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Standard Operating

Procedures

INVENTORY MANAGEMENT

XYZ Processing India (P) Limited


Table of Contents
Page No.
INVENTORY MANAGEMENT .................................................................................................................................... 1

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

3. MATERIAL RECEIVING PROCESS .......................................................................................................... 6


3.1 PROCESS FLOWCHART ........................................................................................................................... 6
3.2 PROCESS DESCRIPTION ......................................................................................................................... 6

4. MATERIAL ISSUE PROCESS ................................................................................................................... 9


4.1 PROCESS FLOWCHART ......................................................................................................................... 10
4.2 PROCESS DESCRIPTION ....................................................................................................................... 10

5. MATERIAL SENT ON RETURNABLE BASIS ......................................................................................... 12


5.1 PROCESS FLOWCHART ......................................................................................................................... 12
5.2 PROCESS DESCRIPTION ....................................................................................................................... 12

6. LOCATION TRANSFER ........................................................................................................................... 14


6.1 PROCESS FLOWCHART ......................................................................................................................... 14
6.2 PROCESS DESCRIPTION ....................................................................................................................... 14

7. PHYSICAL VERIFICATION ...................................................................................................................... 15


7.1 PROCESS FLOWCHART ......................................................................................................................... 16
7.2 PROCESS DESCRIPTION ....................................................................................................................... 16

8. PERPETUAL INVENTORY CONTROL .................................................................................................... 18


8.1 PROCESS FLOWCHART ......................................................................................................................... 19
8.2 PROCESS DESCRIPTION ....................................................................................................................... 19

9. INVENTORY MONITORING ..................................................................................................................... 21


9.1 PROCESS FLOWCHART ......................................................................................................................... 21
9.2 PROCESS DESCRIPTION ....................................................................................................................... 21

10. DISPOSAL OF INVENTORY .................................................................................................................... 22


10.1 PROCESS FLOWCHART (DISPOSAL OF QUALITY MATERIAL) ........................................................... 23
10.2 PROCESS DESCRIPTION (DISPOSAL OF QUALITY MATERIAL) ......................................................... 23
10.3 PROCESS FLOWCHART (DISPOSAL OF PRODUCTION WASTE) ....................................................... 24
10.4 PROCESS DESCRIPTION (DISPOSAL OF PRODUCTION WASTE) ..................................................... 24

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11. RECEIPT OF BY-PRODUCTS IN STORES ............................................................................................. 25
11.1 PROCESS FLOWCHART ......................................................................................................................... 26
11.2 PROCESS DESCRIPTION ....................................................................................................................... 26

12. EXCEPTIONS AND RESOLUTIONS ....................................................................................................... 26

13. REPORTING CATALOGUE AND CALENDER ....................................................................................... 27

14. KEY PERFORMANCE INDICATORS (KPI) ............................................................................................. 28

15. GLOSSARY .............................................................................................................................................. 28


15.1 GLOSSARY OF TERMS USED ................................................................................................................. 28
15.2 FLOWCHART GLOSSARY ....................................................................................................................... 28

16. ANNEXURES ............................................................................................................................................ 29


16.1 LIST OF ANNEXURES .............................................................................................................................. 29

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1. GENERAL

1.1 VERSION CONROL

SOP Designed Reviewed


Version Description Date Approved By
No. By By

1 Draft

2 Final

1.2 ISSUE AND COMMENTS LOG

Target
Sr. No. Issues / Comments Raised By Recommendations
Date

1.3 RELATED SOPs


Sr. No. Process / SOP Code Process / SOP Name

1. --- Purchases (Other Than Fruits & Fixed Assets)

2. --- Purchases (Fruits)

