Obsolete Inventory Research Articles

Reducing Pharmaceutical and Non-Pharmaceutical Inventory Waste in Tertiary Hospital: Impact of ABC-VEN Analysis in a Zero-Waste Strategy Over 7 Years.

To evaluate the prevalence and trend of inventory waste in a tertiary hospital over the last 7 years. This included the type and average monetary value (MV) of inventory waste, as well as the outcome of using the Always-Better-Control (ABC)-Vital-Essential-Non-essential (VEN) matrix as part of a Zero-Waste Strategy. This was a retrospective observational study conducted at King Abdulaziz Medical City (KAMC) over 7 years. The prevalence of waste was 0.21%, which equates to (SAR) 15 million out of SAR 7 billion. The pharmaceutical inventory had significantly higher waste in terms of MV and the number of items (89.8%, and 80.3%, respectively) (P<0.001). The expired pharmaceutical inventory had a significantly higher waste of MV than non-moving and obsolete inventory (79.8%, 14.3%, and 5.9%, respectively) (P<0.001). The ABC-VEN matrix categorized the inventory into Category I, which has the highest MV waste at 82.3%, followed by Category II with 16.8%, and then Category III with 0.9%. However, category II had a significantly higher number of wasted items at (58.2%), followed by Category I (24%) and Category III (17.8%) (P<0.01). The majority of MV waste consisted of a small number of pharmaceutical items that had a high clinical impact, representing 66% and 18%, respectively. After implementing a zero-waste strategy for landfills using the ABC-VEN matrix, the prevalence of waste declined from 0.9% to 0.21%. The waste sent to the landfill was zero from 2018 through 2020, saving 73.64% of the total money. The use of the ABC-VEN matrix positively impacted the reduction of MV waste. The prevalence and trend rate of inventory waste were lower than the benchmarks of global companies, saving more than two-thirds of the inventory value that would have been wasted. The majority of the wasted MV consisted of a small number of pharmaceutical items that had a significant clinical impact.

Investigation of strategies to generate value from excess obsolete and non-use inventories held at a Locomotive Maintenance Service Organisation

Investigation of strategies to generate value from excess obsolete and non-use inventories held at a Locomotive Maintenance Service Organisation

Optimized computational techniques-based inventory control process in supply chain management

Now-a-days, supply chain management is one of the crucial factors in business for identifying the flow of goods, raw material storage, movement of products and inventory process so on. The main aim of the supply chain management process is to provide the valuable business services, infrastructure, logistic control and inventory control to the business for improving the business. Among the various supply chain factors, inventory control is one of the difficult tasks in supply chain management process because of high cost inventory, consistent stockouts, low rate of inventory turnover, high value of obsolete inventory, maximum working capital, huge cost for storage and lot customers. Then, several supply chain management techniques are introduced in traditional to control the inventory process but they are failing to detect with greatest accuracy due to the low convergence rate in computation techniques. So, in this paper introduce the effective and optimized neural network computational approach for managing the inventory control. In addition to this, the system ability to select the product based on the few factors that improve the inventory control system accuracy. Then the excellence of the system is evaluated using experimental analysis and respective performance metrics.

ANALISIS PERLAKUAN AKUNTANSI TERHADAP PERSEDIAAN BARANG USANG PADA PT. SINAR NIAGA SEJAHTERA (DISTRIBUTOR GARUDA FOOD) MANADO

Inventories of obsolete goods will incur inventory costs, costs that exceed income will not generate profits. PT. Sinar Niaga Sejahtera (Garuda Food Distributor) Manado quite often finds inventory obsolescence of goods sold on credit to customer outlets. The research objective was to analyze the causes of obsolete inventory and accounting treatment of obsolete inventory at PT. Sinar Niaga Sejahtera (Garuda Food Distributor) Manado in accordance with accounting theory. The research method used is descriptive qualitative, where data and information obtained from PT. Sinar Niaga Sejahtera (Garuda Food Distributor) Manado is described qualitatively. The results of research at PT. Sinar Niaga Sejahtera (Distributor of Garuda Food) Manado, which is the cause of obsolete inventory due to expiration of consumption or expiration periods and accounting treatment of inventory of obsolete goods using the reserve method is in accordance with the applicable accounting theory and has run well with and obsolete inventory still in the normal category because it never exceeds the limit of what is reserved for one period.

