Case Analysis: Blanchard Importing and Distributing Co. Inc. (Hbs Case 9 - 673 - 033)

This means that stock levels of raw materials, work in progress, and even finished products are kept to a minimum. However, this system requires a very carefully planned scheduling for it to work. Inventory levels are closely monitored such that stock is only obtained when it is needed. This makes storage or warehousing easy since less space is required transportation as well.

In accordance to the annual report of Woolworths Limited 2016, the current accounting practice that is applied to the business regarding its inventory disclosure includes; a perpetual inventory system which continually updates the information by increasing or decreasing inventory from reports throughout the year to verify accounting records (Bragg 2016). A perpetual inventory system in comparison to a periodic inventory system is more efficient and effective for larger corporations. With entities like Woolworths, many transactions occur between themselves and other stakeholders, so by utilising a perpetual inventory system, it saves time and also money (Woolworths 2016)

1) Correct the Economic Order Quantity (EOQ) and Reorder point (ROP) quantities for each of the five items mentioned in the case.

The inventory has a financial importance as it is purchased and recorded at its historical cost or original cost. With respect to a perpetual inventory system, inventory accounts are continually controlled as goods are purchased and placed directly into the inventory account and then later taken out when sold. Therefore the inventory is properly recognized within the period it is sold. Furthermore

Stakeholders found that the current guidance on the inventory measurement was very complicated, which then led FASB to propose an update on the measurement of the inventory. The board implemented this update due to complaints from stakeholders. Many stakeholders are concerned about the complexity on measuring inventory. Currently, Generally Accepted Accounting Principles (GAAP) requires organizations to measure at the lower of

EOQ as described everywhere is “the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models”. This model uses the following assumptions:

Based on the information provided in the above indicated inventory analysis the financial controller and all interested parties within management will be better able to become informed regarding all indicated irregularities, material misstatements or inventory shrinkage . Furthermore, this will assist the management team in understanding and more effectively managing

The POS is a great indicator of items in stock and knows when to order more stocks of the items. Every time any item is sold, POS updates the server and the inventory amount changes. Remember that POS system is the location where a transaction or checkout takes place. POS systems are able to track the internal stock and automatically schedule the replenishment stock from external sources. This inventory management is an important part of Information Systems. Inventory management is mainly about specifying the size and placement of stocked goods. Inventory management is also required at different locations of the supply chain; this encompasses everything from replenishment lead time, carrying the cost of inventory, inventory and demand forecasting, inventory valuation, inventory visibility, price forecasting, quality management, and returns of defective goods. The inventory management needs to be handled in the efficient manner as it is

A risk to the auditor due to the complexity of physical inventory includes the possibility of which of the

The inventory and production departments also have issues. Currently, inventory is done by the receiving area supervisor confirming the shipping documents against incoming orders by hand. This allows for human error and is not a quick or efficient way to do inventory. The same process is used when production takes items from inventory. The inventory system is only updated once daily when new raw materials arrive and then again once daily from production when the raw material is used. The lack of tracking and checking in a timely manner leaves the organization’s processes at a higher risk of failure. The inventory system does not currently communicate with the sales or with the Finance and Accounting applications. This may lead to a

Perpetual inventory system is great and fast way for the business to carry on, however it can also lead to wrong numbers of stock by scanning the same product several times. Conducting a stocktake once a week if possible is important to check that everything is in place.

Second, the classification in inventory management is still inaccurate. That results in some problems such as: the severe lack of some products which are in growing demand (1 inch valve series 230), the redundancy making storage expenses go up and the stagnancy in storage area (to products like gear driven rotary and monitor controller)

Economic Order Quantity (EOQ): Our warehouse utilization has increased from 65% to 90%, it is apparent a significant quantity of our money is being tied up in inventory. The EOQ calculation shows the lot size that will minimize total annual inventory holding and inventory costs.

A common way of decreasing the amount of inventory a business holds on a daily basis is implementing a just-in-time inventory process. A Just-In-Time inventory system means that the business gets the materials for a product, as they are demanded. “The electronic data

Centralised inventory data, orders and payment systems give the company the ability to monitor overall product and cash flows. Every shop will also use the same system to perform the same tasks.