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 year. 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 office 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 board 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: An internal order system for stores to order products from the central warehouse. A production planning system into which WLG's accountants input the sales forecast into. A point of sales system with connected head office reporting system. 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 board 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 specific 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 - In-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 Order Preformatted with columns for item #, Qty and description Prenumbered Filled in while walking around store requirements Count number of items (type) and total quantity Store inventory Requests new Internal Order Checks last order number and adds one: - extracts store inventory information Internal Order Display details via drop-down list 0-0-1 0-0 000 Selects item numbers Yes Captures items number required field Internal Order Enters quantity Captures quantity Another item? No Count number of items (type) and total quantity ordered Completed forms Total number of items (type) and quantity Compare counts Entered - Order requirements Mark form as entered Saves order and displays confirmation Counts correct? Yes Internal Order -Yes input Yes No Error routine not shown; assume correct Display saved confirmation End MELBOURNE Flowchart 2: Warehouse Picking Clerk Warehouse Computer Shipping Clerk Each Thursday morning Once there is an item in the shipping area Extract Internal Orders Internal Order B Collect order lot for shipment Picking list Create a picking list for each order (e. each store) and print Retrieve marked picking list BP- A Marked picking list Retrieve a picking list Other error: corrective control (assume effective) Cross check marked picking list against items Picking list No Internal Order Stores A Match? -No Pick available items & mark items that need to be ordered Missing items? Yes Yes Yes Extract store details Leave items in shipping area along with a marked pick list Input order number Mark items as unavailable Marked picking list Another Copy marked picking list picking list? No Copy - Marked picking - list Marked picking list End Pack goods, include marked picking list Warehouse manager's in-tray Print shipping label Retrieve and attach shipping label Place copy of marked picking list in warehouse manager's in-tray Copy - Marked picking list B Yes Another order lot? -No- End MELBOURNE Flowchart 3: Warehouse Manager Warehouse Manager Warehouse Computer Each Friday morning Retrieve copies of marked picking list from in-tray Copy - Marked picking list Requests new requirements form Extracts new requirement form; allocate next number Warehouse requirements New requirement form Item number Extract inventory details Warehouse inventory 0-1 BIOD 6-09-0 Item can be ordered - request quantity -Yes Item can be ordered? Yes Quantity Update warehouse requirements Warehouse requirements Yes No Another item? No Item not to be re-ordered Another marked picking list? No Request warehouse requirements Extract and print warehouse requirements Warehouse requirements Warehouse requirements 0-1-1. Deliver to purchase clerk Purchase clerk MELBOURNE Flowchart 4: Production Team Production Manager Production Officer Production Computer Each Thursday morning Request sales forecasts Retrieves and displays sales forecast Sales Forecast Created by the accounting department as part of the budget process Sales forecasts Requests next week's production schedule Retrieves and displays production Production schedule schedule Production schedule Request current warehouse inventory Retrieves and displays warehouse inventory Warehouse inventory Warehouse inventory Each Thursday Can assume this process works and is well controlled Approves and enters new production schedule 000-10-20-0-0 0-0-0 Works out new production schedule 11pm 10 Identifies new production orders KAProduction schedule New Bill of Calculates requirements requirements materials 11am next morning Error routine k=No assume effective Confirm requirements? -Yes Create and print manufacturing requirements Manufacturing requirements Delivers to Purchase Clerk Purchase clerk MELBOURNE Flowchart 5: Purchase Requisition Purchasing Clerk Office Manager's Computer Warehouse Manager Production Officer 0-D-D Warehouse requirements Hand delivered by 2pm each Friday Contains item #, Qty and description Manufacturing requirements Hand delivered by 2pm each Friday. Contains item #, Qty and description. New orders tray Adds warehouse requirements to manufacturing requirements Order requirements Both warehouse and manufacturing requirements Warehouse inventory Request new purchase requisition form Checks last requisition form number - adds one, extracts inventory information Purchase requisition Display new purchase requisition form via drop-down list Selects item number Captures items number required field Enters quantity Yes Captures quantity Another item? No Update data store No Completed orders Order requirements Requisition form Print requisition form General Manager's in-tray MELBOURNE Flowchart 6: General Manager General Manager General Manager's Computer Each Monday morning General Manager's in-tray Retrieves requisition forms Requisition form Preformatted with columns for item Qty and description. Pre-numbered. Sequence check Error routine not shown, assume effective Selects and read lowest number requisition Production schedule Assume effective Warehouse inventory Retrieves relevant data Identifies relevant system and data/report Sales forecast Display relevant data Sales Reports Includes sales history, sales trend, for each product category and each product - both business wide and by store. As well as inventory on hand (both warehouse and stores) Approve? No Yes Error