Short term financial management; Inventory management; Working capital management; Accounting and control; Entrepreneurship

n most retail and wholesale businesses, the management of inventory is a major challenge that the business manager has to face. The level of investment in inventory is an important element of working capital that cannot be ignored when liquidity and cash management is being appraised. Even though there is no explicit return / gain from the items held in inventory, more often than not, the size and value of the inventory is significant compared to total asset. VT Pharmacy Limited, commenced operations three years ago as a wholesale outlet for high-end branded products. With the substantial increase in stock levels over the years, the Chief Pharmacist / owner of VT Pharmacy Limited, Vera Thomas, was concerned about the efficiency and effectiveness of the inventory management systems currently in place. By focusing on the management, planning and setting of policies / procedures with respect to inventory, the case will achieve the objective of illustrating how the business manager can better optimise short-term financial resources. This will be achieved by discussing best practices of inventory management such as: (1) controls -instituting measures to prevent / minimise loss through waste, fraud, dishonest employees or negligence; (2) cost to hold - identification of the various cost elements that make up total inventory cost; and (3) development of inventory models and determination of the level of inventory required for a defined period. This case is appropriate for use in a wide variety of programmes: (1) MBA; (2) executive MBA; and (3) programmes directed at potential or current entrepreneurs. The case is supported by a detailed teaching note which includes: (1) the basic issues and highlights; (2) teaching objectives and suggested teaching approach; (3) assignment questions for discussion; (4) analysis of the assignment questions; and (5) suggested board.