3. --- Quality Assurance

4. --- Sales Functions


5. --- Production Controls

1.4 OWNERSHIP

Department Head Office Locations / Plants

Stores --- Mr. Santosh Pandey

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2. PROCESS OVERVIEW

2.1 PROCESS SUMMARY


This SOP covers procedures and guidelines to be followed for management of Inventories for other than Fruits and
Capital Goods. All the goods are stored at Main Store under the custody of Store Manager. These goods are
issued based on an approved Material Requisition in ERP.
Mandatory Physical Verification is conducted for all items in presence of personnel other than the stock custodian
team as per the pre-determined plans. Further, Perpetual Inventory Controls are enabled for certain categories of
inventory.
The SOP also covers procedures for identification of Non-moving and Slow-moving Inventory. An Operation
Committee Meeting is called upon and appropriate measures are taken for such inventory.
Apart from the above, process for Inter-Department Transfers, Inter Warehouse Transfers and Disposal of
Inventory are also covered in this SOP.
After the material is inward, the qualitative and quantitative aspects are checked as per the laid specifications for
the material received. All technical details / results of quality checking for the specified items are recorded and
maintained in Quality Module integrated in ERP.

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

Frequency: Multiple; Each time material arrives at plant gate

3.1 PROCESS FLOWCHART


MATERIAL RECEIVING PROCESS
Other than Fruits and Capital Goods
Entry Gate
Security

Allow loaded vehicles Record basic details in Affix inward stamp on


to enter the plant on Material Inward the challan / invoice
Start
the basis of initial Register and issue and intimate the Store
screening unloading token Executive

Verify the material


received with the Weighment Weigh Gross Weight of
Yes
accompanied required? the vehicle
PO Creation documents
No PO in system?
Process
No
Store - Executive

Unload Material and Prepare Weigh-


Outward Movement
verify the quantity Bridge Slip
of Vehicles / Person
manually (physical
delivering the Material
count, etc.)

Prepare GRN Yes

Weigh Tare Weight of


Unload the material
the empty vehicle

Intimate QA Team Quality check Forward documents to


Yes No End
for verification required? Accounts Department
QA Team

Approve / Reject
QA Process
GRN Quantity

3.2 PROCESS DESCRIPTION

Process Activity Responsibility

3.2.1 Gate Entry


- On arrival of Material at the plant gate, collect purchase documents from the
person carrying the Material and verify.
- Verify Name of XYZ on the face of Purchase Documents and Physical Condition Entry Gate
of the Vehicle along with the Material Carried. Security
- Allow Material for Gate Entry and make inward entry in Material Inward Register
based on the initial screening of the material and documents and issue an
Unloading Token to the person carrying materials.
- Affix Inward Stamp on the invoice or challan mentioning the Gate Entry No. and

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Process Activity Responsibility
intimate Store Executive.

- Entry in Material Inward Register should be made on real time (immediate)


basis.
- Intimation to the Store Department should be sent immediately after the entry in
Material Inward Register.

- Vehicle should enter through the designated plant gate only.


- Ensure Supplier's challan / invoice is in the name of "XYZ Processing India (P)
Ltd" and correct company address is mentioned on it.
- Ensure no unauthorised material (material not having adequate documents,
suspicious items etc.) enters plant without the approval of concerned authority.
- All the required details should be entered in Material Inward Register as per the
defined format.
- Once entered inside the Plant, Vehicles should be parked at the designated
parking space only, before Weighment / QA Clearance / Intimation for unloading
etc. as applicable.
- If the designated parking space is fully occupied, the vehicles should be parked
outside the plant premises and will be allowed to move inside only on availability
of the parking space.
- Vehicles should not be allowed to enter the plant premise at night or stay
overnight at the plant premise (Between 10 p.m. - 6 a.m.).

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

3.2.2 Verification of Material Documents and Material Unloading


On receipt of intimation from the Entry Gate Security, Receive Material Documents
from the person carrying Materials and verify Vendor Name, Item Received,
Reference to the PO etc.

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

If Weighment is not required:


- Instruct the person carrying materials to unload the materials at the designated Store –
storage area
In-charge
- Physically verify quantity of the materials (Physical Count, Weighing Scale etc.)
- 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 unauthorised material (material not having adequate documents, suspicious


items, damaged goods etc.) should be allowed for unloading without the
approval of concerned authority.
- Ensure vehicle is properly parked and no other material, item or article is lying
on the weigh-bridge at the time of Weighment.
- Weighment of loaded vehicle and empty vehicle should be against single
reference no.
- Materials should be unloaded at the designated place only with due care.