Bailing out the food banks? Hunger relief, food waste, and crisis in Central Appalachia

In 2015, West Virginia’s flagship food bank confronted a financial crisis that threatened to cut off the supply of emergency food to some 600 agencies serving 300,000 people a month. Focusing on this crisis, we explore the evolution of charitable food networks across the United States with a particular focus on the role of food banking within agro-industrial supply chains. Drawing on a three year institutional ethnography of West Virginia’s food banking economy, we analyze the transition from producer to buyer driven supply chains in a network that is dependent on charitable giving and affective labor to process surplus foods and revalue obsolete corporate inventories. We argue that food banks and their affiliate agencies have become key institutions within a vast food destruction network increasingly serving the needs of large food firms. While food banks and their affiliate agencies provide tax relief for food corporations and offer a highly efficient vent for state subsidized and corporate food waste, they are primarily funded by community-based organizations who are themselves stretched thin by economic crises within their own locales. The entrenchment and evolution of the food waste qua hunger relief circuit is producing new tensions in a network that is conflicted over whom they are ultimately working for, and sheds light on the paradox of hunger relief in the 21st-century.

Wills Lifestyle in India

In 2003, ITC responded to the high level of obsolete inventory by shifting risk from finished products to manufacturing and raw materials. This required that their supply chain be much more flexible and responsive than it was in the past. By 2006, changes in the supply chain that included moving manufacturing in-house improved flexibility and responsiveness. Obsolete inventory was significantly reduced and the company was much better at matching supply and demand. Cost, however, continued to be higher than that at third parties. The company had to decide on the appropriate tradeoff between cost and responsiveness when structuring its supply chain.The case illustrates how Wills has changed its supply chain to become more flexible and responsive. This change, however, has come at a cost. The case requires the students to analyze the tradeoff between cost and responsiveness/flexibility to decide on an appropriate level of flexibility/responsiveness. The case also requires the student to understand the relative value of increased flexibility versus increased responsiveness.

Enhancing the management of shared inventory in the steel industry using RFID: an alternative to bar codes

An inventory problem of a company that specializes in cutting steel coils into rolls and sheets of steel is addressed in this paper. Rolls and sheets of steel require a high level of customization depending on the specifications by the end user. This causes complexity in the management of finished goods, mainly due to the wide variety of dimensions of the rolls and sheets that are in the storage area. Due to the great variety of products built for stock, it is not possible to define a specific location in the storage area to place a product. For a company located in Mexico, recent data show that the percentage of obsolete inventory (items stored more than 90 days) is 7 %. The objective of this work is to reduce this percentage to 0 %. From a time study, it was learned that searching for finished inventory averaged 15.5 min. This activity consumes a large amount of the available forklift operator time. This means that in situations during which the forklift operator is pressed for time, it may be necessary to abandon the search for the correct finished products in the storage, and instead ship products of more recent production. Over time, the repetition of this event generates increased rates of obsolete inventory. The proposal to solve the problem was to reduce the search times through the implementation of a system that identifies inventory using RFID technology. This will improve the quality of the stored information, and therefore reduce the rate of obsolescence.

Cisco Systems, Inc.: Minding the GAAP?

ABSTRACT Cisco Systems, Inc. manufactures and sells networking and communications products and provides services associated with that equipment and its use. In April 2001, Cisco announced a charge of $2.249 billion against earnings for obsolete inventory. The financial press gave extensive coverage to the write-off, including claims that Cisco was writing off inventory in an effort to set up future windfall profits. Students are required to examine and integrate information from multiple sources, including the relevant U.S. authoritative literature, SEC commentary relevant to Cisco's decision, and Cisco's disclosures, to critically evaluate reactions from the financial press and examine the potential for biased reporting in both Cisco's disclosures and the reactions of the financial press. This case is appropriate for an undergraduate intermediate accounting course or for graduate courses in financial statement analysis or accounting theory.

English

Fraud is a broad concept with two basic types seen in practice. The first is the misappropriation of assets and the second is fraudulent financial reporting. Fraudulent financial reporting usually occurs in the form of falsification of financial statements in order to obtain some forms of benefit. The current research compares the financial ratios between fraudulent and non-fraudulent firms for the companies listed on Tehran Stock Exchange. The sample consists of 134 companies from 2009-2014 and for testing the hypothesis Independent sample t-test was exerted. The results show that there is a significant difference between the means of Current Assets to Total Assets, Inventory to Total Assets and Revenue to Total Assets ratios. This means that management of fraud firms may be less competitive than management of non-fraud firms in using assets to generate revenue. Management may manipulate inventories. The company may not match sales with corresponding cost of goods sold, thus increasing gross margin, net income and strengthening the balance sheet. In addition, manipulation of inventory is in form of reporting inventory lower than cost or market value, and companies choosing not to record the obsolete inventory. Higher or lower margins are related to the issuing of fraudulent financial reporting. In addition, the results show that there is not a significant difference between the means of Total Debt to Total Equity, Total Debt to Total Asset, Net Profit to Revenue, Receivables to Revenue and Working Capital to Total Assets ratios. Key words: Fraud, fraudulent financial reporting, financial ratio.

