grb-038458-sa draft 2.0

8/7/2019 GRB-038458-SA Draft 2.0

http://slidepdf.com/reader/full/grb-038458-sa-draft-20 1/16

Aussie Safe Sunshine Wear

Analysis of Purchasing

System

Name

Dated

8/7/2019 GRB-038458-SA Draft 2.0


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

8/7/2019 GRB-038458-SA Draft 2.0


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.

8/7/2019 GRB-038458-SA Draft 2.0


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.

8/7/2019 GRB-038458-SA Draft 2.0


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

8/7/2019 GRB-038458-SA Draft 2.0


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

8/7/2019 GRB-038458-SA Draft 2.0


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:

8/7/2019 GRB-038458-SA Draft 2.0


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.

8/7/2019 GRB-038458-SA Draft 2.0


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.

8/7/2019 GRB-038458-SA Draft 2.0


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.

8/7/2019 GRB-038458-SA Draft 2.0


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.

8/7/2019 GRB-038458-SA Draft 2.0


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.

8/7/2019 GRB-038458-SA Draft 2.0


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

8/7/2019 GRB-038458-SA Draft 2.0


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

8/7/2019 GRB-038458-SA Draft 2.0


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

8/7/2019 GRB-038458-SA Draft 2.0


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

grb-038458-sa draft 2.0

Documents