Case Analysis

Home Renovation Warehouse

In the Greater Toronto Area (GTA) home renovation spending is expected to rise due to affordability issue related to purchasing a larger home. A study by CIBC reported in the Financial Post (http://business.financialpost.com/personal-finance/mortgages-real-estate/renovation-spending-expected-to-rise-in-2016-as-people-just-cant-afford-to-move) shows the following information on home renovations in Canada:

Home Renovation Warehouse is expanding due to the trend in home renovation spending hoping to capture the trend and move their company from a privately held company, owned by Stephan and Sylvie Gregoire, to a larger publicly traded company. The currently have 35 locations spread across Canada but they have plans to expand into the US market as well as expand their presence across Canada.

Home Renovation Warehouse has issues that must be addressed prior to expanding. The consulting company they have hired to advise them on expansion plans requires them to have audited financial statements. In addition, they are using a periodic inventory system which is a barrier to optimizing their procurement activities. There are many times in which the wrong products are ordered resulting in surpluses in inventory and stock outs for other inventory items. This tends to frustrate the customers and the stock outs require the company to purchase higher cost products and expediting fees. The consultants have recommended the company implement a new computer system that incorporates supply chain management functionality and a perpetual inventory management system.

The Purchasing Manager, Guylaine Dumont has not taken a vacation in several

years. She is difficult to work with and the position responsible for the vendor bidding process has been vacant for 18 months. Three employees, hired into this position, have quit the company and Elaine La Fontaine has not ascertained the root cause of the issue. Guylaine is opposed to changing the inventory system as she says it is adequate for her purposes.

As the company will be competing with Home Depot and Lowes, the consultants have recommended they implement an on-line store where customers order products for either delivery to their home or take advantage of in-store pickup. Currently their stores do not have an appropriate physical design for in-store pickup, so the current 35 stores require renovation to accommodate this new business process. The expertise to design this business process does not currently reside within the corporation. The Sales Manager is also not in favor of implementing new computer systems as this is not an area of expertise for him.

To support the expanding business, it is recommended for the company to implement an ERP system however the owners are not familiar with the benefits of an ERP nor do they have knowledge of the steps they should take to implement as system of this nature. Sylvie Gregoire is in favor of implementing new computer systems as she views this as a necessary event to support the expansion plans.

Their current organization chart showing key positions is displayed below:

The company has decided to implement their new ERP system and in parallel to that activity, design the on-line shopping experience. The company will go public to raise the necessary capital necessary to pay for the new systems, on-line shopping experience, and the planned business expansion. Audited financial statements are a new experience for the organization.

Instructions:

Using the case method taught in class (three steps approach of the case analysis), identify three events in the case (3X2= 6 marks) (write response in text box# 1), analyze the events that you have identified as part of the step 1 using the suggested or any other appropriate management models (3X 5 =15 marks) (write response in text box#2), and make recommendations to Home Renovation Warehouse's management to improve their efficiency and effectiveness (3X3 =9 marks) (write response in text box#3).

In the analysis and recommendations, be sure that of relating at least one of the management models other than COSO ERM. You are not limited to discussing topics represented by the models below. You can use any managemnt model covered in INFO31787 that you think relevant and informing.

Name: _________________________________________________-

Segregation of Accounting Duties

Risk Assessment and Response

COBIT - Standard in NA for IT Management

ITIL - IT Services Standard

Name: _________________________________________________-

Networking, LAN and WAN

Systems Availability

Virtual Private Network/ Encryption

ERP Design

COSO ERM

Defense in Depth

Trust Services Framework

Name: _________________________________________________-

Authentication and Authorization

Functions of Controls

Encryption

Data Processing Cycle

Systems Development Life Cycle

Fraud Triangles