Question

Explain the normal business process in the inventory and warehousing cycle. As part of your explanation, state which documents firms would normally use to record activities in that cycle.

Answer 1

Normal Business Process in the Inventory and Warehousing Cycle can be as follows:

1. Raising Purchase Orders: Raising Purchase Orders (PO) to suppliers of Inventory of Raw Material and Consumables is mostly the initiation of the cycle. Here is stated the requirement in the form of quantity and the expected delivery date. These are the key terms amongst others which are stated in a PO.

2. Receiving the Order: This is generally done through GRN i.e. Goods Receipt Note. This can also be a preceded by Quality Check on the basis of which it can be determined if goods should be sent to be received by stores or not. then the store makes GRN if goods are cleared for stores.

3. Storing of Raw Material is done after GRN is made. This can be done as per location suitable for the goods.

4.Goods Issue Memo: The goods are issued by store as and when possible and required by Production and other Deptt.

5. The Goods then get converted to Finished Goods and are sent back to Stores as Finished Goods.

6. Stores sends them to customers on the direction of the marketing deptt. under an Invoice prepared by Marketing Deptt.