CASE STUDIES CASE A: Office Warehouse, Inc. (Order entry) Office Warehouse, Inc....

CASE STUDIES

CASE A: Office Warehouse, Inc. (Order entry)

Office Warehouse, Inc. is a wholesale distributor of office supplies, such as disks, stationery, file cabinets, and related items. Customers receive an updated catalog annually and place orders over the phone.

When a customer calls in with an order, a clerk asks for the customer ID and name. The clerk keys in the customer number, and the computer retrieves the customer record from the customer database and displays it on the clerk’s screen. The clerk compares the customer name to the data on the screen to ensure that the customer is legitimate. If everything checks out, the clerk enters the customer’s order. After the order is entered, the computer compares the amount of the order to the available credit to ensure that the purchase does not exceed the credit amount limit.

This results in the creation of an entry in the sales event data store and an allocation of inventory. At the end of the day, the sales event data is processed against the customer data and the inventory data, and the sales order is recorded in the sales order master data store. At the same time, a customer acknowledgement is printed in the mailroom and is mailed to the customer. Also, a picking ticket is printed in the warehouse and will be used to assemble the customer’s order.

CASE B: Office Warehouse, Inc. (Shipping)

Before starting this case, review the facts of Case A and see that a picking ticket has been printed in the warehouse and will be used to assemble the customer’s order. The completed order (goods and attached picking ticket) is forwarded to the shipping department. The shipping clerk keys the sales order number into the computer, and the order is displayed on the screen. The shipping clerk keys in the items and quantities being shipped, and after the computer displays the shipment data, the clerk accepts the input. After the shipment is accepted, the computer updates the sales order and inventory master data and creates a record for billing (in the billing-due list data store). The computer also prints a packing slip and bill of lading on a printer in the shipping department. These shipping documents and the goods are given to the carrier for shipment to the customer.

CASE C: Bondstreet Company (Order entry and shipping)

The Bondstreet Company sells medical supplies to hospitals, clinics, and doctors’ offices. Customers place orders over the phone to the Bondstreet customer fulfillment center. Bondstreet uses an ERP system for all of its business processes.

The sales process starts when the customer calls the Bondstreet fulfillment center and gives his name to the CSR. The CSR keys the customer name into the ERP system, and the system retrieves the customer record and displays that data on the sales order entry screen. The CSR examines the data on the screen to ensure that the correct record has been retrieved. If everything checks out, the CSR enters the items and quantities being requested by the customer. As the order is entered, the computer compares the amount of the order to the available credit to ensure that the purchase does not exceed the credit amount limit and allocates the inventory. After the order has been entered, the clerk saves the order, and the computer creates a sales order record, prints a picking ticket in the warehouse, and displays the sales order number to the CSR. The CSR reads the sales order number to the customer.

In the warehouse, clerks pick the goods from the shelf, record the quantity picked and the lot number on the picking ticket, and bring the goods and attached picking ticket to the shipping department. The shipping clerk scans the sales order number from the picking ticket, and the computer displays the order on the screen. The shipping clerk then scans each item and saves the shipment data. The computer updates the sales order and inventory master data (for lot number and quantity shipped) and creates a record for billing (in the billing-due list data store). The computer also prints a packing slip on a printer in the shipping department that the shipping clerk attaches to the goods and gives the goods to the carrier for shipment to the customer.

CASE D: Polis Grocers, Inc. (Customer order and delivery)

Polis Grocers is an online grocery service that provides home delivery of groceries purchased via the Internet. Polis operates in the greater Chicago area and provides delivery to precertified customers. To be certified, the customer must have a user account with an established credit or charge line and rent a refrigerated unit to store delivered goods at their residence should they not be home at the time of delivery.

To enter an order, the customer must log on to the Polis Web site with a user name and password. Using the customer database, the system confirms that the customer has a refrigerator unit in place and that the customer is in good standing. Once approved, the customer can browse the product list that is generated from the inventory database and add items to the shopping cart. When finished, the customer proceeds to the checkout screen to authorize the billing amount to be charged to her account. When the order is submitted, items are allocated in the inventory database, and a new order is recorded in the order database.