3.2.3 Preparation of GRN


PO in ERP
- After unloading of the Materials, Identify PO against which the material is received
and make GRN in ERP.
- Affix ERP generated unique reference number (GRN No.) on the purchase
documents and forward documents to the Accounts Department for accounting. Store –
- Intimate the QA Team in case a quality check is required. In-charge

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

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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.

- GRN should be prepared within 1 day of the unloading of material.


- Similarly all Purchase Documents should be sent to the Accounts Department
within a day.

- No GRN is prepared without raising a PO.


- Goods received are as per specification and terms in PO; approval is taken in
the cases having deviations in quality specifications.
- Goods are kept at proper location till GRN is made to avoid theft / damage.
- Multiple GRNs will be prepared in case the materials has been received against
different POs in the same invoice.
- GRN should not be printed. Instead only GRN Number should be mentioned on
the Purchase Documents for the accounting and Future reference purposes.

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.)

4. MATERIAL ISSUE PROCESS


Trigger: Material Requisition by the User
End: Issue of Material with Acknowledgement of Receipt by User
Frequency: Multiple; Each time Material Requisition is raised by the User

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4.1 PROCESS FLOWCHART
ISSUE OF MATERIAL
Issue of Material and Inter-Department Transfer
User

Identify the material Raise Material Acknowledge receipt


Start End
requirement Requisition of material
Store - Executive

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

End Reject Approve

4.2 PROCESS DESCRIPTION

Process Activity Responsibility

4.2.1 Material Requisitioning


On requirement, Raise Material Requisition in ERP by filling the following details:
- Item required,
- Quantity Required,
- Delivery Time, if there is any specific,

On Material Requisitioning by the user, an ERP Alert will be given automatically


to Store - Executive for issuing material.
User
(Raising
Requisition for
- Desired specifications including priority if any is entered in ERP while raising the the Material)
Material Requisition.
- Requisition should be raised only in case the desired materials is not in hand.
- Multiple Items should not be requisitioned against the single Item Code.
Separate Item Code should be created in ERP if the Item required is not
mastered.
Refer SOP for ‘Master Creation’ for Item Master Creation process.

Input Data Points: Item Name, Quantity Required and Desired Specifications, if any

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Process Activity Responsibility
Output Data Points: Material Requisition

4.2.2 Checking the Availability of Material


- On receipt of intimation for Material Requisition, Check whether the requisite
material is available in other department.
- In case if there is idle material lying with any other department, intimate the
concerned HOD through E-Mail to return the idle material.
- In case material is not available in any other department, check the material
availability in the Store and Issue. If not available, raise a Purchase Requisition
to the Purchase Department.
(Refer the SOP on Purchase – Other Than Fruits & Fixed Assets for
Material Purchase Process.)

Store –
In-charge
Availability should be identified within one day of the receipt of Material
Requisition

In case material is under testing, it should be considered as available for issue


only after obtaining written approval from QA.

Input Data Points: Material Requisition


Output Data Points:
- Intimation to HOD, in case material is available with other department
- Purchase Requisition, in case material is not available

4.2.3 Material Issue


- Issue the Material available in Store to the User. For issuing materials, select
Item, Quantity, Department and other requisite details in the Movement Journal in
ERP and Issue the Materials.
- Take print out of the Material Issue Note and get it signed by user for record
purpose while delivering the material in case approval is given by the Store
Manager.

Store –
In-charge
Material should be issued immediately on its availability at the Stores

- Material should be issued on FIFO basis or in the order of expiry date.


- Material should not be issued without updating inventory level in ERP.
- Expiry / Validity Dates of the Materials should be tracked on regular basis and
accordingly, Materials should be issued.

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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

5.1 PROCESS FLOWCHART

MATERIAL SENT ON RETURNABLE BASIS


User / Store -

Identify the need for Purchase


Material to be Raise Service Indent in
Executive

Start sending material on Yes Process


sent for repairs? system for repairs
returnable basis (Service PO)

No

Print the Gate Pass


and send it along with Material
Prepare Returnable
Store - Executive

the material Receiving


Gate Pass Process

The date on which


material is returned will
be captured in ERP Mark an entry against
Amend as per the
the returnable Gate
direction
Pass reference
No Yes
Approving
Authority

Approve/ Reject the Is Gate Pass


End
Gate Pass approved?

