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Sop Inventory Management PDF Free
Sop Inventory Management PDF Free
Procedures
INVENTORY MANAGEMENT
1. GENERAL ................................................................................................................................................... 4
1.1 VERSION CONROL .................................................................................................................................... 4
1.2 ISSUE AND COMMENTS LOG ................................................................................................................... 4
1.3 RELATED SOPS .......................................................................................................................................... 4
1.4 OWNERSHIP .............................................................................................................................................. 4
2. PROCESS OVERVIEW............................................................................................................................... 5
2.1 PROCESS SUMMARY ................................................................................................................................ 5
2.2 SUB-PROCESSES...................................................................................................................................... 5
Page 2 of 31
11. RECEIPT OF BY-PRODUCTS IN STORES ............................................................................................. 25
11.1 PROCESS FLOWCHART ......................................................................................................................... 26
11.2 PROCESS DESCRIPTION ....................................................................................................................... 26
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1. GENERAL
1 Draft
2 Final
Target
Sr. No. Issues / Comments Raised By Recommendations
Date
1.4 OWNERSHIP
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2. PROCESS OVERVIEW
The objective of these procedures is to ensure correct and timely inward of materials received at the plant and
adequate documentation of supporting documents to facilitate accurate bill passing.
2.2 SUB-PROCESSES
- Receipt of Material
- Issue of Material
- Material Sent on Returnable Basis
- Warehouse Transfer
- Physical Verification
- Perpetual Inventory Control
- Inventory Monitoring
- Receipt of By-Products in Stores
- Disposal of Inventory
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3. MATERIAL RECEIVING PROCESS
Trigger: Arrival of Material at the plant gate
End: Document Set (Invoice, Challan, QA Slip, Weighment Slip, GRN etc.) forwarded to Accounts Department for
Accounting
Approve / Reject
QA Process
GRN Quantity
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Process Activity Responsibility
intimate Store Executive.
Input Data Points: Following details to be captured in the Fruit Inward Register:
- Gate Entry Number (Serial Number),
- Date of Inward,
- Name of the Vendor,
- Material Description,
- Quantity of the Material Received (As per the accompanied documents),
- Unit of Measurement (UOM),
- Transporter Name / Material Carrying Person,
- Entry Token Number,
- Inward Time,
- Outward Time,
- Signature of the Security Person,
- Remarks, if any specific to the Inward of the Materials.
Output Data Points: Entry in Material Inward Register
Reference to Forms / Templates / Policies:
- Inward Register Format
- Guidelines for the plant security (w.r.t. Movement of outsiders inside the Plant
Premise, Security Gate Controls, Parking of vehicles, Stay of the vehicles &
drivers inside the Plant etc.)
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Process Activity Responsibility
If Weighment is required:
- Instruct vehicle driver to move vehicle towards the Weigh Bridge
- Obtain Gross Weight of the Vehicle and prepare Weigh Slip
- Unload the Materials at the designated place of storage
- Obtain Tare Weigh of the Vehicle and Net Weight of the Materials
- Acknowledge the driver’s copy of delivery challan and return with the instruction
to move outside the plant
Material should be unloaded within 2 hours of the entry inside the plant gate.
No PO in ERP
- In case the PO has not created till the time of unloading of the materials, follow-up
with the Purchase Team for PO creation in ERP.
Refer SOP for ‘Purchase - Other Than Fruits & Capital Goods’ for PO
Page 8 of 31
Process Activity Responsibility
creation process.
- Once PO is created, make GRN against the PO; affix system generated unique
reference number (GRN No.) on purchase documents and forward documents to
the Accounts Department for accounting purpose.
- Intimate the QA Executive in case a quality check is required.
Refer SOP for ‘Quality Assurance’ for QA Process.
- In case QA Testing are carried out, based on the QA Results, prepare GRN in
ERP.
Input Data Points: Weighment Slip / QA Slip (With desired quality specifications, if
any)
Output Data Points: GRN in ERP (Received Quantity, Accepted / Rejected Quantity,
Invoice / Delivery Challan Date etc.)
