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Development of Internal Audit and Cyclecounting Procedures for Reducing Inventory Miscounts

Development of Internal Audit and Cyclecounting Procedures for Reducing Inventory Miscounts Focuses on schemes to reduce inventory miscounts from theoperational management point of view. An internal audit procedure isdevised for identifying most of the dataentry errors, which are one ofthe main causes of inventory miscounts during the flow of materialthrough intransit stations. Inventory miscount errors, which escape theinternal audit procedure, are further reduced through cycle counting.Divides stations with a materialflow network into two categoriesexternal and internal stations. Further subdivides internalstations into intransit and stock stations. Identifies and correctsmost of the dataentry errors by monitoring the compliance of certainrules individually at each intransit station and collectively at allintransit stations. Optimally determines the frequencies for cyclecounting by minimizing the sum of the cyclecounting cost and thepenalty cost owing to additional stockouts and overstocking on accountof inventory miscounts. The suggested internal procedure and cyclecounting with revised frequencies were implemented in a company dealingwith spareparts distribution realizing an annual saving of about1 million just a year after the implementation of the programme. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Operations & Production Management Emerald Publishing

Development of Internal Audit and Cyclecounting Procedures for Reducing Inventory Miscounts

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0144-3577
DOI
10.1108/01443579210008123
Publisher site
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Abstract

Focuses on schemes to reduce inventory miscounts from theoperational management point of view. An internal audit procedure isdevised for identifying most of the dataentry errors, which are one ofthe main causes of inventory miscounts during the flow of materialthrough intransit stations. Inventory miscount errors, which escape theinternal audit procedure, are further reduced through cycle counting.Divides stations with a materialflow network into two categoriesexternal and internal stations. Further subdivides internalstations into intransit and stock stations. Identifies and correctsmost of the dataentry errors by monitoring the compliance of certainrules individually at each intransit station and collectively at allintransit stations. Optimally determines the frequencies for cyclecounting by minimizing the sum of the cyclecounting cost and thepenalty cost owing to additional stockouts and overstocking on accountof inventory miscounts. The suggested internal procedure and cyclecounting with revised frequencies were implemented in a company dealingwith spareparts distribution realizing an annual saving of about1 million just a year after the implementation of the programme.

Journal

International Journal of Operations & Production Management – Emerald Publishing

Published: Mar 1, 1992

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