B. Physical inventory - Planning & preparation

Inventory Planning & Scheduling

Physical counts or cycle counts must be conducted at least once annually for all materials. With limited exception (see exceptions section) the sites that perform a Full Periodic (Wall-to-wall) inventory must complete them between July and November each year^[1].  Cycle counts may be performed in addition to the annual Full Periodic counts.. 

FRA validates and publishes updated physical inventory planning prepared by PIM and considering that:

• Recommended 90% of the physical inventory count (in value of items) be done by the end of September
• 100% of the physical inventory count (in value of items) must be done by the end of November, including all external storage (Hard Closing)

Exceptions:

• The period can be extended/ modified if requested by the external Audit team.  The need for date modification must be approved by the Group Controller.
• Furthermore, for the sites that perform Cycle counting they must;
  • By November 30th, references counted must represent at least 80% of the total value of industrial supplies inventory.

The annual planning must include a list of all the inventory storage location (on site / off site), the frequency of cycle counts, a detailed planning taking into account the above objectives

^[1] The site must maintain an auditable roll forward from the date of the inventory to the reporting period date. 

The annual planning includes :

1. A list of the inventory storage location

• On site
• Off site: inventory on consignment, held in third parties facilities or by toll manufacturers

2. Frequency of cycle counts, if applicable

• All storage locations divided by count date;
• Inventory planning has to be prepared targeting 100% of Inventory counted at the end of reference period;

3. A planning taking into account the following objectives

• Cycle Counting - A count of items representing 100% of end inventory should be done as of 30th November (in value), each
  year (including external Storage)

• Full Physical Counting - A count of items representing 100% of end inventory should be done as of 31 December (in value),
  each year (including external Storage)

Specific for Industrial Suplies

• By November 30th, references counted must represent at least 80% of the total value of industrial supplies inventory.
• The rest 20% of references of the total value must be counted by either sampling counting method every year or cycle counting method every 3 years

That planning must be communicated to FRA, who could organize/support the supervision by a third party without prior notification to PIM. 

4. Cycle Counts rules
 

• Cycle counts have to start before July 1st of each year, otherwise Full Inventory count will have to be executed at the plant;
• ABC Classification method has to be implemented for a complete cycle count model implementation for spare parts;

The site procedure has to include:

• The name of the finance responsible assigned (FRA) who is authorized to validate physical inventory discrepancies and particularities linked to the segregation of duties
  
  
• A reference to applicable safety procedure
  
  
• Triggering event to engage a second count : for each of the category of inventory (A31000, A34000, A37000), determination of a threshold for the value of discrepancies above which a second count must be performed. A 0.5 % threshold of the total amount of the inventory concerned is recommended, it will be applied as such if the site inventory procedure doesn’t specify otherwise.

• Specific scenarios in which recounts might not be required
  • Meter readings or print in continuous production environments
  • Scenarios specific to the site's activity