Inventory Flowchart

Page 4
Cynthia Truong
Annie Tang
Yan Yan
May Liu
Mercy Muitah
Part 1
 Specifications for special sales
orders are received from engineering
design department
 A Production planning clerk enters
the data into the computer
 The computer updates the data to
two magnetic disks as Product
specification file (specifies what parts
are needed) and Operations
(routing) file (specifies where to go
from each machine)
Part 2

 Determine the production

needs manually by Sales
forecast (forecasted sales
made by the sales
department) and Back-
order report (orders that
have been placed by
customers, but production
item is not available to
meet customer needs).
Part 2 (Continued)

 The Production
requirements by
product is created and
the data is entered into
the computer at the end
of each day.
Part 3
 We merge the
information from the
routine (Product
specification file and
operations (routing) file)
and specialized area
(Production
requirements by
products) and prepare
production and material
needs.
Part 3 (Continued)
 The computer updates the
information to 4 magnetic disks
as four master files: Raw
material inventory file (how many
raw materials we have), Machine
loading file (what raw materials
to load up the machines), Open
production orders file (orders
that are still in the process), and
Production schedule file (the
schedule for machines, labor,
when to receive raw materials,
etc.).
Part 4
 With updated information, a
copy of Bills of materials,
Operations lists, and Sales
order are created.
 Bills of materials is the
document that specifies the
part number, description,
and quantity of each
component used in a
product.
Part 4 (Continued)

 Operations lists is the

document that specifies
the labor and machine
requirements needed to
manufacture the
product.
Part 4 (Continued)
 Sales Order is the
document created during
sales order entry, listing
the item numbers,
quantities, prices, and
terms of the sales.
 All three above
documents are send to
the customer as
acknowledgement.
Part 5
 A copy of Production
order, Move tickets,
Materials issue cards
are also created with
updated information.
Part 5 (Continued)

 Production order is a
document authorizing the
manufacture of a specified
quantity of a particular
product. It lists the
operations to be performed,
the quantity to be produced,
and the location to which the
finished product is to be
delivered.
Part 5 (Continued)
 Move tickets are documents
that identify the internal
transfer of inventory, the
location to which they are
transferred, and the time of
the transfer.
 All three documents above
are sent to Production
operations department
Part 6
 The Revised production
schedule is prepared
and sent to Production
work center.
Part 7
 The Materials
requirements report is
also prepared and sent
to purchasing
processing department.
Possible Internal Control Improvement
 Back up control-Multiple back up copies of files are recommended. One can
be stored on-site and another stored off-site .
 Data entering edit control-Completeness checks can verify that all required
data is entered.
 Specifications for special sales orders need to get approval by the credit
department before entering- Since this are not regular sales orders and
probably are high cost items, it’s important to ensure that they are approved by
the Sales manager. Signatures on the Sales Order request is one way of
ensuring approval.
 Accurate sales forecasts and inventory records-Without accurate reports,
overproduction and underproduction can occur. Overproduction can lead to
surplus creating cash flow problems since resources are tied up in inventory.
Underproduction on the other hand can lead to shortage thus loss of sales and
customer dissatisfaction
 Proper segregation of duties- In this case, the person entering the data at the
end of the day, should not been the one determining production needs..
Thank you!