5.2 PROCESS DESCRIPTION

Process Activity Responsibility

5.2.1 Identification of the Requirement


Identify the Requirement for Material to be sent outside the Plant and obtain approval
from respective HOD.
Material can be sent outside the plant in the following two situations basically:
Material sent for Repairs
Raise Service Requisition in ERP and generate Service PO. In Service PO, mention User
the Item, Details of Repairs required, Expected date of Return etc. Department

(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.

5.2.2 Preparation of Gate Pass


- Prepare the gate pass on receiving an intimation from the user department.
- Enter the Outgoing Material, Quantity, Target / Expected Date of Return, Person
Responsible for Follow-up etc.
- Once requisitioned, the request will go for an approval from the approving
authority.
- If any amendment needs to be made in the Gate Pass, amend gate pass as per
the comments of the approving authority.
- Print the gate pass, Sign it and send along with the material.
Stores – In-
charge

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.

Input Data Points: Service PO


Output Data Points: Returnable Gate Pass

5.2.3 Approval on Gate Pass


- Verify the material to be sent on returnable basis and the Gate Pass made by the
Store Executive.
- Approve the Gate Pass in ERP based on the requirement.
- Reject the Gate Pass if material is being sent for illegitimate reasons or the Gate
Pass is incomplete w.r.t. the details.

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.

Input Data Points: Service PO


Output Data Points: Returnable Gate Pass

5.2.4 Preparation of Gate-In Entry


At the time of receiving back the material sent on returnable basis, receive the
material as per the pre-defined process (Refer Section 3.2 - Material Receiving
Process)
Stores –
Mark an entry against the Returnable Gate Pass reference in ERP. Mention actual
In-charge
date of receipt and mention remark for the Returnable Gate Pass.

Entry for receipt of material sent on returnable basis should be made within one

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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

6.1 PROCESS FLOWCHART


LOCATION TRANSFER
Department

Receive Intimation Print the Material


Transfer the material Arrange necessary
User

from the Store Amend as per the Transfer Note to obtain


Start through Inventory acknowledgement logistics and send the
Executive for Material comments
journal material
Transfer
Yes
Approving

Workflow
Authority

No
as per the
defined Approve / Reject the
Amendments
matrix transfer (with
required?
comments)
Executive
Store -

Receive the material


End and Acknowledge
Material Transfer Note

6.2 PROCESS DESCRIPTION

Process Activity Responsibility

6.2.1 Transfer of Material


- On receipt of an intimation from the Store Team, identify the idle material
available at the floor.
- Transfer the Material to the Store through Inventory Movement Journal.
- Obtain approval from the Approving Authority. User

- Once Approved by the Approving Authority, Prepare a Material Return Note


with the Item, Quantity, Reasons for the Transfer etc.
- Return the material to Store Team and obtain acknowledgement. File a copy of
the acknowledged return note and give another copy to the Store - Executive.

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Process Activity Responsibility

Material should be sent within one day of receiving an intimation form the Store -
Team.

- Inter-departmental transfers of material should not be made directly and


should be routed through Stores.
- In case any changes are required, necessary amendments will be carried
over by the user and again the request will go for the approval of approving
authority.

Input Data Points: Intimation from Store Executive


Output Data Points: Material Return Note
Reference to Forms / Templates / Policies: Format for Material Return Note

6.2.2 Approval for Transfer of the Material


On receipt of intimation from the ERP, Check the Item, Location, Reasons for the
Transfer etc. and approve / reject the request. Respective
Departmental
HODs
Approval Rejection should be given within 1 day of the receipt of the requisition
for Material Transfer.

6.2.3 Receipt of Material


Receive the material from user and acknowledge Material Transfer Note. Mention
Store -
receipt Date on the Material Transfer Note.
Executive
Keep one copy of Material Transfer Note with the Store records and Return back one
acknowledged copy for the records of user.

