Page 348 - Accounting Best Practices

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16–12 Move Inventory to Floor Stock
the warehouse staff is not available. Further, the warehouse staff must be care-
fully instructed as to why no one but them is allowed in the warehouse; further,
they should receive additional training in how to process inventory transactions,
and then be given a bonus plan based on reaching high inventory accuracy levels.
Only by taking all of these steps will there be a good chance that nonwarehouse
personnel can be kept out of the warehouse and that the warehouse personnel are
committed to a high level of inventory accuracy.
This best practice is always opposed by the production department, which
claims that either it will be too time-consuming to wait for the warehouse depart-
ment to pick parts from the shelf or that they will not be able to get any parts at
all if the warehouse staff is not available. The best way to allay these fears is to
have all systems in place and fully functional before locking down the ware-
house. By doing so, the production staff will find that there are no problems with
the new system and will have no complaints left to make.
Cost: Installation time:

16–12 MOVE INVENTORY TO FLOOR STOCK

The typical inventory contains an enormous number of small parts, many of which
are difficult to track, are not stored in easily countable containers, and require a
large amount of paperwork in proportion to their size and frequency of usage. In
short, they are a pain for the warehouse staff to handle. Likewise, they represent a
minor irritation for the accounting staff, since they must all be counted during the
physical inventory counting process, and, because of the difficulty of counting
them, they take up an inordinate amount of time. Further, they can easily represent
one-third of the total number of inventory items, which is one-third more costing
documentation than the accounting staff wants to track. Accordingly, it is safe to
say that the smallest and most inexpensive parts in inventory are the root cause of a
great deal of extra work for the employees of several departments.
A moderately easy best practice that takes care of this problem is shifting the
small inventory items out of the warehouse and onto the shop floor, where they
are treated as supplies. This approach carries the multiple benefits of requiring far
less inventory handling work from the warehouse staff, fewer inventory counts
during the physical inventory process, and much less inventory-costing work
from the accounting staff. In addition, it brings more inventory close to the shop
floor, where the production staff appreciates the readier access, as well as not
having to go to the parts counter to requisition additional parts. This is one of the
rare best practices that is greeted with universal approval by a multitude of per-
sonnel, not just those in the accounting department.
Though this step can be taken quickly, one should be mindful of the danger
of issuing a quantity of expensive parts to the shop floor that may quickly disap-
pear, resulting in a significant loss. For these few costly items, it may be better to