Inventory Adjustments & Discrepancies

Inventory Control Procedures

Objective

To ensure that inventory records remain accurate by properly handling discrepancies, damaged items, and adjustments. This process prevents stock shortages, financial misstatements, and operational delays.

Scope

This applies to all inventory adjustments, including:

• Stock discrepancies found during audits or cycle counts.

• Damaged or expired materials that need removal.

• Corrections due to system errors or manual data entry mistakes.

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5.1 Handling Stock Discrepancies

Stock discrepancies occur when physical stock counts do not match system records.

Common Causes of Discrepancies

• Misplaced stock due to incorrect storage.

• Unrecorded material movements (e.g., manual withdrawals without system entry).

• Data entry errors when recording stock transactions.

• Supplier delivery mismatches not identified during receiving.

Resolution Process

1. The Storekeeper reports discrepancies found during stock counts.

2. The Inventory Supervisor reviews stock movement records to locate errors.

3. If the cause is unclear, an investigation is launched to identify the issue.

4. Once confirmed, a Stock Adjustment Form is submitted for approval.

5. The Inventory Manager approves the adjustment, and the ERP system is updated.

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5.2 Adjusting Damaged or Expired Stock

Damaged or expired stock must be removed from inventory to prevent usage.

Identification & Reporting

• Storekeepers identify damaged stock during inspections.

• QC Inspectors verify unusable materials and classify them as:

  • Repairable (can be fixed and reused).

  • Obsolete (no longer usable and must be disposed of).

Approval & Disposal Process

1. A Stock Adjustment Request is created in the ERP system.

2. The Inventory Supervisor validates the request and checks for alternative usage.

3. The Inventory Manager and Finance Department approve the write-off.

4. Materials are disposed of or returned to the supplier as per company policy.

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Case Scenario: Resolving a Stock Shortage

Scenario

During a routine cycle count, the Storekeeper finds that 30 units of a high-value electrical component are missing from the system records.

Actions Taken

✅ DO:

• Cross-check stock transactions from the last issuance and transfer logs.

• Verify past Material Issue Requests (MIs) and Goods Return (GR) entries.

• Investigate if a manual stock movement was made without system entry.

• Submit a Stock Adjustment Form to correct the missing quantity.

❌ DON’T:

• Adjust stock without approval from the Inventory Manager.

• Ignore the discrepancy without a proper investigation.

• Assume the missing stock was used without documentation.

• Manually enter stock values without tracking the cause of the issue.

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Responsibilities

Role	Key Responsibilities
Inventory Manager	Approves stock adjustments and discrepancy resolutions.
Inventory Supervisor	Investigates stock shortages and oversees adjustments.
Storekeeper	Reports stock discrepancies and damaged materials.
QC Inspector	Verifies damaged or obsolete stock before disposal.

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