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4.1 PROCESS FLOWCHART
ISSUE OF MATERIAL
Issue of Material and Inter-Department Transfer
User
Material Material
Yes available at No available at Yes
other dept.? Stores?
A
Location /
A Warehouse Prepare Material Issue
Transfer Process Issue Material Issue the Material in Note and obtain the
No to the User Physically ERP sign of user
Store - Departmental
Purchase
HOD
Process (Other
than Fruits &
Fixed Assets)
Manager
Input Data Points: Item Name, Quantity Required and Desired Specifications, if any
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Process Activity Responsibility
Output Data Points: Material Requisition
Store –
In-charge
Availability should be identified within one day of the receipt of Material
Requisition
Store –
In-charge
Material should be issued immediately on its availability at the Stores
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5. MATERIAL SENT ON RETURNABLE BASIS
Trigger: Identification of the need for sending material on returnable basis
End: Receipt of Material with the Gate Pass
Frequency: As per the requirement
No
(Refer the SOP for ‘Purchase - Other Than Fruits & Fixed Assets’ for creating
Service PO)
Once Service PO is generated, sent material to the Store along with instruction to
prepare Returnable Gate Pass.
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Material sent for Other Reasons
Send material to the Store and inform the Store Executive to prepare a Returnable
Gate Pass.
Gate Pass should be approved within one day of receipt of intimation from user
department.
The Gate pass should contain the expected date of return for the outgoing
material.
Approving
Authority
Gate Pass should be approved within one day of receipt of intimation from Store
Executive.
Ensure that material is being sent for genuine and legitimate reasons.
Entry for receipt of material sent on returnable basis should be made within one
Page 13 of 31
day of receipt of goods.
- Ensure that the Gate-In Entry is marked against the Returnable Gate Pass.
- Material sent on returnable basis should be regularly monitored and should be
received back within the pre-decided schedule.
6. LOCATION TRANSFER
Trigger: Requirement of Material & Identification of Idle Materials Lying with the Other Location
End: Acknowledgement of the Materials Received from the other Location
Frequency: As per requirement
Workflow
Authority
No
as per the
defined Approve / Reject the
Amendments
matrix transfer (with
required?
comments)
Executive
Store -
Page 14 of 31
Process Activity Responsibility
Material should be sent within one day of receiving an intimation form the Store -
Team.
7. PHYSICAL VERIFICATION
Trigger: Physical Verification Plan
End: Appropriate action for Inventory Adjustments, if any and Approval of the Accounting Transactions
Frequency: Annual
Page 15 of 31
7.1 PROCESS FLOWCHART
PHYSICAL VERIFICATION OF INVENTORY
Other than Fruits and Capital Goods
Download stock Prepare a plan for for inventory movement Intimate the schedule
Inform the concerned HOD agrees
Start statement in ABC scheduling physical Yes and send the plan to to the concerned
Audit Team
No
Download inventory list Ensure all the pending
Revise the plan as per
from system entries are made in
the HOD’s comments
(without quantity) system
Verification Team
A No variance
Shortage
No
Adjust inventory in
system
Pass inventory
A End
adjustment Journal
Voucher
Approving
Authority
Workflow
as per the
Approve the Journal defined
Voucher matrix
Plan and schedule should be finalised within 7 days from the starting of the
Financial Year.
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Process Activity Responsibility
- Cut-off Procedure should include exact time for cut-off of receipts, dispatches
and other movements.
- Ensure that GRN for all the materials have been accounted prior to generation
of stock report from the ERP.
- Entry for stock which has been physically transferred from one department to
another should be passed in the ERP before generation of stock report from the
ERP.
- Ensure that the inventory list does not contain quantity of stock as per the ERP.
- Physical Verification Team should not include the person from the same
department / Custodian of Stock to ensure segregation of duties.
As per the requirement, members from production, quality etc. may be included
based on the extent of verification. However, the verification must be supervised by
people not normally concerned with stock keeping.
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Process Activity Responsibility
materials in closed area etc. are followed.