7. PHYSICAL VERIFICATION
Trigger: Physical Verification Plan
End: Appropriate action for Inventory Adjustments, if any and Approval of the Accounting Transactions
Frequency: Annual

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7.1 PROCESS FLOWCHART
PHYSICAL VERIFICATION OF INVENTORY
Other than Fruits and Capital Goods

Define the cut-off date


Finance / Internal

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

HOD about the plan with the plan?


category verification physical verification HODs and plant GM
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

Record the physical


Physical

Record physical count count and obtain sign Conduct physical


Excess and find out the short / of the concerned HOD verification
excess inventories

Shortage

Evaluate the reasons Recount and re- Obtain reasons for


Evaluate the shortage Is shortage Take appropriate
Accounts Department

for excess inventory Yes verification of critical variance in inventories


in inventory level critical? action for variances
level materials from concerned HOD

No
Adjust inventory in
system

Pass inventory
A End
adjustment Journal
Voucher
Approving
Authority

Workflow
as per the
Approve the Journal defined
Voucher matrix

7.2 PROCESS DESCRIPTION

Process Activity Responsibility

7.2.1 Planning Physical Verification


- Extract the stock statement from ERP as per ABC Categorisation.
- Prepare a plan and schedule the physical verification in consultation with the
respective HOD.
- Make necessary changes if any required in the Physical Verification Plan as per
the comments of the Approving Authority.
- Define cut-off date for movement of stock at the time of the physical verification Finance /
activity and forward schedule to the physical verification team. Internal Audit
Team
- Intimate the schedule to the Plant-GM and concerned HODs.
- Download the inventory list after ensuring that all the pending entries are recorded
in ERP and handover to the Physical Verification Team.

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.

Input Data Points: Inventory Report


Output Data Points: Physical verification schedule with inventory list
Reference to Forms / Templates / Policies: Format for Inventory Count Sheet

7.2.2 Carrying Out Physical Verification


- Receive Inventory List for Physical Verification and Conduct physical verification
as per the schedule.
- Mention count of the stock on the physical verification sheet and obtain
acknowledgement of the respective HOD.
- Record the physical count in ERP and Forward the Inventory Physical Verification
Sheet to the Accounts department.

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.

- Teams for physical verification of inventory should comprise representatives Physical


from Accounts and Custodian Departments. Verification
Team
- Finished goods for which invoices have been generated in the ERP but which
are not dispatched to customers should be kept separately and should not be
considered for the physical verification. If considered, due reconciliation should
be carried out.
- Inventory Movement should be completely stopped while conducting physical
verification.
- In case of materials to be verified with the help of equipment (weighing
machines, tapes etc.), ensure equipment used are calibrated and show correct
measurements.
- 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 stacking norms for storage of materials are properly adhered to.
- Check that safety guidelines like adequate fire fighting equipment, storage of

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Process Activity Responsibility
materials in closed area etc. are followed.

Input Data Points: Inventory List Sheet


Output Data Points: Physical Count of Inventory
Reference to Forms / Templates / Policies: Inventory Policy (Guidelines w.r.t. the
Physical Verification)

7.2.3 Inventory Reconciliation


- Receive Inventory Physical Verification Sheet from the Physical Verification Team.
Evaluate the variances, if any between ERP Inventory and Inventory physically
verified.
- In case of no difference, the process ends here.
- In case of shortage, identify the criticality.
- If major deviations, re-count and re-verify the inventory level of critical items. In
case of Non-Critical variances:
 Seek appropriate reasons for variances from concerned departments.
 Assess the impact and evaluate reasons provided by departments.
 If shortages are reconciled, record appropriate explanations, obtain approval
from appropriate authorities and prepare necessary details for making
accounting adjustments in books.
- In case of minor deviations, adjust the inventory in ERP through Inventory Journal. Accounts
- If there is excess inventory: Department

 Identify material accounting documents to verify issues not recorded or


receipt accounted more than actual in ERP, if any.
 If no reasons are identified for excess stock, prepare note for updating stocks
in ERP.
- Pass Inventory Adjustment Entry in ERP and obtain approval from approving
authority.

