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Aussie Safe Sunshine Wear
Analysis of Purchasing
System
Name
Dated
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TABLE OF CONTENTS
EXECUTIVE SUMMARY ................................ ................................ ................................ .......................... 3
INTRODUCTION ................................ ................................ ................................ ................................ ....... 4
Background................................ ................................ ................................ ................................ .............. 4
Aim of the Report ................................ ................................ ................................ ................................ .... 4
Scope ................................ ................................ ................................ ................................ ....................... 4
COMPONENTS OF THE PROPOSED DESIGN ................................ ................................ ......................... 5
Purchasing system Flowchart ................................ ................................ ................................ ................... 5
Purchasing System Data Flow Diagram................................ ................................ ................................ .... 6
EFFECTS OF THE PROPOSED DESIGN ................................ ................................ ................................ ... 6
EDI related threats ................................ ................................ ................................ ................................ ... 7
Information for effective Management Control................................ ................................ ......................... 7
DISCUSSION OF FINDINGS ................................ ................................ ................................ ..................... 9
Just-In-Time (JIT) ................................ ................................ ................................ ................................ .... 9
Advantages of JIT ................................ ................................ ................................ ................................ .... 9
Disadvantages of JIT................................ ................................ ................................ .............................. 10
IMPORTANCE AND BENEFITS OF ANALYSING TOOLS ................................ ................................ ... 11
Narrative Description ................................ ................................ ................................ ............................. 11
Diagramming Tools ................................ ................................ ................................ ............................... 12
CONCLUSIONS ................................ ................................ ................................ ................................ ....... 13
ROCOMMENDATIONS ................................ ................................ ................................ ........................... 15
REFERENCES ................................ ................................ ................................ ................................ .......... 16
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EXECUTIVE SUMMARY
This report is based on the system used by Aussie Safe Sunshine wear. The report focuses on
finding possible deficiencies of the redesign system. Also, outline the information needed for
effective purchasing system management and expenditure cycle in general.
Recommendation have been made that if implemented should maximize the efficiency of the
system. These include other alternatives systems.
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INTRODUCTION
Background
Aussie Safe Sunshine Wear was established to manufacture a range of fashionable clothes that
provided protection from the sun in tropical states and countries. After a period of sustained growth
the existing purchasing system was unable to cope efficiently with the volume of transactions and
the system was redesign.
Aim of the Report
This report is basically the evaluation of the redesigned system of the company. The aim is to
explain the new system and check it thoroughly. This report highlights the advantages of the new
system and exposes the disadvantages or any flaws in the new system.
Scope
The scope of this report is very wide as it will be used by the company to guide their employees
about the system. This report will also be used in future for the maintenance or up gradation of the
system. For the future this will be an asset to the company in their database department.
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COMPONENTS OF THE PROPOSED DESIGN
Purchasing system Flowchart
Inventory
Check shows
Complete
Purchase
Send PR to
Purchasing
Incorrect PR
form returned
Correct and
Send back
Receive PR
Is form
correctl
Return
to
Complete
Purchase Order
Send PO to
Supplier
Receive
Purchase
Supply GoodsReceive Goods
Person making Purchasing Supplier
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Purchasing System Data Flow Diagram
Management Supplier
5.1 Report
Request
Distributor
5.2
Generate
ReportPurchase
Order
Slide Order
Inventory
Accounts
Products
Production
Report
DataFlow2
Report Current
information
Report
Current
Information
Report
Current
Information
Report Current
Information
Report Current Information
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EFFECTS OF THE PROPOSED DESIGN
EDI related threats
Electronic Data Interchange (EDI) can be formally defined as 'the transfer of structured data, by
agreed message standards, from one computer system to another without human intervention¶. It
represents the application of computer and communications technology to traditional paper-based
business processes, supporting innovative changes in those processes. It involves the exchange and
transmittal of business documents, such as invoices, purchase orders and shipping notices, in a
standard, machine process able format.
Although EDI has created a number of changes in the way commerce is conducted and has offered
significant opportunities, it also has attracted new threats and potential exposures and increased the
seriousness of some existing problems. Some examples of these are described below.
� Absence of Human Intervention: this is often seen as an advantage, since computers can perform
repetitive tasks more quickly and consistently than humans. From a security viewpoint, however,
the removal of humans from the process also removes a degree of protection, since the computers
are incapable of applying curiosity or common sense to instructions.
Paperless Trading: the absence of paper from the electronic equipment.
