Inventory Flowchart Page 6 Bill Liang Ricardo Gutierrez Tina Tsou Jesus Mercado

Flowchart Narrative  Before units in work-in-process inventory become finished goods, they are sent to the inspection station. The inspector enters the inspection results where the file is updated in the computer. Units that do not pass inspection are sent back to work-in-process and a notice of rejected orders is created. Units that pass inspection are entered into the open production orders file.  Goods are then moved to the warehouse along with the final move ticket. Final move ticket and goods data is entered. The finished goods inventory file and the work-in-process inventory file are updated, with a debit and credit respectively. The new data stored in these files is used to close the production order file, and print a report of completed production orders and a journal voucher. The report of completed production orders is sent to production planning and the journal voucher is sent to the accounting department.

Threats  Poor quality of inspection: The inspectors' job performance could be bad and will cause poor quality products to pass through the inspection line without any notice. The inspector might also reject products that are not “perfect” but are still up to company standards.  Inventory Theft: Inventory could be stolen by either the inspector or another employee during the inspection period.

Threats  Inspector has too much control/authority: Apparently no one checks the inspector’s work. At the completion of the inspection, he/she enters the results. This will determine if the product will pass on to finished goods, return to work-in-process, or is a total loss. The inspector has control over the product’s quality and the authority over resources used for rework. He/she shouldn’t have this much control over the production order, but instead, report to someone who does. Also, because the inspector has physical control over the products and is in charge of updating information, an omission may be easier to go by uncontested.

Controls  Inspector sign-off: Inspectors should initial the products they have inspected. In the event that a bad product passes through, management could trace where the problem occurred.  Second line of inspection: Adding a second line of inspectors who will randomly double check the inspected products will increase the quality of products and the quality of inspectors' work.  Random spot checks by management and performance reports: Management may want to check and evaluate the inspector’s work to promote efficient practices.  24-Hour surveillance camera: Adding a surveillance camera that records all of the employee's actions during work will reduce the chance of inventory theft. It will also help in solving other problematic areas.

Controls  Passwords to handle products and input data: This will make it harder for someone to simultaneously have access to the products and be able to alter data.  Confidentiality agreement: An extra measure to promote adherence to the separation of duties.  Bar-coding/RFID: A good way to keep track of all inventory and call suspected "defects" to attention if a double check need be made.  Issuance of Move Tickets and updating done separately: To minimize loss and promote accuracy.  Better product design: Better product design may help to minimize the inspector's defect turnout and make him/her work harder to find defects -- increased efficiency.