Inventory Reconciliation should be carried out within 2 days of the Physical


Verification.
Input Data Points: Physical Count of Inventory
Output Data Points: Inventory Adjustment in ERP
Reference to Forms / Templates / Policies: Format for Variance Report

8. PERPETUAL INVENTORY CONTROL


Trigger: Inventory Report from ERP
End: Inventory Adjustment in ERP
Frequency: Annual / Quarterly / Monthly

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8.1 PROCESS FLOWCHART

PERPETUAL INVENTORY CONTROL

No Variances
Record the physical
Store Executive

Download stock Identify the inventory count and get sign by


Conduct physical
Start statement with ABC items which require concerned HOD Excess
verification
Categorization perpetual control

Shortage

Record the count and


Is variance file for future
End No reference
critical?

Yes
Store Manager

Is stock Obtain reasons for


No adjustment variance in inventories
required? from concerned HOD

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

8.2 PROCESS DESCRIPTION

Process Activity Responsibility

8.2.1 Carrying Out Physical Verification


- Download the stock statement and identify the inventory requiring perpetual
control.
- Conduct physical verification and record the physical count.
- Obtain approval from respective HODs.
- Find out the variances in stock as per the ERP and stock as per the Physical
Count.
- Forward Physical Verification Sheet along with Variance Statement to the Store
Manager for approval.
Store -
executive

Category A – Monthly, Category B – Quarterly, Category C - Annually

- Documents for inventory verification should be duly signed and filed.


- Finished goods for which invoices have been generated in the ERP but which
are not dispatched to customers should be kept separately.
- In case of materials to be verified with the help of equipment (weighing
machines, tapes etc.), ensure equipment used are calibrated and shows correct

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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.

Input Data Points: List of inventory


Output Data Points: Inventory Counts with the Variances, if any
Reference to Forms / Templates / Policies: Inventory Policy (Guidelines for
Perpetual Inventory Controls)

8.2.2 Evaluation of Variances


- Receive Inventory Physical Verification Sheet along with the Variance Sheet from
the Store – Executive. In case variances are critical, identify the reasons and
decide whether Stock Adjustment is required in ERP.
- In case Stock Adjustment is required, forward the list of inventories requiring
adjustment to the Accounts Department.
Store –
Manager
Variances should be evaluated within a day of the Physical Verification of
Inventory.
Input Data Points: Inventory Stock Report
Output Data Points: Physical verification schedule with inventory list
Reference to Forms / Templates / Policies: Format for inventory count sheet

8.2.3 Inventory Reconciliation


Take appropriate actions for variances and adjust inventory in ERP.
If shortages are found:
- Seek appropriate reasons for variances from departments
- Assess the impact and evaluate the reasons provided by departments.
- In case of shortages are reconciled, record appropriate explanations should be
recorded and approved by appropriate authorities and prepare necessary
details for making accounting adjustments in books.
Accounts
If there is excess inventory: Department
- Identify material accounting documents to verify issues not recorded or receipt
accounted more than actual in ERP, if any.
If no reasons are identified for excess stock, prepare note for updating stocks in ERP.

Pass Inventory Adjustment Entry in ERP and take approval from approving authority.
Input Data Points: Variance Report
Output Data Points: Inventory Adjustment in ERP

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9. INVENTORY MONITORING
Trigger: ---
End: Monitoring of the Status of Inventory and Reporting to the Operations Committee
Frequency: Monthly

9.1 PROCESS FLOWCHART

MONITORING NON-MOVING / SLOW-MOVING INVENTORY


Store - Executive

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

Monitor the status as


per the approved plan
End
and report to
Operations Commitee
HODs

Evaluate and provide


Forward the reasons to
reasons along with the
Store Executive
utilization plan
Operations
Committee

Circulate and
Discuss and approve Present the plan in the
communicate the plan
the utilization plan meeting
to concerned persons

9.2 PROCESS DESCRIPTION

Process Activity Responsibility

9.2.1 Identification of Non-Moving / Slow-Moving Inventory


- Extract Inventory Ageing Report from the ERP and identify Non-moving and Slow-
moving Inventory as per the defined policy.
- Prepare a list of Non-moving / Slow-moving items and forward to the concerned
HODs.
Store -
Manager
List of non-moving / slow-moving item should be prepared on monthly basis
within 7 days of the end of the month.