Information for effective Management Control
An effective organization is one where managers understand how to manage and the control
systems help motivate and direct employees in their roles. Understanding organizational control
systems is essential for the long-term effectiveness of an organization. Without enough control
systems in place, confusion and chaos can overwhelm a company. However, if control systems are
"choking" an organization, the company will suffer from erosion of innovation and
entrepreneurship. The features of a basic management control system including:
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y Planning
y Measurement of goals
y Feedback
y Evaluation
y Reward subsystems
The first element is the characteristic or condition of the operating system which is to be measured.
We select a specific characteristic because a correlation exists between it and how the system is
performing. The characteristic may be the output of the system during any stage of processing or it
may be a condition that has resulted from the output of the system. For example, it may be the heat
energy produced by the furnace or the temperature in the room which has changed because of the
heat generated by the furnace. In an elementary school system, the hours a teacher works or the gain
in knowledge demonstrated by the students on a national examination are examples of
characteristics that may be selected for measurement, or control. The second element of control,
the sensor, is a means for measuring the characteristic or condition. The control subsystem must be
designed to include a sensory device or method of measurement. In a home heating system this
device would be the thermostat, and in a quality-control system this measurement might be
performed by a visual inspection of the product.
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DISCUSSION OF FINDINGS
Just-In-Time (JIT)
Just in time is a µpull¶ system of production, so actual orders provide a signal for when a product
should be manufactured. Demand-pull enables a firm to produce only what is required, in the
correct quantity and at the correct time.
This means that stock levels of raw materials, components, work in progress and finished goods can
be kept to a minimum. This requires a carefully planned scheduling and flow of resources through
the production process. Modern manufacturing firms use sophisticated production scheduling
software to plan production for each period of time, which includes ordering the correct stock.
Information is exchanged with suppliers and customers through EDI (Electronic Data Interchange)
to help ensure that every detail is correct.
Supplies are delivered right to the production line only when they are needed. For example, a car
manufacturing plant might receive exactly the right number and type of tires for one day¶s
production, and the supplier would be expected to deliver them to the correct loading bay on the
production line within a very narrow time slot.
Advantages of JIT
y Lower stock holding means a reduction in storage space which saves rent and insurance
costs.
y As stock is only obtained when it is needed, less working capital is tied up in stock.
y There is less likelihood of stock perishing, becoming obsolete or out of date.
y Avoids the build-up of unsold finished product that can occur with sudden changes in
demand.
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y Less time is spent on checking and re-working the product of others as the emphasis is on
getting the work right first time.
Disadvantages of JIT
y There is little room for mistakes as minimal stock is kept for re-working faulty product.
y Production is very reliant on suppliers and if stock is not delivered on time, the whole
production schedule can be delayed.
y There is no spare finished product available to meet unexpected orders, because all products
is made to meet actual orders ± however, JIT is a very responsive method of production.
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IMPOR TANCE AND BENEFITS OF ANALYSING TOOLS
Narrative Description
The injunction to read the documentation has a long and colorful history. Users are berated and
insulted for not having consulted the documentation, but, in many cases, the user can hardly be
blamed. The documentation is shoddy, incomplete, and badly organized, if it's present at all.
Exceptions are becoming rarer and rarer.
As documentation decreases in quality, users stop turning to it. As users stop turning to it,
companies stop trying to maintain it -- why bother, if the users won't read it? This line of reasoning
is dooming the future of documentation to failure. Documentation is important and needs to be
taken seriously.
A disturbing trend is illustrated by video games which ship with woefully incomplete manuals,
relying on a separately sold strategy guide to include charts, tables, and other fundamental
information. This reliance probably comes down to the financial implications of the words
"separately sold." One sometimes wonders whether productivity software would have better
documentation if the market for third-party books about it weren't so lucrative.
Some documentation is actually pretty good. Apple's diagrams and instructions for memory
upgrades and the like are second to none. But I see very little how-do-I-use-it documentation
anymore.
This situation is much, much worse when it comes to application software. It may be reasonable to
assume that most users can figure out how to use a mouse (not just use it like a microphone to order
the computer around) or at least be taught how to use it. On the other hand, applications almost
always involve a great deal of undiscovered knowledge and new material. Each application is doing
a new kind of thing -- it requires that the user be exposed to its abilities in some way.
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Diagramming Tools
Causes in a cause & effect diagram are frequently arranged into four major categories. While these
categories can be anything, you will often see:
y Manpower, methods, materials, and machinery (recommended for manufacturing)
y Equipment, policies, procedures, and people (recommended for administration and service).
