Chris Cho is a veterinary surgeon, specializing in pigs. His customers are pig farmers, large and small, throughout the province. To support his practice, he also operates All Creatures Veterinary Supplies Ltd (ACVS), which supplies drugs and other supplies to pig farmers. Most of the drugs can only be sold on a vet's prescription. The sale of other supplies is unrestricted, although there are safety issues surrounding the storage of some items.
ACVS orders drugs and other supplies in bulk from local and overseas suppliers. Most sales are made to farmers on the receipt of a telephoned purchase order. The sales order is taken by a clerk in the office and entered into the computer system. This generates a packing slip for the store man, who then takes the supplies from the shelves and packages them for delivery. Often there are not sufficient supplies in stock to complete an order, so that part of the order is held over until more supplies are obtained.
Purchase orders are initiated by the store man when inventory is running low. Ttie store man has to be careful not to hold too much inventory, because there are strict regulations regarding "use by" dates for drugs. Sometimes an order of drugs and supplies is not received in full from the suppliers because they are waiting for delivery from the manufacturer. In this case, the store man makes a note in his diary to follow up and obtain the missing items at a later date.
Clients are often in a hurry to receive their drugs, and Chris often takes drugs with him when he visits a farm. When he remembers, Chris leaves a note for the store man explaining which drugs he has taken. ACVS maintains a perpetual inventory system, and the store man is responsible for periodic inventory counts to confirm the accuracy of the inventory records.
Required
(a) What strengths and weaknesses can you identify in the inventory control system at ACVS?
(b) What substantive procedures would you recommend for purchases, given your assessment of the control system?