Case Overview Walker Leather Goods (WLG) manufactures a range of high quality traditional Australian leather goods (boots, hats, belts bag, etc.). It also sells a range of associated clothing and accessories, which are sourced from other suppliers. WLG's sales are predominantly made through a range of stores across the country, and an online offering (that functions as a dark store). WLG has a turnover of around $45 million per yea r. The business is family-owned and run; the patriarch of the family, John Walker, has recently stepped down as the General Manager after running the business for 40 years. John was regarded as very hands-on and traditional in his ways, with an attitude of: \"if it ain't broke, don't fix it\". John's sons and daughters have had success over the years in opening the stores and expanding online, effectively updating the sales process. However, John has maintained control in the head office, which is attached to the factory and warehouse. As a result, WLG's purchasing process is largely manual as it was centralised in head ofce and involves separate systems. Sarah Walker, John's granddaughter, has just been appointed as General Manager and is looking at updating WLG's system and purchase a new Enterprise Resource Planning System (ERP System), to replace the current antiquated independent systems. However, due to the size of the purchase, she needs the approval of the boa rd before proceeding. The board is still chaired by John, and the other 4 members are his sons and daughters. Sarah has hired your team as consultants to help convince the board that they should adopt the new ERP System to help streamline the purchase process. Currently, WLG uses a series of independent systems, including: 0 An internal order system for stores to order products from the central warehouse. o A production planning system into which WLG's accountants input the sales forecast into. 0 A point of sales system with connected head office reporting system. 0 A warehouse inventory management system, which the production planning system has access to. Sarah believes that a majority of the board can be convinced to support the purchase of an ERP System if your team can explain how WLG's accounting information can be improved by the introduction of an ERP System and the associated controls. She believes that it is important, however, to highlight any strengths of the current process so it is not seen as an attack on her grandfather, which may result in the boa rd voting against the proposal. Effectively, Sarah has asked your team to assess the strengths and weaknesses of WLG's purchase process. Based on this assessment, you need to identify how an ERP System will improve WLG's accounting information. This should be done by identifying how an ERP System will enhance both WLG's operational goals\" and information quality (VAC) of WLG's accounting information. Sarah is not looking for your team to fix specic issues (e.g. data entry risks) in the purchase process, rather how an ERP System can be used to improve the accounting information as a whole, with two key examples to support your argument. *this is the standard expenditure cycle primary goal. Your team has been supplied with the following diagrams to conduct your analysis: ' Flowchart 1 ln-Store ' Flowchart 2 Warehouse ' Flowchart 3 Warehouse Manager ' Flowchart 4 The Production Team ' Flowchart 5 Purchase Requisition ' Flowchart 6 General Manager ' Flowchart 7 Purchase Order ' Flowchart 8 Purchasing Manager MELBOURNE Flowchart 1: In-Store Store Manager Store Computer Each Wednesday Preformatted with columns for item # Qty and description Order Prenumbered requirements Filled in while walking around store Count number of items (type) and total quantity Store Checks last order inventory Requests new number and adds one; Internal Order extracts store nventory information Internal Order Display details via drop-down Selects item list numbers Yes Captures items number required Internal field Enters quantity Order Captures quantity Another item? Count number of -No items (type) and total Completed quantity ordered forms Total number of tems (type) and quantity Entered - Order Compare counts requirements Saves order and Mark form as Counts entered Yes correct? Yes input Yes displays confirmation Internal Order Error routine No not shown assume correct Display saved confirmation EndMELBOURNE Flowchart 2: Warehouse Picking Clerk Warehouse Computer Shipping Clerk Each Thursday Once there is an morning item in the shipping area Extract Internal Internal Collect order Orders Order lot for B shipment Picking list Create a picking list for each order (i.e. Retrieve marked each store) and print picking list A Retrieve a picking Marked picking list list Other error: Cross check corrective Picking list marked control picking list assume against items effective) No Pick available items & mark Internal Order Stores Missing Yes items that Match? -No items? need to be ordered Yes Yes Leave items in shipping area along Extract store details Input order Mark items as with a marked number unavailable pick list Copy marked Marked picking list Another picking list? picking list No Copy - Marked picking st End Marked picking list Pack goods, include marked picking list Warehouse manager's Retrieve and in-tray Print shipping label attach shipping label Place copy of marked picking list in Copy - Marked warehouse picking list B manager's in-tray Yes- Another order lot? No- EndMELB Flowchart 3: Warehouse Manager Warehouse Manager Warehouse Computer Each Friday morning Retrieve copies of Copy - Marked marked picking list from in-tray picking list Extracts new Requests new requirement form; Warehouse requirements form allocate next requirements number New requirement form Extract inventory Item number Warehouse