Scenario Considered: Casey Convenience Stores:

You are the in-charge of an audit team that has completed an operational audit of the Rochelle Illinois Distribution Center (DC) for Casey's General Stores. The auditors reviewed the performance of the distribution center from April 1, 2012 to March 31, 2013. The auditors reviewed policies and procedures and evaluated the effectiveness of the inventory system in meeting the needs of stores in its service area. The audit was performed from April 8, 2013 through April 11, 2013 and an exit conference was held on April 12. The audit findings are presented below: 1) Five years ago Casey's General Stores opened the Rochelle Distribution Center. At that time the safety stocks for products were set at two weeks supplies. This was based on the average usage of material by the 22 stores the DC served and a modest safety stock. Currently, the DC serves 46 stores. When a product in the warehouse reaches the safety stock level, more product is ordered by corporate purchasing located at the corporate offices in Ankeny. The level of safety stock has not been revised since the opening of the warehouse. 2) When the DC was opened the center was divided into spaces. For example, aisle 1 was reserved for coffee supplies (coffee, cups, lids, stirrers, etc.). As the number of stores the DC serves has grown, the allocated space is often insufficient. When product is received and the allocated space is full, product must be stored elsewhere in the DC. There have been times when warehouse personnel believe that the warehouse is out of product. Warehouse personnel fill out an Inventory Deficiency Reports (IDR). Many of IDRs are resolved when Inventory Control personnel search for and find items in the DC, but not in the allocated space for that item. If allocated space is increased for the maximum amount of every item, a larger warehouse would be needed. In addition, since it would be unusual to have the maximum amount of each and every product at the same time, a warehouse of that size would be inefficient. When inventory is below maximum there would be a large amount of empty self space. In addition, since there is never a situation where every item in the warehouse is at its maximum level at the same time, senior management has already stated that a larger warehouse is not an option at this time. Therefore, a recommendation to increase the warehouse space is not an acceptable recommendation. 3) Several IDRs contained comments regarding damaged goods. For example, a very large recent IDR was for a shortage of vanilla toffee coffee, one of the special coffee flavors highlighted in September. An audit of the inventory records found the following: The audit team vouched the inventory adjustments back to the IDR to determine if the reasons for the discrepancies could be ascertained. The staff auditor also interviewed the warehouse employee that completed the IDR. The auditor reviewed the area where the coffee is stored. It was determined that a bottom box on a large pallet of coffee had collapsed and 3/4 of the boxes had fallen and had been damaged beyond use. Another pallet had been placed on top of the coffee pallet in question. The damaged boxes were moved to a damaged goods area, but had not been adjusted in the current inventory. . 4) The auditors decided to review the damaged goods procedures. This investigation revealed: There are no written procedures for damaged goods Damaged product is taken to a rework area. If usable/saleable product can be salvaged it is placed back into the warehouse supply. A list of unusable damaged product removed from inventory is made by a warehouse employee. It is signed off by a warehouse supervisor. This list is provided to the quality control clerk. The quality control clerk investigates damages in an attempt to reduce further losses. The list is kept and a quarterly report is made to the warehouse manager regarding warehouse damages. The report from quality control is used to prepare financial reports and performance reports that are sent to the corporate offices. Product damaged that cannot be sold (e.g. dented cans) may be used in the DC (coffee and supplies may be used in the office or break area) once it is approved by the quality control clerk and the inventory manager. . Finding Headline: States the overall problem in one sentence/headline. Current Condition What is the condition you found? Provide relevant details to explain why this is a problem. Criteria What is the expected condition, based on policy, legal requirements, or best practice? Cause Why is there a difference between current condition and criteria? What is the root cause? What policies / standards were not followed? Why is this happening? Effect What is the risk? What did happen or what can happen if this is not corrected? Action Plan Do not need for the A575 Project What should be done to fix the root cause of the problem? What can be done to improve processes? Reviewed with: Date: You are the in-charge of an audit team that has completed an operational audit of the Rochelle Illinois Distribution Center (DC) for Casey's General Stores. The auditors reviewed the performance of the distribution center from April 1, 2012 to March 31, 2013. The auditors reviewed policies and procedures and evaluated the effectiveness of the inventory system in meeting the needs of stores in its service area. The audit was performed from April 8, 2013 through April 11, 2013 and an exit conference was held on April 12. The audit findings are presented below: 1) Five years ago Casey's General Stores opened the Rochelle Distribution Center. At that time the safety stocks for products were set at two weeks supplies. This was based on the average usage of material by the 22 stores the DC served and a modest safety stock. Currently, the DC serves 46 stores. When a product in the warehouse reaches the safety stock level, more product is ordered by corporate purchasing located at the corporate offices in Ankeny. The level of safety stock has not been revised since the opening of the warehouse. 2) When the DC was opened the center was divided into spaces. For example, aisle 1 was reserved for coffee supplies (coffee, cups, lids, stirrers, etc.). As the number of stores the DC serves has grown, the allocated space is often insufficient. When product is received and the allocated space is full, product must be stored elsewhere in the DC. There have been times when warehouse personnel believe that the warehouse is out of product. Warehouse personnel fill out an Inventory Deficiency Reports (IDR). Many of IDRs are resolved when Inventory Control personnel search for and find items in the DC, but not in the allocated space for that item. If allocated space is increased for the maximum amount of every item, a larger warehouse would be needed. In addition, since it would be unusual to have the maximum amount of each and every product at the same time, a warehouse of that size would be inefficient. When inventory is below maximum there would be a large amount of empty self space. In addition, since there is never a situation where every item in the warehouse is at its maximum level at the same time, senior management has already stated that a larger warehouse is not an option at this time. Therefore, a recommendation to increase the warehouse space is not an acceptable recommendation. 3) Several IDRs contained comments regarding damaged goods. For example, a very large recent IDR was for a shortage of vanilla toffee coffee, one of the special coffee flavors highlighted in September. An audit of the inventory records found the following: The audit team vouched the inventory adjustments back to the IDR to determine if the reasons for the discrepancies could be ascertained. The staff auditor also interviewed the warehouse employee that completed the IDR. The auditor reviewed the area where the coffee is stored. It was determined that a bottom box on a large pallet of coffee had collapsed and 3/4 of the boxes had fallen and had been damaged beyond use. Another pallet had been placed on top of the coffee pallet in question. The damaged boxes were moved to a damaged goods area, but had not been adjusted in the current inventory. . 4) The auditors decided to review the damaged goods procedures. This investigation revealed: There are no written procedures for damaged goods Damaged product is taken to a rework area. If usable/saleable product can be salvaged it is placed back into the warehouse supply. A list of unusable damaged product removed from inventory is made by a warehouse employee. It is signed off by a warehouse supervisor. This list is provided to the quality control clerk. The quality control clerk investigates damages in an attempt to reduce further losses. The list is kept and a quarterly report is made to the warehouse manager regarding warehouse damages. The report from quality control is used to prepare financial reports and performance reports that are sent to the corporate offices. Product damaged that cannot be sold (e.g. dented cans) may be used in the DC (coffee and supplies may be used in the office or break area) once it is approved by the quality control clerk and the inventory manager. . Finding Headline: States the overall problem in one sentence/headline. Current Condition What is the condition you found? Provide relevant details to explain why this is a problem. Criteria What is the expected condition, based on policy, legal requirements, or best practice? Cause Why is there a difference between current condition and criteria? What is the root cause? What policies / standards were not followed? Why is this happening? Effect What is the risk? What did happen or what can happen if this is not corrected? Action Plan Do not need for the A575 Project What should be done to fix the root cause of the problem? What can be done to improve processes? Reviewed with: Date