Inventory control

Leggett & Platt takes inventory on monthly basis. Once a month the entire production process is shut down to ensure an accurate inventory control system. Each Manager selects a crew of employees that physically goes around the facility and count all finished goods, raw materials and in-transit products. Every item must be accounted for, whether is good or bad. The day before inventory, employees spend most of the day sorting, classifying and organizing items. Top management has indicated to all branch managers to make sure they have a safety stock net of 5%. The day of inventory the inventory clerk issues lots of 25 inventory tickets and distributes them as needed. Employees must fill out an inventory ticket for every item. Once the physical count for finished goods is completed, management compares it with the inventory on hand. This information is transferred to the inventory control department. Based on the numbers, this department places orders to cover month and a half of finished goods on stock. For finished goods the company forecasts future demand and places orders for at least 2 months worth of inventory based on the previous selling activity of these items. Raw materials are ordered based on production records. Inventory control department works closely with production to ensure any major production breakdowns or changes are taken in consideration when placing orders. Keeping a 5% stock safety net is not always possible due to the nature of business and the different ingredients that go on the final product. Lead times are a major concern. Every supplier has a different lead time and purchasing department has to factor this into the order to get the items on time and still provide a safety net. Each branch decides how much to order and the due date. Corporate has a centralized inventory control system that selects suppliers. Branches must use corporate approved suppliers at all times.