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Purchasing Process Essay

1557 words - 7 pages

Report
As a computer manufacturer and retailer, Make to Order (MOC) presents its mission as “provide value to customers through supplying quality computer equipment at a competitive price as quickly as possible”. We can see from the mission statement that Quality, Competitive Price and Just in Time (JIT) are three of the major operation goals of MOC. In addition, restricted by its size (25 staff) and the special feature of computer industry (high speed of innovation), MOC is wisely applying Zero Inventory in its supply chain to reduces cost and avoid obsolete item. Thus purchasing process plays an important role in the whole operation process. Failure to manage purchasing may lead to ...view middle of the document...

On receiving the goods, two documents (PO and delivery document) are compared against the received goods. This process helps to guarantee that ordered items are delivered and unordered ones are rejected. However, warehouse officer’s duty is to check the quantity only. Quality is somehow overlooked. This is inconsistent with MOC’s operation goals.
Operation efficiency is defined by Gelinas, Sutton and Oram (1999) as a full employment of resources. It seems that the goal is not met in MOC internally.
Firstly, it is hard not to notice that the purchase order is created in financial office rather than in purchase office. The reality in MOC is purchase officer use spread sheet to make the order and finance officer use the spread sheet to make a purchase order. As a matter of fact, purchase officer is supposed to be in charge of ordering and payment process is finance officer’s job. Besides, financial officer can play a role of checking and approving the order so as to avoid kickbacks. The input and creation of purchase order is merely a repetition of spreadsheet.
Secondly, the biggest hidden trouble in MOC purchasing process lies in the fact that it involves too much manual input. As mentioned before, purchase order’s preparation and place are completed manually; this may lead to a lot of non-value added activities once data entry error occurs.
Both of the aspect above can lead to a waste of human and IT resources.
Major strength and weakness of the internal control environment
Control goals of the information as presented by Gelinas, Sutton and Oram (1999) are to ensure input validity, completeness, accuracy and update completeness and accuracy.
Input validity can be achieved by a computerized system. The list of authorized vendors is a good example. The list is represented and approved by the management, and the purchase officer can only choose the name. This guarantees that only valid items are allowed to enter to the system. However, as we have discussed above, there is too much manual data entry. Input invalidity may be caused when entering the MOC’s item codes, quantity and the agreed price in preparing PO. The same with input completeness and accuracy, adding the number of ordered goods may leave out some needed items and affects the effectiveness and efficiency of the purchasing process and other departments as well.
Referring to update completeness and accuracy, MOC has its PO, inventory and vendor data store; they are updated as the data are entered. As long as input is correct, the validity of data update can be achieved. However, data update may go wrong because of technology or operation failure. As the relative information is not sufficient, it is hard to evaluate MOC’s update effectiveness and efficiency regarding to these aspects.
Referring to process redundancy, as mentioned before, the spread sheet can be seen as a mere repetition of PO. The function of it is no more than a purchase order. This...

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