For Orderly or Forced Liquidation scenarios, it takes a multi-discipline person to optimally complete a valuation of imported, wholesale or OEM inventory. Today’s lenders require in depth multi-discipline valuation analysis of inventory to make informed decisions regarding initial loan applications or for portfolio review purposes. The appraiser must understand the objectives of the lender in order to establish the proper valuation basis. In addition to basic valuation skills, the inventory appraiser should have education and/or experience in the following fields: • Accounting • Engineering • Finance • Information Technology • Inventory Control • Liquidation • Marketing and Sales • Purchasing Accounting – The appraiser must understand the underlying accounting policies and principles appropriate to the valuation purposes. For instance, the implications that various accounting inventory valuation methods (e.g. FIFO, LIFO, Standard) have on the appraiser’s valuation approach. The appraiser must also be able to discuss with accounting personnel various accounting issues as they relate to the inventory valuation task. Engineering – In the case of Original Equipment Manufacturers (OEM’s) the work in progress particularly may warrant investigation as to its salability under a distressed financial scenario. Such reviews may consider “as is” partial production resale capability, adaptability to products of other OEM’s, cost to complete calculations, disassembly practicality, vendor return potential, and scrap potential, among other issues. Finance – As with accounting, the valuation consultant may need to interface with the Chief Financial Officer to elicit vital information to holistically complete the appraisal. Information Technology – One of the more interesting elements of inventory valuation is the diversity of the data bases for inventory information. It is the appraiser’s challenge to use the existing data in a cost effective manner. The appraiser usually will find it necessary to manipulate and interpret the data provided by the subject’s data processing system. Understanding both the nature of the data and the underlying account concepts that are incorporated into the data enable the appraiser to efficiently and effectively complete the valuation assignment. Each company being appraised has varied methods of accumulating, organizing and processing their inventory. Firm A may have a very basic system such that valuation on a line item basis is not practical, forcing valuation on a grouped or class basis. In such cases, turnover and obsolescence stratification may be impossible. Yet Firm B may have an extremely detailed system with extensive historic sales data by line item, thereby enabling line item valuation. Inventory Control – Companies use different methods to tracking inventory flow, cost accumulation, and inventory verification. The appraiser must be able to thoroughly understand and use such potentially varied data in the most appropriate manner. Marketing & Sales – Often overlooked in the valuation process is the role of marketing and sales. It is important that the appraiser establish a realistic inventory liquidation scenario in order to determine Orderly and Forced Liquidation values. The dynamics of the marketplace and the relationship among purchasing, production, orders, shipping, and credit must be incorporated in the liquidation scenario in order to determine reasonable values. The appraiser must be able to discuss these issues with appropriate marketing and sales personnel. These discussions likely will involve margins, competitive positioning, price points, and obsolescence. Liquidation – Some appraisers may be directly associated with or even employed by liquidation firms. Yet liquidators are not experienced in all types of liquidations. A soft goods liquidator may well not have the skill set to liquidate an OEM’s hard goods inventory. Therefore, the valuation consultant should have the ability and contacts, and the humility, to contract / hire others that may offer insider information relevant to the industry of the subject firm. Purchasing – Data flowing into the inventory record comes initially from purchasing and accounts payable systems. This data is modified by and added to through the cost accounting process. Often the purchasing manager can offer current information concerning such issues as basic costs, quantity discounts, vendor return policies, trends in raw materials costs, product replacement changes, import duties, and so forth. In summary, the appraisal professional blends diverse skill sets to successfully complete the inventory valuation project. He/she applies these disciplines into a format consistent with the Uniform Standards of Professional Appraisal Practice. The inventory work product is then a document that provides a readable, flowing narrative, supported by appropriate factual information, leading towards the valuation conclusion. The resultant work product is thereby useful to the reader in interpreting inventory valuation concepts, collateral coverage and risk exposure, facilitating an informed review by the lending professional.