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Inventory Management Sample Process Interview Questions

Posted by Protiviti KnowledgeLeader on Fri, Jul 28, 2017 @ 08:23 AM

This extensive list of questions can be asked during an interview for an inventory audit.

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Purchasing

  • Can I have a copy of your policies and procedures?
  • Can I have a copy of your organizational chart?
  • Personnel
  • Headcount and associated roles?
  • Do purchasing personnel have access to the A/P system?
  • Do purchasing personnel specialize in a product category for which they acquire goods?
  • Systems
  • What is the system used for purchasing?
  • Is the purchasing system electronically linked to the G/L, A/P, inventory, and supplier systems?
Placing the Order
  • Do you practice vendor managed inventory – where the vendor is responsible for monitoring the inventory levels? How is the demand for inventory communicated to vendors?
  • How are inventory needs communicated to the procurement department?
  • Which department is responsible for monitoring material lead times, machine capacity, etc.?
  • What is the process followed to place orders with vendors?
  • What documentation and approvals are required?
  • Are there system or process controls in place that would prevent the placement of an unauthorized purchase order?
  • Has an authorization matrix been established to determine the level of management authorization that is required to place the order? Please provide a copy.
  • How is the procurement department notified when inventory levels sink below threshold levels?
  • Have threshold levels been established?
  • How are inventory needs communicated to suppliers? (E-procurement, fax, phone, EDI, mail, system-automated)
  • How is the purchasing process expedited (e.g. use of long term contracts, blanket purchase orders, etc.)?
  • Who monitors open POs?
  • Does anyone monitor purchasing activities?
  • Indicate the number of suppliers that contribute 80% of total purchases.
  • Office supplies & MRO (maintenance, repair, and operations) supplies
  • Does anyone have procurement cards? Who?
  • What are the authorized spending limits?
  • Who orders office supplies and MRO supplies?
  • Who approves the requisitions?
  • Centralized purchasing?

Receiving

  • Describe the receiving processes and location.
  • What is the process followed to ensure that all items ordered are properly received? Is this process automated?
  • Who is responsible for stocking received items? Where are the received items sent?
  • Quality check
  • How are raw materials checked for quality?
  • What is the process to return the materials to the vendor in cases where the quality standards are not met?
  • How is the return of materials communicated to accounting?

Inventory Management

  • Can I have a copy of your policies and procedures?
  • Which inventory cost-flow method do you use for operational and financial purposes?
  • How is inventory classified? Do you utilize bar coding or scanning equipment?
  • How are raw material, work-in-progress (WIP) and finished goods stored and monitored?
  • How are location numbers assigned? Outline of location number definitions?
  • What systems are used for monitoring the distribution of inventory? Does the system interface with all of the plants – or do the plants manually submit inventory updates to accounting?
  • What are the procedures followed to verify current inventory levels and managing inventory needed for upcoming work orders?
  • How do you identify, value, and dispose of obsolete, damaged, and/or slow-moving inventory?
  • How do you determine appropriate reserves and safety stock levels?
  • Cycle counts
  • How often are cycle counts performed?
  • What products are given priority or a low variance threshold?
  • Are cycle counts performed for raw materials, WIP and finished goods?
  • Are random cycle counts periodically conducted?
  • What is the process followed to perform inventory counts?
  • Who is responsible for conducting the cycle counts (independent of accounting function)?
  • How are the employees trained to perform this function?
  • Have policies/procedures/instructions for cycle counts been established and documented?
  • Who performs the validation of the counts (should be independent of receiving/production functions)? Any approvals required?
  • What are the documentation requirements for the cycle counts?
  • Are the cycle count documents pre-numbered to keep track of all outstanding documents?
  • How are cycle counted items marked?
  • What is the process followed to research and resolve discrepancies if any are noted during the cycle count process?
  • What is the variance threshold above which items must be researched?
  • Are the causes of the discrepancies tracked and evaluated?
  • What is the single greatest cause of inventory errors? (Clerical error, equipment failure?)
  • Who is responsible for making adjustments to the system for discrepancies noted during the cycle count process?
  • Is an annual physical inventory performed?

Inventory Management – Warehouse Security

  • What controls are in place to limit access to the warehouse and inventory supplies (e.g. cameras, guards, restricted access areas, etc.)?
  • How often are access levels reviewed (e.g., to eliminate access to terminated employees, etc.)?
  • Have safety procedures for the warehouse been documented and communicated to employees?
  • How is the warehouse organized (e.g., more expensive products locked in cages, items separated and clearly labeled)?
  • Is damaged, obsolete, scrap and consigned inventory segregated to prevent confusion during the cycle counts?
  • How are movements of inventory monitored to ensure that it is properly safeguarded? What documentation is required?
  • Are there instances when inventory would be transferred among inventory locations? How is the inventory accounted for?
  • Approximately how many days/months worth of inventory is stored within current warehouses? Any changes in the aging over the last few months?
  • Do you store consigned inventory for customers or consign inventory to others? If so, how is it controlled and recorded?
  • How do you determine which inventory is obsolete? What is the process for determining excess and obsolete inventory? Have policies been established?
  • What procedures are performed for the scraping of obsolete inventory? Is this done in a timely manner? Does the scrapping of materials require authorization?
  • Do you receive any payment for scrapped goods? How is this recorded within the financials?
  • What is the process for stocking overages when orders are closed? How is this communicated to accounting to ensure that the inventory aging is accurate?
  • What type of management reporting is performed?
  • Are inventory performance metrics monitored on a regular basis, e.g., inventory turns?

