Control of inventories

Question

Hardcase Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items:

Because the shop carries mostly high-quality, designer luggage, all inventory items are tagged with a control device that activates an alarm if a tagged item is removed from the store.
Because the display area of the store is limited, only a sample of each piece of luggage is kept on the selling floor. Whenever a customer selects a piece of luggage, the salesclerk gets the appropriate piece from the store’s stockroom. Because all salesclerks need access to the stockroom, it is not locked. The stockroom is adjacent to the break room used by all mall employees.
Whenever Hardcase receives a shipment of new inventory, the items are taken directly to the stockroom. Hardcase’s accountant uses the vendor’s invoice to record the amount of inventory received.
Determine whether each of these procedures is appropriate or inappropriate and select the response below.

Answer 1

To assess the appropriateness of each inventory control procedure implemented by Hardcase Luggage Shop, let's break it down:

1. Control Device for Inventory Items:

   • Response: Appropriate
   • Reason: Tagging high-quality, designer luggage with a control device that activates an alarm is a feasible security measure to prevent theft. This adds a layer of protection for items that are presumably high in value.

2. Limited Display Area with Stockroom Access:

   • Response: Inappropriate
   • Reason: While having a limited display area is common in retail, the fact that the stockroom is not locked and all salesclerks have access could lead to potential inventory loss or theft. Best practice would involve securing the stockroom to control access.

3. Receiving Shipments of New Inventory:

   • Response: Inappropriate
   • Reason: Taking items directly to the stockroom without a verification process (such as a count and inspection against the vendor's invoice) can lead to discrepancies, loss, or damage going unnoticed. It's important to verify the shipment upon receipt to ensure accuracy in inventory records.

Overall Summary:

• One procedure (control device) is appropriate, while the other two (stockroom access and receiving shipments) are inappropriate and could benefit from improvement to enhance inventory control and security.