Assembly FG: An Educational Case on MRP II and ERP

This educational case teaches students how discrete manufacturing companies use Manufacturing Resource Planning II (MRP II) within an Enterprise Resource Planning (ERP) system to plan purchase and production orders. In addition, students learn how ERP uses cost rollup controlled by a multi-level bill-of-materials (BOM) to cost work-in-process and finished goods parts. Using Microsoft Excel, students implement the “BOM explosion” logic used in MRP II to plan order quantities and start dates for purchase orders and production orders. By learning MRP II and cost rollup logic, students better understand why inaccuracies in computerized BOM or inventory records can lead to poor materials planning, material shortages, increased production costs, delayed shipments, excess and obsolete inventory, and inaccurately costed work-in-process and finished goods parts. The learning process and benefits of using the case in an Accounting Information Systems (AIS) or Cost Accounting course are discussed. Teaching Notes on how to administer the case and suggested answers for the exercises that follow the case are presented. Evidence of teaching effectiveness of the case is also included.

Use of Process Modeling in Product Development Integration within Manufacturing Environment

The impact of supply chain on new product development (NPD) and product introduction is particularly important in a time when (i) there are pressures for growing product proliferation in order to meet varied demands and constraints, (ii) the research and development pipeline is a key focus in companies, and (iii) technology life cycles have shortened so much that obsolete inventories and time to market are crucial for companies margin performance. This research focuses on the early stages of the collaborative product development process in the extended enterprise and shows it is a contribution to the business world. The output of the research includes the functional requirements of a framework and a developed prototype methodology with tools and technologies that are tested with case studies in the industrial environment. The study also focuses on using modern modeling tools to represent the product development processes of an Original Equipment Manufacturer (OEM) and its suppliers.

Creating the Foundation for Change: An In‐depth Assessment of a Municipal Water Department's Inventory

This article discusses improving inventory management at an unnamed municipal water department. The article discusses conducting an assessment of the complete inventory process, and results indicated that a number of operating efficiencies were needed, including: labor savings in inventory identification, ordering, processing, transferring, and returning; increased customer service (parts available when required and in the quantity required); reduction in inventory quantity ‐ the right parts at the right time, and overall reduction in redundant or obsolete inventory; and, increased inventory tracking ‐ employee‐targeted system ensures accurate reporting and overall tracking. The article discusses creating a change process that included: physical count of inventory; indentifying the processes and procedures that led to the discrepancies in inventory; reclassifying inventory; and, re‐training employees. Positive outcomes of this project are listed.

Coordinated responsiveness for volatile toy supply chains

Demands for innovative products in short selling windows are highly unpredictable. This volatility creates demands with dramatic peaks and troughs due to risk-avoidance behaviours among manufacturers and retailers. The consequences are high obsolete inventory, lost sales, and markdowns. Theoretically, the concepts of quick response and postponement are among the potential solutions for such as a volatile and seasonal toy supply chain. This study explores the role of responsiveness and coordination in improving supply chain performance. It is based on an in-depth case study in a European toy supply chain. Consumer and retailer demand patterns and their implications to the manufacturer's supply chains are analysed. Opportunities for relocating order penetration points (OPP) and quick response are simulated, and appropriate relocation rules are established. It is concluded that OPP relocation and responsiveness are beneficial but inadequate in improving the supply chain. Coordination of ordering behaviours is necessary. Coordination processes to achieve greater performance between the toy manufacturer and two of its retailers are presented. Furthermore, the concept of ‘coordinated responsiveness’ is proposed, which combines the concepts of quick response, accurate response and coordination.

Supply chain management practices in toy supply chains

PurposeInnovative products usually experience highly unpredictable and variable demand. This is especially valid for the volatile and seasonal toy industry, which produces high obsolete inventory, lost sales and markdown. In such a volatile industry, what supply chain management (SCM) practices are applicable and effective? This study seeks to explore SCM practices, and identify practical and theoretical gaps in toy supply chains.Design/methodology/approachThis article includes a longitudinal and in‐depth case study during the past year in an international toy manufacturer, which includes qualitative semi‐structured interviews and questionnaire with 11 main European toy retailers.FindingsThe study concludes that there are three main SCM practices for toy retailers in terms of ordering behaviours (one‐off, JIT, and mixed model), and one dominated SCM practice for toy manufacturers (traditional mass‐production or push‐models). These low‐responsive practices in the toy supply chain are not caused only by slow knowledge diffusion. SCM know‐how is not yet capable of managing such levels of volatility and seasonality. Therefore, explanations of these theoretical gaps and what new theories are required for such extreme volatility and seasonality are proposed.Originality/valueIt reveals actual SCM practices in a volatile and seasonal supply chain, such that theoretical and practical gaps are identified. Also, it proposes a model to match manufacturing SCM‐practices with retailer SCM‐practices.