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8.1 PROCESS FLOWCHART
No Variances
Record the physical
Store Executive
Shortage
Yes
Store Manager
Provide list of
Yes
inventory requiring
adjustment entry in
system
Authority Department
Approving Accounts
Pass inventory
Adjust inventory in Take appropriate
adjustment JV (at the
system action for variances
end of year)
Workflow
as per the
defined
Approve JV
matrix
Page 19 of 31
Process Activity Responsibility
measurement.
- Once verified put a distinguishing mark on inventory verified to avoid double
counting.
- Any items found in damaged / not in usable condition should be appropriately
marked on inventory count sheets for easy reference.
- Ensure that GRN for all the material should be accounted prior to generation of
stock report from the ERP.
- Entry for stock which has been physically transferred from one department to
another should be passed in the ERP before generation of stock report.
Pass Inventory Adjustment Entry in ERP and take approval from approving authority.
Input Data Points: Variance Report
Output Data Points: Inventory Adjustment in ERP
Page 20 of 31
9. INVENTORY MONITORING
Trigger: ---
End: Monitoring of the Status of Inventory and Reporting to the Operations Committee
Frequency: Monthly
Consolidate the
Identify non-moving / Forward the identified
Extract inventory information for the Forward to Store
Start slow-moving items as list to the concerned
ageing list from ERP review of Operations Manager / GM Plant
per defined policies HODs
Committee
Circulate and
Discuss and approve Present the plan in the
communicate the plan
the utilization plan meeting
to concerned persons
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Process Activity Responsibility
utilisation plan.
- After incorporating the replies for the Utilization Plans of the Non-Moving and
Slow-Moving Inventory, forward the reasons to Store Executive.
Utilization Plan should be circulated to the Store – Executive within 2 days of the
receipt of list of Non / Slow Moving Inventories.
Ensure that proper supporting and documents are maintained for the reasons
given to the Store Team.
Store –
Final Presentation should be forwarded to the Store Manager / Plant GM within Executive
two days.
Input Data Points: Reasons for non-moving / slow-moving inventory / Utilization Plan
Output Data Points: Report on non-moving / slow-moving inventory
Reference to Forms / Templates / Policies: Format for the Presentation to the
Operations Committee
Ensure that the status of the approved plan is monitored on a regular basis.
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End: Outward movement of rejections / waste from plant
Frequency: Requirement Basis
by Quality or Authorised
Start
Person as Scrap /
Reject etc. On Closure of Production
Orders By-Product will be
directly transferred to Stores
Store
Move rejected
materialto designated
Area and tag rejected
Sales
Disposal through
Sales invoicing Outward Movement End
sales
Authority Executive
Approving Accounts
Approve write-off
Page 23 of 31
Process Activity Responsibility
- Evaluate whether rejected inventories have sale value.
Inventories having sale value will be sold with Sales Invoice.
(Refer SOP for Sales for the process of sales invoicing)
Inventories having zero sale value will be written-off from ERP with approval
of Approving Authority and disposed-off accordingly.
designated place
Approve write-off
Page 24 of 31
Process Activity Responsibility
- Re-dump the Production Waste in the Designated Tanks.
- Record the details of the Waste in the Manual Log Book.
Page 25 of 31
11.1 PROCESS FLOWCHART
Intimate QA
Department for quality Enter the by-product Send the by-product
Start
check on generation of quantity drums to Stores
by-product
QA Executive
Quality Process
On closure of
By-products rejected by
Production Order by-
Quality Department will
product will be directly
be stored separately
transferred to Stores
Executive
Store
Confirm and store the by-products received immediately on receipt. Stores – In-
charge
Ensure that the by-products are stored securely at the designated place.
Page 26 of 31
Sr. Resolutions and Activity
Exception Remarks
No. Actions to be Taken Reference
vehicle will be allowed to enter the plant.
2. Material rejected In case the material is rejected during physical Section 3.2.2 ---
while verification verification by the Store Executive, an approval
by the Store via E-Mail is to be taken from the plant /
Executive purchase HOD and only then the material will be
allowed to be unloaded.