These guidelines can be helpful but should not be used if they limit the diagram or are
inappropriate. The categories you use should suit your needs. At SkyMark, we often create the
branches of the cause and effect tree from the titles of the affinity sets in a preceding affinity
diagram.
The C&E diagram is also known as the fishbone diagram because it was drawn to resemble the
skeleton of a fish, with the main causal categories drawn as "bones" attached to the spine of the
fish, as shown below.
Cause & effect diagrams can also be drawn as tree diagrams, resembling a tree turned on its side.
From a single outcome or trunk, branches extend that represent major categories of inputs or causes
that create that single outcome. These large branches then lead to smaller and smaller branches of
causes all the way down to twigs at the ends. The tree structure has an advantage over the fishbone-
style diagram. As a fishbone diagram becomes more and more complex, it becomes difficult to find
and compare items that are the same distance from the effect because they are dispersed over the
diagram. With the tree structure, all items on the same causal level are aligned vertically.
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CONCLUSIONS
While knowing what IT assets are in use and how they are configured may seem like mundane
issues, it is vital to both the financial health of the IT organization and its operational performance.
Not knowing what we have is costly. In fact, I¶ve had vendors tell on more than one occasion that
they make their money by knowing what assets we own better than we do and selling us more than
we really need (they usually confess this after they are no longer selling to me). An asset
management system is an important, foundational piece of the overall systems necessary to manage
IT infrastructure. Without a good asset management system the organization will waste time and
resources managing inventory, buying unnecessary equipment and software, and maintaining
license compliance for software. With a functioning asset management system the organization can
expect to reduce the total cost of ownership for IT infrastructure and provide a solid foundation for
the operational system necessary to keep the infrastructure operating efficiently.
Recommendations
It is recommended that Aussie Safe Sunshine Wear should use the JIT approach for their inventory.
For this they just need to first get a reliable supplier partner who understands the need of their
company for providing the complete visibility of the goods in transit. Once they are to get the
reliable supplier partner, further implementation of the JIT approach would be easier and certainly
would add benefits to the company. The balance between the too much and too little inventory
would make their inventory stocks to a considerable reduced amount and at the same time meet
their customers¶ demands adequately. Further benefits associated with the JIT inventory strategy
include the reduction in incurring the storage costs during recession times when the customers
spending declines. Also there is the risk of the inventory getting obsolete if the stock is accumulated
for longer periods of time. With only a few risks associated with the JIT approach, and these risks
also in a way add to the benefits of the company. The employees work more diligently to work in
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the available inventory. They would maximize their efficiency. The supplier would also make its
strong network for supplying the materials on time to maintain its reliability status in the minds of
its customers.
It is recommended that the Aussie Safe Sunshine Wear should use an Enterprise Resource Planning
(ERP) for its data storage. This would help the cross departments know what is going on in other
departments with which the other departments would be able to make informed decisions and take
steps to carry out their duties. Only a careful selection of the ERP system should be done that fits
with the requirements of the company. Also the system would help them to maintain the records
throughout the production process. The staff would be able to report more accurate delivery times
to their customers thus meeting the demands more accurately.
Reference: Bailey, M 2009, MRP Why you need it and what it, page 35
Bailey, M 2009, MRP Why you need it and what it, page 36
Together with the application of ERP system and JIT inventory strategy the company would be able
to meet the demands of the customers more accurately and more efficiently. There would be lesser
lags in the whole process from purchasing the raw materials to the delivery of the fashion wear
clothes to their customers. The ERP system would help the company to keep the tracks of the
transactions all available at one platform which would help the office staff to forecast the future
demands, know the trends of the customer demands and then be able to provide what the customer
actually needs.
Reference: Carleton, G 2011, p 35
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RECOMMENDATIONS
1. Budget to actual comparison
2. Current to prior period comparison
3. Performance indicators
4. Follow-up on unexpected results or unusual items
5. Security of physical and intellectual assets
6. Physical safeguards
7. Perpetual records are maintained
8. Periodic counts/physical inventories
9. Compare counts to perpetual records
10. Investigate/correct difference
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REFERENCES
1. Purchase order System, Link:
http://www.conman.ualberta.ca/stellent/groups/public/@finance/documents/procedure/pp_cmp_
054572.hcsp
2. Purchasing System, Link:
http://www.answers.com/topic/purchasing-system
3. Procurement, Link:
http://en.wikipedia.org/wiki/Procurement
4. Content management system, Link:
http://en.wikipedia.org/wiki/Content_management_system
5. Management, Link:
http://www.iso.org/iso/iso_catalogue/management_standards/management_system_basics