Earnings Quality and Short Sellers

SYNOPSIS: A key measure of earnings quality is the deviation of net income from operating cash flows. Sloan (1996) finds that firms with high accruals (or a large gap between net income and operating cash flow) experience a decline in earnings performance not anticipated by investors, resulting in predictable future returns. In this paper, I examine whether investors short sell securities with high accruals. Such a strategy is able to directly profit from the predictable lower future returns. Using a sample of U.S. traded firms from 1990-1 998, I do not find evidence that short sellers trade on the basis of information contained in accruals. Keywords: accruals; earnings quality; returns; short sellers. Data Availability: Data are available from sources identified in the text. INTRODUCTION Earnings quality is often defined in terms of persistence and sustainability. Revsine et al. (1999, 224-225) state that earnings are considered to be of high quality when they are sustainable. Bodie et al. (2002,628) speak of the quality of earnings in terms of the extent to which we might expect the reported level of earnings to be sustained. In this paper, earnings that are more persistent are viewed as higher quality. Examples of low-quality earnings include insufficient allowance for doubtful accounts, insufficient provisions for obsolete inventory, and aggressive revenue recognition practices that bring future revenues into the current period. Common to these examples of low earnings quality is the fact that current earnings are temporarily inflated due to accounting choices, but cash flows are unaffected. The lower persistence of earnings resulting from high levels of accruals does not have to be a direct result of earnings management activity. The nature of accrual accounting is to accrue and defer past, current, and anticipated future cash receipts and disbursements. The accrual process involves a significant amount of estimation of future cash receipts and payments, and a subjective allocation of past cash receipts and payments. In doing so, the accrual process creates accounts of varying reliability. For example, recording the net realizable value of receivables involves estimation of default risk across a portfolio of debtors. Other examples include estimating recoverable amounts of inventories, depreciating and amortizing long-lived assets, and estimating post-retirement benefit obligations. Estimation errors for the various asset, liability, and associated revenue and expense accounts (either intentional or unintentional) will all lead to lower persistence in earnings. Collectively, these estimations ma nifest themselves in the magnitude of reported accruals. Sloan (1996) documents that firms with reported income greater than operating cash flows (i.e., high accruals) experience a decline in earnings performance in the following year. In addition, stock prices fail to impound the implications of current accruals for future earnings, leading to predictable return patterns for firms with high levels of accruals. Furthermore, firms reporting earnings with large accruals are more likely to be subject to SEC enforcement actions (Dechow et al. 1996; Bradshaw et al. 2001) and earnings restatements (Richardson, Tuna, and Wu 2002). Collectively, this suggests that the magnitude of accruals is a good indicator of earnings quality. In this paper, I examine whether short sellers are able to identify and trade on earnings quality information embedded in accruals. Short sellers have particularly strong incentives to utilize measures of earnings quality because they can directly profit from the lower future performance of high-accrual firms. Previous research finds that short sellers are an informed subset of investors who are able to identify over-priced securities (see e.g., Figlewski 1981; Dechow et. al. 2001; Desai et. al. 2002). Short sellers have the ability and the financial incentive to trade on the basis of accrual information. …

Optimizing Inventory Replenishment of Retail Fashion Products

We consider the problem of determining (for a short lifecycle) retail product initial and replenishment order quantities that minimize the cost of lost sales, back orders, and obsolete inventory. We model this problem as a two-stage stochastic dynamic program, propose a heuristic, establish conditions under which the heuristic finds an optimal solution, and report results of the application of our procedure at a catalog retailer. Our procedure improves on the existing method by enough to double profits. In addition, our method can be used to choose the optimal reorder time, to quantify the benefit of leadtime reduction, and to choose the best replenishment contract.

Progressive engineering changes in multi-level product structures

One of the objectives of engineering changes is to redesign product/component parts to perform better or to be produced more efficiently. Frequent engineering changes, however, contribute to scheduling instability in multi-level product structures in addition to obsolete inventories. In this paper, we consider progressive probabilities of engineering changes as opposed to the constant probabilities generally assumed in most related studies. Realistically, the probability of changing a part at a certain level is affected by the changes in its parent levels. Thus, the likelihood of changes may progressively cascade from the top to the bottom of the product structure. An analytical procedure is developed to compute progressive probabilities of engineering changes. Then, a sensitivity analysis is performed to see how the shape of product structure and component commonality affect resultant progressive engineering changes for the lower-level items in the product structure. We find that engineering changes of a component part are affected significantly by the number of immediate parent items and their magnitudes of engineering changes. However, the depth of product structure has no significant impact on the engineering change of any item.

Disposal of Excess Inventory

This paper deals with the problem of disposal of slow-moving or obsolete inventory. For many reasons, companies will find themselves in an overstock situation where the potential sales value of excess stock, less the expected storage costs, does not match the salvage value. We present relationships for the optimum number of items to keep under conditions of stochastic demand and perishing.