In the warehouse, a clerk downloads an outstanding order from the order database to a handheld computer. The downloaded order provides an electronic picking ticket for use in assembling the customer’s order. The clerk reads the order from the handheld computer screen, picks the goods, and scans each item as it is placed in a box. As each item is scanned, the computer updates the inventory and order databases. When the order is completed, the clerk presses a button on the handheld, and the computer prints a barcode on the handheld computer. The clerk attaches the barcode to the outside of the box and places the order on a conveyor belt to delivery services.

In delivery services, the delivery person uses another handheld device to read the barcode and access the sales order information from the order database. The items in the box are rechecked per the order and loaded for delivery to the customer. Keying in the confirmation of the order contents by the delivery person triggers the printing of delivery directions and receipt. Upon delivering the groceries and receipt to the customer, the delivery person once again reads the barcode with the handheld device and presses the button for confirmation of delivery. The completion of the delivery is automatically recorded in the order database. The system at this time also updates the customer’s master data for billing purposes.

The following is a list of 12 control plans from this chapter or from Chapters 8 and 9.

Control Plans

A. Enter customer order close to where customer order is prepared

B. Turnaround document

C. Independent shipping authorization

D. Populate input screens with master data

E. One-for-one checking of the goods, picking ticket, and sales order

F. Preformatted screens

G. Confirm input acceptance

H. Reasonableness check

I. Backup procedures (for data)

J. Program change controls

K. Digital signature

L. Personnel termination controls

The following are 10 system failures that have control implications.

System Failures

1. Bob Kyte, a former employee of the Saunders Company, gained access to the order entry department after hours and logged on to the system using his old user ID. He entered an order for a legitimate customer but instructed the system to ship the goods to his home address.

2. Acme Inc.’s field salespeople record customer orders on prenumbered order forms and then forward the forms to central headquarters for processing. Frank Rosen, one of Acme’s top salespeople, mailed 40 customer orders to headquarters on one Friday afternoon. Unfortunately, they were misplaced in the mail and did not reach headquarters until two weeks later.

3. At Medford Company, clerks key order data into the order entry system at one of several PCs. In the first week of operations of this system, every sales order produced by the computer was missing the data for the “ship-to” address.

4. At Richmond, Inc., the finished goods warehouse delivers goods to the shipping department, accompanied by the picking ticket. Then the shipping department prepares a packing slip. A recent audit discovered that a dishonest warehouse employee had been forging picking ticket documents, allowing him to have goods shipped to an accomplice.

5. The job of Gladys, a programmer at Tolland, Inc., included doing maintenance programming for the order entry application. Gladys altered the programs so that the credit-checking routine was bypassed for one of the customers, a company owned by her uncle.

6. After receiving goods from the warehouse, with attached picking ticket, shipping clerks at Sandisfield Company key in the sales order number, item numbers, and quantities. The computer then records the picking ticket data and prints a packing slip. Customers have been complaining that the packing slip is not accurate as to items and quantities.

7. Clerks in the shipping department at Quincy, Inc. scan picking tickets to bring up the appropriate open sales order and then scan another bar code on the picking ticket to trigger the recording of the shipment. They then prepare a packing slip, attach it to the box, and put the box on the conveyer to the loading dock. They have discovered that some shipments are not being recorded by the system.

8. Customers of LaFond Company have complained that the goods received are not accurate. Sometimes they receive the wrong goods and sometimes the wrong quantity.

9. Becket Company receives orders from established customers over the Internet. Recently the company has received a number of orders from individuals masquerading as legitimate customers.

10. A recent audit of the order-entry process at Stamford Company determined that the clerks were making many errors in entering data such as the customer’s name and address from the customer order documents.

Match the 10 system failures with a control plan that would best prevent the system failure from occurring. Write one or two sentences explaining each answer. Because there are 12 control plans, you should have two letters left over.