Production Management

  • Policies and procedures?
  • Bill of Materials (BOM)
  • What is the process followed to establish a standard bill of materials?
  • How does the process differ if a part is new or existing?
  • Who approves the bill of materials?
  • Who is responsible for entering the BOM into the system?
  • What is the process for reviewing and monitoring variances between the standard bill of materials and the actual costs?
  • How often are management reports prepared?
  • Do the management reports contain the appropriate level of detail to identify root causes for the variance?
  • Standard costs
  • How are the standard labor hours by product determined?
  • How are standard machine hours determined? Set up and run times?
  • How are labor charges applied to the cost of inventory?
  • How are the costs of labor checked for accuracy, completeness, etc?
  • What is the process to update standard costs based on current procurement and production costs?
  • How often are the standard costs updated?
Pre-Production
  • What forecasting model is utilized for inventory needs?
  • Who performs such forecasting procedures and how often is it performed?
  • What is the process to create, manage and close work orders?
  • What process is followed to forecast future work order needs?
  • Are work orders pre-numbered?
  • How and when are materials allocated to the production work orders?
  • How are inventory requests from the manufacturing floor transacted?
  • When materials are needed, what triggers the picking process – system generated pick list?
  • How are items moved from the warehouse to the production floor?
Production
  • How are the actual materials, labor hours, and set up and run times monitored and recorded?
  • Are the actual labor hours reviewed and approved by responsible management?
  • What is the process followed if a customer calls to cancel an order?
  • How is the product/inventory associated with that order handled?
  • Sold off to other customers?
  • How are these items recorded in the system?
  • Are customers required to pay despite the order cancellation?
  • How are work-in-progress (WIP) products evaluated for quality?
  • What happens to a WIP item if it does not meet quality standards?
Post-Production
  • What is the process to close work orders?
  • Are completed products reconciled to the originated work orders?
  • If only part of the product is utilized, how is the partial usage recorded?
  • How are scrap materials handled?
  • What type of management reporting is performed?
  • Are inventory performance metrics monitored on a regular basis?

Distribution: Quality Control and Shipping

  • Policies and procedures?
  • What is the process followed to evaluate finished goods for quality control?
  • What happens to items that do not pass quality standards?
  • How is rejected material stored – in a separate/caged area?
  • How are packing slips generated – system generated or manual?
  • What type of management reporting is performed?
  • Are inventory performance metrics monitored on a regular basis?

Inventory Accounting

  • How is inventory recorded on the general ledger? Is a reconciliation performed which ensure that all inventory held is recorded?
  • In cases where materials were returned due to unsatisfactory quality, how is this communicated to accounting? How is this recorded?
  • What is the process followed to track inventory items that are on consignment?
  • How often are the inventory count results reconciled to the general ledger?
  • If discrepancies are noted during the cycle count, how is this communicated to accounting? Who is responsible for making adjustments to the system for discrepancies noted during the cycle count process? What accounts are used in the journal entry transaction?
  • Who is authorized to create and post any adjusting journal entries? What level of management review is required prior to posting the journal entries? What system controls are in place to prevent unauthorized access to the G/L?
  • How are cycle counts validated by accounting?
  • Is the period end cut off date communicated to shipping, receiving, customer returns and accounts payable to ensure accurate inventory records?
  • Are unrealized losses accounted for on work in process products by periodically comparing total costs-to-date and estimated costs-to-complete to net realizable value (estimated selling price less reasonably predictable costs of completion & disposal)?
  • What is the process followed to estimate and account for inventory reserves (e.g., aged inventory, obsolete inventory, etc.)? Are there any policies written for this procedure? Who is responsible for preparing and posting the journal entry?
  • How is the disposal of obsolete or excess inventory communicated to accounting? How is the disposal recorded?
  • How ensure that the inventory aging is correct when items (e.g., from cancelled orders) are restocked? How is the restocking of such items communicated to accounting?

 

This sample list of questions is just a small part of the Inventory Management Training Guide on KnowledgeLeader. If this list was helpful for you, here are some other relevant resources you might find useful:

Topics: supply chain, vendor management, accounting/finance, accounts payable, inventory management, materials management

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