Input Data Points: Inventory Ageing Report


Output Data Points: List of Non-moving / Slow-moving inventory

9.2.2 Evaluation and Identification of Reasons


HODs
- Receive list of Non-moving and Slow-moving Inventory from the Store – Manager.
Evaluate and identify reasons for slow and non-moving items along with the

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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.

Input Data Points: List of Non-Moving / Slow-Moving Inventory


Output Data Points: Reasons for Non-moving / Slow-moving Inventory / Utilization
Plan

9.2.3 Consolidation and Final Reporting


- Receive the department wise Utilization Plan for Non / Slow Moving Inventories
and Consolidate the information received from various HODs.
- Prepare a final presentation in requisite format.
- Forward the presentation to Store Manager / Plant GM.

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

9.2.4 Discussion and Implementation of Utilization Plan


- Present the Utilization Plan in the Operation Committee’s Meeting.
- Evaluate the report on Slow and Non Moving items and finalize the utilization plan.
- Circulate the Action plan approved in the meeting to the concerned persons and
follow-up on previous action plans discussed with the results achieved.
Operations
Committee

Ensure that the status of the approved plan is monitored on a regular basis.

Input Data Points: Report on non-moving / slow-moving inventory


Output Data Points: Final Utilization Plan

10. DISPOSAL OF INVENTORY


Trigger: Rejections of goods / production waste

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End: Outward movement of rejections / waste from plant
Frequency: Requirement Basis

10.1 PROCESS FLOWCHART (DISPOSAL OF QUALITY MATERIAL)

DISPOSAL OF QUALITY MATERIAL

Rejections by Quality Rejections by Authorised Persons


Disposable
Material

Raw Material In-process FG Others Consumables Packing Material Spares Others

Fruits on receiving in FG produced or


SFG or By-products Any other rejection Rejection based on Rejection based on Rejection based on Rejection based on
Factory, Stored in stores rejected by
rejected by quality by quality usability usability usability usability
Silo or Crates Quality, FG exipred
Executive Executive Authorised Person

Tag Material Rejected


Quality /

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

Write-off the material in


Disposal through
ERP and charge loss to
write-off
P/L account

Approve write-off

10.2 PROCESS DESCRIPTION (DISPOSAL OF QUALITY MATERIAL)

Process Activity Responsibility

10.2.1 Rejection of Inventories


On rejection of Materials by the Quality Assurance Team / Other Authorized
Personnel, Separate the Material from Other Good Materials and Tag the material as Quality /
scrap / rejected. Authorised
Person

Only Non-usable Materials should be Rejected.

10.2.2 Segregation of Inventories Stores –


- Move the rejected material at designated place. Manager

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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.

10.2.3 Write-off of Inventory


Write off the material in ERP with the quantity of rejection and charge loss to P/L
Account.
Accounts -
Executive
On write-off, an intimation will go to the approving authority for approval.

Material should be written-off in ERP as soon as it is physically disposed.

10.2.4 Approval for Write-off of Inventory


Approving
On receipt of intimation from ERP, Review the request for Inventory Write-off. Authority
Approve the Write-Off request in ERP.

10.3 PROCESS FLOWCHART (DISPOSAL OF PRODUCTION WASTE)

DISPOSAL OF PRODUCTION WASTAGE

Collect the production


Obtain Tare Weight of
Start wastage at the
the Vehicle
Production

designated place

Re-dump the production


Obtain Gross Weight of
Waste in the Waste Enter Wastage quantity Wastage Quantity
the Vehicle
Tanks in Waste Yard updated against the
Production Order in ERP
Executive
Accounts

Write-off the Material in


ERP and charge loss to End
P/L account
Approving
Authority

Approve write-off

10.4 PROCESS DESCRIPTION (DISPOSAL OF PRODUCTION WASTE)

Process Activity Responsibility

10.4.1 Collection of Production Waste


- Obtain Tare Weight of the Vehicles carrying Production Waste. Production –
Shift In-charge
- Load Vehicles with the Production Waste and obtain Gross Weight and Net
Weight.

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Process Activity Responsibility
- Re-dump the Production Waste in the Designated Tanks.
- Record the details of the Waste in the Manual Log Book.

