Accounting Best Practices, Fifth Edition

16–20. Move Inventory to Floor Stock

The typical inventory contains an enormous number of small parts, many of which are difficult to track, are not stored in easily countable containers, and require a large amount of paperwork in proportion to their size and frequency of usage. In short, they are a pain for the warehouse staff to handle. Likewise, they represent a minor irritation for the accounting staff, since they must all be counted during the physical inventory counting process, and, because of the difficulty of counting them, they take up an inordinate amount of time. Further, they can easily represent one-third of the total number of inventory items, which is one-third more costing documentation than the accounting staff wants to track. Accordingly, it is safe to say that the smallest and most inexpensive parts in inventory are the root cause of a great deal of extra work for the employees of several departments.

A solution is to shift the small inventory items out of the warehouse and onto the shop floor, where they are treated as supplies. This approach carries the multiple benefits of requiring far less inventory handling work from the warehouse staff, fewer inventory counts during the physical inventory process, and much less inventory-costing work from the accounting staff. In addition, it brings more inventory close to the shop floor, where the production staff appreciates ...