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Old 05-13-2010, 07:55 PM
mattsaga
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Lightbulb OSMI, Inventory Risk, and Industry Standards

I have a question and some comments that I would really appreciate some insight on - from any industry standard perspective. Specifically related to the Manufacturing Industry.

Inventory Management. In Manufacturing, when a product line changes or is revised in some way affecting inventory, the object of an inventory management group is to manage to zero or as close to zero - all inventory risk in terms of Obsolete and Slow Moving Inventory

From a Sarbanes Oxley perspective - I have seen the standard at a 1% to 2% of total inventory as acceptable for an audit.

What is realistic? What should Finance/Accounting be using for an Accrual and Reserve baseline?

What is acceptable? Is it simply up to a financial controller or operations leadership team or supply chain leadership team to decided? It is definitely subjective based on a supplier's lead-time and PO Terms, but shouldn't dictate the end result.

Obviously the goal is ZERO dollars obsolete, but in reality - it isn't realistic, so what would we agree on is acceptable?

If there is $10,000M in inventory, 1% would be $100K. If there is $50K in inventory, this would equate to $500.

Insight appreciated.

Matt, CPIM
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inventory management, manufacturing, obsolete, osmi, slow moving

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