- Production Waste should be regularly moved to the Production Waste Tanks in


the Waste Yard.
- Vehicle Loading should be monitored to ensure that the Waste is not spread
here and there in the Plant Premise. The Vehicle should be properly parked
below the Waste Bins, where the Waste is first collected and stored.

10.4.2 Waste Records in ERP


Record Waste Quantity against the Production Order in ERP at the time of Closure of
Production Order. Production –
Shift In-charge
Waste should be recorded against the Production Order in ERP at the time of
Closure of the Production Order.

10.4.3 Write-off of Inventory


Write off the material in ERP with the quantity of Production Waste recorded against
the Production Order and charge loss to P/L Account.
Accounts -
Executive

Material should be written-off in ERP as soon as it is moved to the Waste Tanks


in Waste Yard and recorded in the Production Order.

10.4.4 Approval for Write-off of Inventory


Approving
On receipt of intimation from ERP, Review the request for Inventory Write-off. Authority
Approve the Write-Off request in ERP.

11. RECEIPT OF BY-PRODUCTS IN STORES


Trigger: Generation of By-products
End: By-products stored in Stores
Frequency: Continuous

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11.1 PROCESS FLOWCHART

RECEIPT OF BY-PRODUCTS IN STORE


Production
Executive

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 quantity Store by-products at


End
receipt in Stores designated area

11.2 PROCESS DESCRIPTION

Process Activity Responsibility

11.2.1 Sending By-Products to Stores Production –


Refer SOP for Production Controls Sr. Manager

11.2.2 Receiving By-Products in Stores


- On receipt of By-Products in Store, Confirm the quantity of by-products in ERP.
- Store by-products at the designated area as per the defined guidelines.

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.

Input Data Points: Quantity of by-products


Output Data Points: Confirmation of by-products received in Stores

12. EXCEPTIONS AND RESOLUTIONS

Sr. Resolutions and Activity


Exception Remarks
No. Actions to be Taken Reference
1. Material rejected In case the material received at the gate is Section 3.2.1 ---
while initial rejected during the initial screening by the gate
screening at the security, an approval via E-Mail is to be taken
plant gate from the plant / purchase HOD and only then the

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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

13. REPORTING CATALOGUE AND CALENDER

Sr. Name of the Objective / Detailed Responsible Reporting Reference to


Frequency
No. Report Description of the Report Person To Format, if any

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

15.1 GLOSSARY OF TERMS USED

Term Description

FIFO First-in-first-out

GM General Manager

GRN Goods Receipt Note

HOD Head of department

P/L Profit and loss

PO Purchase order

QA Quality assurance

15.2 FLOWCHART GLOSSARY


Activity over
Activity in
Start Decision E-Mail /
ERP
Phone
Workflow Workflow
Mail
as per as per
the the
Defined Defined
Pre- Matrix Matrix
Document Manual
Defined End
Activity
Process

Page 28 of 31
16. ANNEXURES

16.1 LIST OF 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

5. Item Master – Critical Parameters Appendix – I

6. Inventory Classification Appendix – II

7. Inventory Physical Verification Schedule ---

Page 29 of 31
APPENDIX I : ITEM MASTER - CRITICAL PARAMETERS

Stock Level used in Inventory Control System Formulas

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

The highest level to which stock should Normally be allowed to rise,


Max = Reorder Level + Re-Order Qty - (minimum
Maximum Level otherwise too much working capital is tied up, thus sacrificing liquidity, and
usage in minimum delivery periiod)
there is a risk of loss through deterioration and obsolescence’

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.

A: Annual demand in Units


P: Cost of placing an Order
S: Carrying cost of One Unit for a year

Page 30 of 31
APPENDIX II : INVENTORY CLASSIFICATION
ABC Classification

Classification of Inventories
(As per VILFREDO PARETO Principles)
Categories

Class A Item Class B Item Class C Item


(Close day by Day) (Regular Review) (Infrequent Review)

Consumption Value 80% Consumption Value 15% Consumption Value 5%


Percentage of Items 20% Percentage of Items 30% Percentage of Items 50%

List down items Determine Classify the Items Determine


and arrange them Inventory Levels Apply ABC in ABC Categories Inventory Items
Start
Store - Executive

in descending for each Inventory Classification as per Manual required Perpetual


order Item classification Control

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