details inventory Item can be ordered - request _Yes item can be quantity ordered? Yes Update warehouse Quantity Warehouse requirements requirements Yes No Another item? No Item not to be re-ordered Another marked picking list? No Request Extract and print warehouse warehouse Warehouse requirements requirements requirements Warehouse requirements Deliver to purchase clerk Purchase clerkMELBOURNE Flowchart 4: Production Team Production Manager Production Officer Production Computer Each Thursday morning Created by the Request sales Retrieves and displays sales Sales accounting forecasts Forecast department as forecast part of the budget process Sales forecasts Requests next Retrieves and week's production displays production Production schedule schedule schedule Production schedule Request current Retrieves and warehouse displays warehouse Warehouse inventory inventory nventory Warehouse inventory Can assume Approves and this process enters new Works out new Each Thursday works and is production production 11pm well controlled schedule schedule Identifies new production orders Production schedule New Calculates Bill of requirements requirements materials 11am next morning Error routine Confirm Create and print assume No- requirements? Yes manufacturing effective requirements Manufacturing requirements Delivers to Purchase Clerk Purchase clerkMELBOURNE Flowchart 5: Purchase Requisition Purchasing Clerk Office Manager's Computer Warehouse Manager Production Officer Hand delivered by 2pm each Hand delivered Warehouse Friday. Manufacturing by 2pm each requirements Contains item requirements Friday. Contains #, Qty and item #, Qty and description description. New orders tray Adds warehouse requirements to manufacturing requirements Order Both warehouse requirements and manufacturing requirements Warehouse inventory Checks last Request new requisition form purchase number - adds one, requisition form extracts inventory information Purchase Display new requisition purchase requisition form via drop-down list Selects item Captures items number number required Yes field Enters quantity Captures quantity Another item? -No Update data store No Completed orders Order requirements Requisition form Print requisition form General Manager's in-trayEach Mondayr morning Retrieves requisition forms Requisition form Sequence checks Selects and read lowest number requisition Retrieves relevant data Display relevant data Sign form; mark as approved Approved - requisition iorrn Another requisition? General Manager's in-tray Prefer-matted with columns for item #1. Qty and description. Pre-numbererl. Error routine (assume effective) Approved requisition form Flowchart 6: General Manager Identies relevant system and dataJreport Production schedule Warehouse inventory General Manager General Manager's Computer Includes sales history: sales trend. for each product category and each product - loom business wide and by store. As well as invenlioryI on hand [both warehouse and stores] MELBOURNE Flowchart 7: Purchase Order Purchasing Officer Purchasing Officer's Computer Each Tuesday Approved 10:30am Retrieves approved requisition form requisition form Approved - requisition form Extract new Requests new purchase order Purchase purchase order form - allocate next order number Display new purchase order form Item number Extract inventory Warehouse details nventory Identifies vendors Display vendors who supply Vendors inventory item Select vendor from list Capture vendor ID Display vendor Extract items items vendor supplies required Yes field, numeric only, drop D down list. Option to Select item Capture item save order if number number additional items not available required field numeric Enter quantity Capture quantity only Completed Purchase order requisition form Vendors D Yes- Another item No Save purchase order Purchase order Approved requisition form No (entered) Warehouse inventory Another PO? Email purchase order Mark requisition form as entered No NO Close PO screen Vendor WarehouseMELBOURNE Flowchart 8: Purchasing Manager Purchase Manager Purchasing Computer 3rd Monday of Sales Warehouse each month orders Inventory Includes sales history, sales trend, for each product category Requests sales Create sales report Sales and each product - both Reports business wide and by store. As report well as inventory on hand (both warehouse and stores) Identify items that are not Assume selling well ffective Display Sales report - non-manufactured low volume items that are not items selling well and sales history Further details Select first item of item displayed on request (not shown assume effective) Not to be ordered is a Continue Update inventory - Warehouse seperate attribute, null to stock? -No mark as not to be ordered inventory (can be ordered) or Not to be ordered Yes If "yes" is selected, computer Select next item (if automatically displays next any) item until all items are chosen Endb) Using WLG's purchase process, explain how WLG accounting information can be improved by the introduction of an ERP System. This is to be done by explaining how the use of an ERP System, and the associated controls, will help improve information reliability (i.e. Validity, Accuracy and Completeness) and achieve the primary goals of the purchase process. This section should: i) Be supported by providing two (key) examples of how WLGs purchase process can be improved through process improvements or controls resulting from the introduction of an ERP. The examples should be broad, in that they should be able to be replicated and/or applied in different parts of the process. You are NOT asked to provide a specic improvement in a single subprocess. ii) Address the concern around the cost of implementation, and other issues relating to the implementation of an ERP system that you identify