Case

Allergic skin reactions to clothing is most often a result of the formaldehyde finishing resins, dyes, glues, chemical additives and tanning agents used in processing the fabric or clothing. Aussie Health Clothing produces a range of clothes, including bedding, underwear, blouses and shirts etc., that provide relief for persons with allergies. After a period of sustained growth the existing purchasing system was unable to cope efficiently with the volume of transactions and a redesigned system has been proposed. An external consultant has been employed to evaluate this proposed redesign. The new system will have a materials inventory master file, an open purchase order master file and a supplier history file. The inputs to the system will include materials inventory receipts and issues transactions which will be entered online in the user departments. The outputs from the system will include purchase order batches, periodic reports of deliveries overdue and cash flow commitments. The software modules that are separate from the main updating software will create these reports. Functional managers can access this information by conducting on-line queries. The main updating software reviews a transaction to determine if it is a receipt or an issue and then updates the appropriate inventory master record. With each issue transaction the software will check the quantity in the master inventory record. If the inventory level falls below a reorder point, a reorder record will be written to a temporary file. This file will be processed at the end of every day to prepare purchase orders. With each inventory receipt transaction the software will update the inventory level and the open purchase order and supplier history files. The purchase order software module will process the temporary reorder file by firstly reorganising the records by supplier code number. All the reorder records for a particular supplier will collated into a single purchase order and the EDI system will create and transmit this single purchase order to the supplier. This purchase order will also be added to the open purchase order file. This file is processed every day and a report is created that identifies the purchase orders for which the delivery date has passed. At month-end the supplier history file and open purchase file are processed to create the supplier performance and the cash flow commitments reports.

Requirement 1: (20 marks)

From the information presented in the case complete the following:

- A separate systems flowchart for each of the three subsystems that make up the purchasing system, i.e.

Inventory Update,

Purchase Order Preparation

Report Preparation

- A data flow diagram at Level 0 for the purchasing system.

Requirement 2: (10 Marks)

Identify any deficiencies in system (if any) and the information needs for effective management of the purchasing system in particular and the expenditure cycle in general.

Requirement 3: (10 marks)

Make recommendations and suggestions to management to make the system more efficient and/or make improvements you see as appropriate. In doing so, you should consider adopting recent advances in information systems in one or two technologies.