Case Study of Pharma & Chemical Industries Physical Inventory Stock

Secretarial Services
Whitney leaning against a railing on a downtown street

One of our important clients in Mahad MIDC Area is a leading manufacturer & exporter in pharma products.
Their yearly turnover is around INR 120 crores = the US $ 1.7 MIO
Our Client was in the middle stage of ERP implementation.
During implementation phase all the records of stocks of all type of materials i.e. Raw Materials, Primary / Secondary Packing Materials, Semi-Finished (WIP) Materials, Finished Materials & even engineering materials stocks were kept manually.
Engineering materials stocks were not updated on day to day basis for more than 2 months.
Even replenishment of stocks we were done manually.

The corporate management was worried as there might be chances of the following:

1.If Critical material not available for production Or
2.Critical Engineering Material not available for Repairs & Maintenance then there will be production brake down & production loss as time lost is lost.

So they invited APMH & Associates LLP for the following.

1.100% physical inventory stock taking.
2.To audit production site processes of P2P(Procure to Pay) , Issue of Materials & O2C(Order to Cash)


APMH found the solution by doing the following :
APMH has deployed 4 well-experienced persons’ team for stock audit.
One senior person of 36 years’ experience in logistics, ERP implementations & Risk Reduction Audits in 3 MNCs (German, Swiss, American).
  • One Associate with 6 years’ experience in Accounts & Stock Taking in MNCs too.
  • One Associate with 5 years’ experience in Accounts & Stock Taking.
  • One Article pursuing CA.
Total 4 persons were involved in stock taking audit only for 2 days as below :
1 senior person to check Processes & manual records
  • 1 Associate for FG & SFG- 100%
  • 1 Associate for RM- 100%
  • 1 Article for Primary & Secondary PM- 100% &
  • Engineering materials randomly as stocks were not updated for 2 months.
Audit finding were as below which were critical for production.
1 costly & critical Raw Material found less than record.
  • Many Engineering materials were mismatched.
It was suggested to carry out Physical Inventory stock taking perpetually throughout the year as below.
1.A Category - To carry on physical inventory stock taking of Critical/Costly/Restricted Raw Materials/ PM/ Engineering Materials monthly basis = 12 Cycles in a year.
2.B Category - To carry on physical inventory stock taking bio monthly basis = 6 Cycles in a year.
3.C Category - To carry on physical inventory stock taking quarterly basis = 4 Cycles in a year.

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