The receiving function is responsible for entering inventory receipts into the computer system, and occasionally does not do a good job in this capacity. For example, the late or inaccurate data entry of receiving information can lead to inaccurate financial statements, as well as inaccurate information for the production planning and purchasing staffs to procure and assemble materials for the production department to use.
The solution is to eliminate the function. This is an extremely difficult best practice to implement. The concept that only a relatively small number of companies have fully implemented is to fully qualify suppliers in terms of their ability to ship goods of high quality, precisely on time, and to do so directly to the production process. This requires a great deal of advance work by the purchasing staff to find suppliers willing to do this, as well as supplier inspections by company engineers to ensure that supplier quality standards match or exceed those of the company. Only after this work has been done can a company convert to the direct delivery of goods to the production department, bypassing the receiving area.
A final problem to overcome is how to account for receipts if there is no receiving staff. The answer is to assume that parts were received if the products in which they are used as components were built. Accordingly, production records are exploded into their component parts in the computer to determine whose parts were used, and then pay those suppliers based on their usage records. Subsidiary problems to resolve before this payment system will work are to centralize component sourcing with one supplier per part and to eliminate all scrap from the production process. Supplier centralization is necessary because the computer system will not know which supplier to pay once it backs into the number of parts used. Similarly, there can be no scrap in the production process, or else suppliers will not be paid for the full number of parts delivered, since these parts were not included in finished products; the only alternative that will work here is to set up a scrap reporting system from which suppliers can also be paid.
Clearly, there are a large number of major issues to overcome before the receiving department can be eliminated. Though this results in fewer transaction errors for the accounting department to worry about, the improvement is dwarfed by the changes needed to bring it about.