AB Hi-Fi expenditure cycle

AB Hi-Fi is a multi-store retail business that sells products such as DVDs, CDs, mp3 players, game consoles and TVs. AB Hi-Fi has a central warehouse that is located in Melbourne. All products purchased by the busi ness are delivered to this central warehouse. The narrative of the AB Hi-Fi expenditure cycle follows.

Process 1.0 Determine demand for goods

Purchase officers at AB Hi-Fi monitor stock levels via the computer. The computer has predefined reorder points and reorder quantities for each inventory item. When stock levels for a particular item drop down to this reorder point a purchase requisition is automatically generated by the computer and forwarded via email to the purchase officer responsible for these items. The purchase officer is responsible for reviewing sales trends for this item and deciding whether to reorder the goods listed on the purchase requisition. The pur chase officer can cancel the order if they feel that the goods are not worth reordering, amend the purchase requisition if they think that the quantity is too high or too low, or accept the requisition without change. Once the purchase officer has made a decision about the purchase requisition, they log on to the computer and open the purchase requisition. They make any changes required to the quantities and products on the pur chase requisition, and then mark the requisition as complete by ticking on a check box. The completed purchase requisition is then sent via email to the purchasing manager for review. The purchasing manager logs on to the computer and opens the purchase requisition. The purchasing man ager is offered a choice of two tick boxes for each open purchase requisition. If the manager selects the 'reject' box. the purchase requisition is cancelled and no further action is taken. If the purchasing man ager selects the 'accept' box. an email is sent to the purchase officer informing them that the purchase requisition has been approved.

Required (a) Identify and explain TWO risks for Determine demand process at AB Hi-Fi. (b) Recommend and Explain TWO changes you would like to make to the Determine demand process at AB Hi-Fi in order to reduce their level of risk.