You just started working in a new role as Inventory Manager for Super Distributors Pty Ltd. In few days you realized that the previous manager had little knowledge in inventory management as he was mainly an administration person who was roped in this role due to cost cutting measures. Excessive stock holding was also a major issue with cash tied up in stock and the company is struggling with its cash flow. Stocktaking has also been a major issue where the Internal Auditor in his last report indicated that there are no pre-planning for stock take and that there are huge discrepancies arising from stock take itself - forget about the significant level of stock variance noted after stock take which is the resultant of poor stock take planning. You company holds stock value of approximately $1m (in your local currency) with key categories such as Pharmaceutical, Stationery and Liquor. 

Your General Manager asked you to present to him and to the Managing Director addressing the
following key issues which he feels important to bring high level of efficiencies and accuracy in the
inventory management.

 

Based on the case study above, you are required to:
1. Identify at least 3-5 risks involved in holding inventory. Your GM needs to understand more on carrying cost, so you are required to explain in detail the key components of carrying costs relating to one of the major products which is Ice Cream Distribution to local retailers.

 

2. Give a sample plan for stock take. This should include the best method for stock taking, pre-stock planning, during stock take what procedures should apply and after stock take what.
should be the proper approach towards detecting the stock take errors to reduce the stock variance.

 

3. How can Pareto's 80/20 Principle can assist the firm to better managing the inventory for this
company. Please explain using various analyses (such as VED etc). You should focus on three key category of items and explain which analysis will be appropriate with justifications: The categories are: Pharmaceutical, Stationery and Liquor.

 

4. Your Line Manager also asked you to establish a checklist to detect any signs of poor inventory
management which he can use to monitor the performance of the unit now under your control. List down signs and explain with justifications.