removalinventory

Removal inventory refers to the formal process of removing items from a company’s inventory records and from physical stock when those items are no longer suitable for sale or use. It is used to keep inventory data accurate for financial reporting, forecasting, and supply chain planning.

Common scenarios prompting removal include damage or spoilage, obsolescence, returns that cannot be restocked, regulatory disposals, and transfers to another location or asset disposition. Removal may also occur during cycle counts or audits when discrepancies are found and corrective actions are required. The goal is to ensure that stock levels, cost of goods sold, and financial statements reflect the true state of inventory.

The removal process typically involves initiation, verification, disposition, and documentation. An authorized person creates a removal transaction that specifies the item, quantity, reason, location, and date. The item’s identity and quantity are verified, and the appropriate financial impact is recorded, such as write-offs, write-downs, or cost adjustments. After disposition, inventory records are updated, lot and serial numbers are adjusted if applicable, and supporting documentation is stored for audit trails. Controls may include approval workflows, segregation of duties, and regular reconciliations with physical stock.

Systems used to manage removal inventory include enterprise resource planning (ERP) systems and warehouse management systems (WMS) with inventory disposition modules. Data considerations cover lot/serial tracking, expiration dates, unit of measure, and cost methods. Removal inventory is a common aspect of reverse logistics and inventory accuracy programs and is related to concepts such as inventory adjustment, shrinkage, and disposition.