4. Material received In such cases, generally the Weighment is not Section 3 ---
by hand, courier, required. The Items will be physically counted by
etc. the Store person and accordingly GRN will be
prepared.
5. Material Issue In such case, the approval will be taken from the Section 4 Material will be
without Plant – GM and respective HOD within 1 day. issued without
Requisition raising a
requisition is
ERP only in case
of emergencies.
6. Material sent on In such cases, follow-ups will be made with the Section 5 ---
returnable basis concerned person. If not to be received, should
not received back be write-off and charged to P&L account.
Refer Material Disposal process
7. Difference in the Reconciliation will be done with the ERP Qty. Section 10.2.2 ---
quantity of by- (Production Order) and agreed differences, if
products sent by any to be approved by the Production – Sr.
the Production Manager.
Dept. and
received at the
Stores
Monthly, ---
th
Delay in GRN prepared after two before 7 of
Stores – Production –
1. preparation of days of receipt of the the
Manager GM
GRN Materials succeeding
month
Delay in issues of Item details and delay in Stores – Production – Same as ---
2.
materials issues along with reasons Manager GM above
Number of days of stocks ---
of raw materials / finished
Production –
Stock Analysis goods comparison with Stores – Same as
4. GM / Finance
Report standards and Manager above
Controller
comparison of previous 3
months
Deviation in Inventory as Production – ---
Stock Variance Accounts – As per PV
5. per ERP Records and GM / Finance
Report Manager schedule
Physical Count Controller
Page 27 of 31
14. Key Performance Indicators (KPI)
Sr. Reporting
Measure Unit / Particulars Responsibility Frequency
No. To
15. GLOSSARY
Term Description
FIFO First-in-first-out
GM General Manager
PO Purchase order
QA Quality assurance
Page 28 of 31
16. ANNEXURES
Document
Sr. No. Description Document
Ref. Number
---
Inventory Management Policy
(Guidelines for ABC Classification, Inventory
1. Levels, Classification of Non / Slow Moving Items,
Physical Verification, Material Issue, Perpetual
Controls, Inventory Movement Method etc.)
---
2. Material Inward Register
---
3. Physical Verification Sheet (Material Count Sheet)
---
4. Weighment Slip
Page 29 of 31
APPENDIX I : ITEM MASTER - CRITICAL PARAMETERS
The lowest level to which stocks should Normally be allowed to fall, and is
Min = Reorder Level – (average usage in average
Minimum Level held as a buffer stock to be made available in situations of Non-delivery by
delivery period)
a supplier’
Inventory Levels
This is the level at which an order would Normally be raised’. It takes into Re-Order = maximum usage * maximum delivery
Re-Order Level
account the maximum usage in the maximum delivery period period
Safety stock is the stock held by a company in excess of its requirement for Safety Stock = (maximum daily usage – average
Safety Level
the lead time. Companies hold safety stock to guard against stock-out. daily usage) * Lead Time
EcoNomic This is the quantity which is most ecoNomical to order as it minimises the
EOQ = (2AP/S)^2
Order Quantity costs of ordering and the carrying costs
It is the time that elapses between the placing of an It is cost incurred at a time of ordering the item and
Lead Time Ordering Cost
order and actually receiving the goods ordered securing its supply.
Other Critical Parameter
ABC Classifying Inventory as per the principle of Cost incurred for holding the volume of inventory and
Carrying Cost
Classification ALFREDO PARETO for selective control. measured as a percentage of unit cost of an item.
Inventory Valuation is Important and very dynamic It is the method of controlling inventory list at regular
Inventory Perpetual
aspect as it affects the Cost of Goods Sold in interval of receipt and issue to facilitate regular
Valuation Control
Company’s Income. checking.
Page 30 of 31
APPENDIX II : INVENTORY CLASSIFICATION
ABC Classification
Classification of Inventories
(As per VILFREDO PARETO Principles)
Categories
Amend the
Is Classification Classification as Intimate to HOD
Yes No
approved? for Approval
per direction
Store - Manager
Workflo
Apply
Approved / Reject
w as per
End Classification in the
the Classification
ERP
Defined
matrix
Page 31 of 31