolster the system of controls for in­ventory. The 20 policies in this section are broken down into subcategories for receiving, record accuracy, valuation, and obsolescence. The next three policies help ensure that incoming inventory is properly inspected, recorded, and stored.

Incoming inventory shall be recorded after it has [...]

A just-in-time system is comprised of a number of manufacturing tech­niques whose central goal is to produce only to specific customer orders, and in the shortest possible period of time. The next techniques are some of the ones used to reach this goal.

Frequent supplier deliveries directly to production
Reliance on fewer suppliers
Material movements [...]

Additional technology and management concepts can be built on top of the basic computerized perpetual inventory tracking system described in the last section to improve the overall level of efficiency while also reducing the amount of manual transaction processing. However, since so many dif­ferent systems are in use, they are not described here as a [...]

Perhaps the single most important control over the amount and location of inventory on hand is the use of a perpetual inventory system. Under this ap­proach, inventory records are updated constantly with purchases arriving from suppliers, sales to customers, picked items being sent to the produc­tion area, and so on. In its simplest form, no [...]

There is inevitably a certain amount of inventory that will not be used, due to excessive purchasing of raw materials beyond a company’s needs, customers not buying certain items, or assembly requirements no longer calling for par­ticular parts. The most common approach is inattention: letting obsolete in­ventory pile up until external auditors force the company [...]

The default approach to handling goods in transit is that they are not the company’s property prior to arriving at the receiving dock or after leaving via the shipping dock. However, this is not always correct, since shipping terms can specify that the company is responsible for the goods for all or some portion of [...]

This section describes controls for only the most basic inventory manage­ment system, where there is no perpetual inventory tracking system in place, no computerization of the inventory database, and no formal planning sys­tem, such as manufacturing resources planning (MRP II) or just-in-time (JIT).
When there is no perpetual inventory tracking system in place, the key control [...]

This section describes controls over the acquisition of inventory where there is no computerization of the process.
The basic acquisition process centers on the purchase order authoriza­tion, as shown in Exhibit 1. The warehouse issues a prenumbered purchase requisition when inventory levels run low, which is the primary authoriza­tion for the creation of a multipart purchase [...]