PHYSICAL INVENTORY LOTS OR SEGMENTS.- The physical inventory segments for general supplies are formed according to the number of line items that can be counted and balances verified or adjustments processed within 30 calendar days.

The physical inventory lots of ammunition are formed on the basis of the number of locations that can be processed within 30 days.

Conducting the Physical Inventories

A physical inventory consists of three basic steps. They are physical counts, post-count validation, and preadjustment research. A physical inventory is considered complete when the stock point record balance has been verified as correct or when the adjustment quantity has been determined and processed. Refer to enclosure 3 of NAVSUPINST 4440.115 for detailed procedures in conducting physical counts and reconciliations.

Physical inventories are normally conducted on an open for business as usual basis. With very few exceptions, inventories are normally conducted in this manner because management cannot shutdown or freeze supply operations without adversely affecting support to the customer. The stock point ensures that there is positive control over all in-process or infloat transactions and material that may affect the inventory count. If a positive control cannot be achieved, take the following actions:

1. Suspend processing of low-priority requisitions (issue priority 9 to 15) while the item is under inventory.

2. A shut down or closed inventory in which all transaction and material processing is frozen is permitted if customer support will not be adversely affected.

Those items that are controlled on a serial number basis must be reconciled by serial number. This reconciliation process is conducted as part of the inventory.

Physical Inventory Report

The physical inventory reporting activities (see enclosure 13 of NAVSUPINST 4440. 115) must submit quarterly reports to COMNAVSUPSYSCOM not later than 15 calendar days after the end of each quarter. The report is a summarization of the results of physical inventories and in-house receipt losses (UADPS-SP activities only). Each reporting activity must also submit a copy of the quarterly report to their major command. Refer to enclosure 5 of NAVSUPINST 4440.115 for detailed information concerning physical inventory report.

Physical Count and Reconciliation Procedures

The preliminary inventory controls must be established at least 7 days but no more than 15 days before the cutoff date. 'his ensures that transactions that will affect the physical inventory cutoff and the count are identified.

Obtain the count cards/listing for all locations recorded for all condition codes and items qualifying for inventory. As a minimum, the count cards/listing should contain material identification information, location, cutoff date, and inventory serial number. The count cards/listing should not have the stock record balance (quantity on-hand). Controls are maintained to ensure the count cards/listings are returned by personnel assigned as counters.

The first count starts by the first workday following the actual cutoff date and is completed and returned to the inventory office within 3 workdays.

COUNT PROCEDURES.- Inventory counters must verify the information between the count cards/listings/bar code labels with material in location. Annotate any discrepancies on the count cards/listings. Count all the items during the first count. Pull and count the items in all open or nonstandard unit pack boxes or containers. Do not open any contractor sealed containers unless the quantity cannot be determined. Any computations used to get the total of inventory count is written on the count cards/listings. Personnel assigned as counters must sign (or initial) and date the inventory cards/listings after completing the inventory count.

FIRST COUNT VALIDATION AND SECOND COUNT REQUIREMENT.- The quantities are summarized by cognizance symbol (COG), national stock number (NSN), purpose code, and condition code. After summarization, the items are matched against the stock record quantities. If there are discrepancies on quantities, review the infloat transactions and material and adjust counts as required.

The item is considered reconciled and the inventory is complete if the following results are achieved: 

. The adjusted first count quantity matches the stock record quantity 

. The difference between the adjusted count quantity and the stock record actual cutoff quantity is $800 or less and the material is not a controlled item

A second count is taken for all discrepancies in sensitive and controlled items. A second count is also taken for discrepancies of $800 or more between adjusted counts and stock record actual cutoff quantities.

The second count must not begin until the following actions are completed: 

. All first counts for a specific NSN and condition code have been accounted for

. The infloat transactions and materials have been considered and compared with stock record balances