Inventory Manager Interview Questions And Answers

No, the model only works for those cases that meet its assumptions.

A inventory should be taken at least once a year. If items are perishable, seasonal or highly demanded a inventory should be taken more often.

A order point is a point in time at which a order is placed to replenish goods in inventory.

Forecasting is the process of estimating the future demand of a product.

EOQ stands for Economic Order Quantity.

When conducting a physical inventory the classification, location and number in stock of a good should be recorded.

Total stocking cost is the cost to the store of holding a good in its inventory. The stocking cost consists of the carrying cost times half the quantity in inventory and the order completion cost times demand divided by the quantity. In its mathematical form the cost is represented by TSC=(Q/2)C + (D/Q)S.

Inventory levels and their values can affect the income of the store, the amount of taxes paid, and the total stocking cost.

The EOQ level is the point at which stocking costs are at their lowest point for a given item.

Yes, through the use of forecasts inventory levels can be set to meet the demands while keeping levels as low as possible.

An order quantity is the amount of goods that an order requests be shipped to the store.

Total stocking cost is the cost to the store of holding a good in its inventory. The stocking cost consists of the carrying cost times half the quantity in inventory and the order completion cost times demand divided by the quantity.
In its mathematical form the cost is represented by TSC=(Q/2)C + (D/Q)S.

Are those basic inputs that are converted into finished product through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future productions.

For manufacturers, “cost of goods sold” (COGS) is the cost of buying raw materials and manufacturing finished products.

For retailers, it's the cost of obtaining or buying the products sold to customers.

Opening Stock (Beginning inventory) + Purchases – Closing Stock (End Inventory) = COGS

If the company is in a service industry, COGS is the cost of the service it offers.

COGS can help companies work out how much they should charge for their products and services, and the level of sales they need to sustain in order to make a profit.

The price paid for products is particularly crucial to retailers, as it is often their greatest area of expenditure. But all businesses can benefit from an analysis of COGS, as it can highlight ways of improving efficiency and cutting expenditure.

Yes, in order to compare stock costs when using the EOQ model you must compute the costs for both the original level and the EOQ level of order quantities.

The value can be found using four methods in inventory control. The first is the specific cost in which each item's cost is added together for the inventory's value. A second method is to use the weighted average of the costs for a period to determine value. A third method is first in, first out. In this method value is measured using the latest costs of goods while working towards the beginning of the period until all goods in inventory are valued. The final method is last in, first out. In this method the costs of gods at the beginning of the period are used to determine the inventory's value much like FIFO.

By following your inventory policy you should be able to realize important advantages in inventory control. The first is reduced costs for inventories, along with reduced amounts of inventory. Theft and shrinkage should also be reduced if inventory policy is followed. The final benefit will be increased profits for the store.

Many decisions about inventory levels are strategically important. So instead of relying solely on the supply organization to decide, executives need to have a major say in the fundamental issues that impact inventory management-everything from determining the right breadth and complexity of product offerings to optimal plant and distribution footprints.

This breakdown makes it easier to make sound decisions about appropriate levels for each of these three areas. It helps determine the minimum safety stock needed to provide an insurance policy against supply chain problems either from manufacturing glitches or distribution uncertainties so that customers get what they ordered.

It's useful for pinpointing the amount of inventory required to replenish deliveries every two weeks. And it helps companies find ways to avoid a backlog of excess or obsolete inventory.

In financial accounting, the term inventory shrinkage is the loss of products between point of manufacture or purchase from supplier and point of sale. The term shrink relates to the difference in the amount of margin or profit a retailer can obtain. If the amount of shrink is large, then profits go down which results in increased costs to the consumer to meet the needs of the retailer.

In retail terms, shrinkage refers to a company's percent loss resulting from damage, product expiration and theft of unsold products. Retail shrinkage can happen anywhere along the production and sale chain, including at the factory, in transit or at the retail location.

You can calculate retail shrinkage by dividing the value of goods lost to shrinkage by the total value of goods that are supposed to be in the inventory.

Shrinkage =

( Total value of the goods that you are supposed to have in your inventory - Total value of the goods that is physically stocked in your inventory )

/ Total value of the goods that you are supposed to have in your inventory.

i.e. Shrinkage = (Book stock - Actual Stock) / Book Stock

= Total Value of goods lost / Total value of the goods that you are supposed to have in your inventory

☛ 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?

☛ 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?

☛ 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?

☛ 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?

☛ 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?