Inventory Flowchart Page 4

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Inventory Flowchart Page 4

• Cynthia Truong
• Annie Tang
• Yan Yan
• May Liu
• Mercy Muitah

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Part 1

• Specifications for special sales orders are
  received from engineering design department
• A Production planning clerk enters the data into
  the computer
• The computer updates the data to two magnetic
  disks as Product specification file (specifies
  what parts are needed) and Operations (routing)
  file (specifies where to go from each machine)

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Part 2

• Determine the production needs manually by Sales
  forecast (forecasted sales made by the sales
  department) and Back-order report (orders that
  have been placed by customers, but production
  item is not available to meet customer needs).

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Part 2 (Continued)

• The Production requirements by product is created
  and the data is entered into the computer at the
  end of each day.

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Part 3

• We merge the information from the routine
  (Product specification file and operations
  (routing) file) and specialized area (Production
  requirements by products) and prepare production
  and material needs.

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Part 3 (Continued)

• The computer updates the information to 4
  magnetic disks as four master files Raw material
  inventory file (how many raw materials we have),
  Machine loading file (what raw materials to load
  up the machines), Open production orders file
  (orders that are still in the process), and
  Production schedule file (the schedule for
  machines, labor, when to receive raw materials,
  etc.).

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Part 4

• With updated information, a copy of Bills of
  materials, Operations lists, and Sales order are
  created.
• Bills of materials is the document that specifies
  the part number, description, and quantity of
  each component used in a product.

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Part 4 (Continued)

• Operations lists is the document that specifies
  the labor and machine requirements needed to
  manufacture the product.

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Part 4 (Continued)

• Sales Order is the document created during sales
  order entry, listing the item numbers,
  quantities, prices, and terms of the sales.
• All three above documents are send to the
  customer as acknowledgement.

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Part 5

• A copy of Production order, Move tickets,
  Materials issue cards are also created with
  updated information.

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Part 5 (Continued)

• Production order is a document authorizing the
  manufacture of a specified quantity of a
  particular product. It lists the operations to be
  performed, the quantity to be produced, and the
  location to which the finished product is to be
  delivered.

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Part 5 (Continued)

• Move tickets are documents that identify the
  internal transfer of inventory, the location to
  which they are transferred, and the time of the
  transfer.
• All three documents above are sent to Production
  operations department

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Part 6

• The Revised production schedule is prepared and
  sent to Production work center.

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Part 7

• The Materials requirements report is also
  prepared and sent to purchasing processing
  department.

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Possible Internal Control Improvement

• Back up control-Multiple back up copies of files
  are recommended. One can be stored on-site and
  another stored off-site.
• Data entering edit control-Completeness checks
  can verify that all required data is entered.
• Specifications for special sales orders need to
  get approval by the credit department before
  entering- Since this are not regular sales orders
  and probably are high cost items, its important
  to ensure that they are approved by the Sales
  manager. Signatures on the Sales Order request is
  one way of ensuring approval.
• Accurate sales forecasts and inventory
  records-Without accurate reports, overproduction
  and underproduction can occur. Overproduction can
  lead to surplus creating cash flow problems since
  resources are tied up in inventory.
  Underproduction on the other hand can lead to
  shortage thus loss of sales and customer
  dissatisfaction
• Proper segregation of duties- In this case, the
  person entering the data at the end of the day,
  should not been the one determining production
  needs..

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• Thank you!