routine (assume effective) Yes Sign form; mark as approved Approved requisition form Approved requisition form Another requisition? No End MELBOURNE Flowchart 7: Purchase Order Purchasing Officer Purchasing Officer's Computer Each Tuesday 10:30am Retrieves approved requisition form Approved requisition form Approved - requisition form Requests new purchase order Extract new purchase order form - allocate next number Purchase order Display new purchase order form Item number Extract inventory details Warehouse inventory Display vendors Identifies vendors who supply inventory item Vendors Select vendor from list Capture vendor ID bobo ih O HO DOTTO Display vendor items Extract items vendor supplies D required Yes field, numeric only, drop down list. Option to save order if additional items not available Select item number Capture item number required field, numeric only Enter quantity Capture quantity Purchase order Completed requisition form Vendors Dk Yes Another item No Save purchase order Purchase order Approved - requisition form (entered) No Warehouse inventory Another PO? Email purchase order Mark requisition form as entered No No Vendor Warehouse Close PO screen MELBOURNE Flowchart 8: Purchasing Manager Purchase Manager Purchasing Computer 3rd Monday of each month Sales orders Warehouse Inventory Create sales report Requests sales report Sales Reports Includes sales history, sales trend, for each product category and each product both business wide and by store. As well as inventory on hand (both warehouse and stores) Identify items that are not selling well Assume effective Display Sales report - low volume items non-manufactured items that are not selling well and sales history Select first item Further details of item displayed on request (not shown assume effective) Continue to stock? Update inventory - mark as not to be ordered No Not to be ordered is a seperate attribute, null (can be ordered) or Not to be ordered Warehouse inventory Yes Select next item (if any) If "yes" is selected, computer automatically displays next item until all items are chosen End c) An explanation of how management could measure the success of the ERP System implementation. Specifically, this section will: i. Identify two appropriate performance measures to assess the impact of the change. The KPIs should relate to the key examples provided above. ii. Explain how each of the measures will be calculated, and what data will be used, including how the data can be collected if necessary. measures are assess in iii. Explain why these suitable to the changes performance/information expected because of the ERP System implementation. 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 year. 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 office 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 board 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: An internal order system for stores to order products from the central warehouse. A production planning system into which WLG's accountants input the sales forecast into. A point of sales system with connected head office reporting system. 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 board 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 specific 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 - In-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 Order Preformatted with columns for item #, Qty and description Prenumbered Filled in while walking around store requirements Count number of items (type) and total quantity Store inventory Requests new Internal Order Checks last order number and adds one: - extracts store inventory information Internal Order Display details via drop-down list 0-0-1 0-0 000 Selects item numbers Yes Captures items number required field Internal Order Enters quantity Captures quantity Another item? No Count number of items (type) and total quantity ordered Completed forms Total number of items (type) and quantity Compare counts Entered - Order requirements Mark form as entered Saves order and displays confirmation Counts correct? Yes Internal Order -Yes input Yes No Error routine not shown; assume correct Display saved confirmation End MELBOURNE Flowchart 2: Warehouse Picking Clerk Warehouse Computer Shipping Clerk Each Thursday morning Once there is an item in the shipping area Extract Internal Orders Internal Order B Collect order lot for shipment Picking list Create a picking list for each order (e. each store) and print Retrieve marked picking list BP- A Marked picking list Retrieve a picking list Other error: corrective control (assume effective) Cross check marked picking list against items Picking list No Internal Order Stores A Match? -No Pick available items & mark items that need to be ordered Missing items? Yes Yes Yes Extract store details Leave items in shipping area along with a marked pick list Input order number Mark items as unavailable Marked picking list Another Copy marked picking list picking list? No Copy - Marked picking - list Marked picking list End Pack goods, include marked picking list Warehouse manager's in-tray Print shipping label Retrieve and attach shipping label Place copy of marked picking list in warehouse manager's in-tray Copy - Marked picking list B Yes Another order lot? -No- End MELBOURNE Flowchart 3: Warehouse Manager Warehouse Manager Warehouse Computer Each Friday morning Retrieve copies of marked picking list from in-tray Copy - Marked picking list Requests new requirements form Extracts new requirement form; allocate next number Warehouse requirements New requirement form Item number Extract inventory details Warehouse inventory 0-1 BIOD 6-09-0 Item can be ordered - request quantity -Yes Item can be ordered? Yes Quantity Update warehouse requirements Warehouse requirements Yes No Another item? No Item not to be re-ordered Another marked picking list? No Request warehouse requirements Extract and print warehouse requirements Warehouse requirements Warehouse requirements 0-1-1. Deliver to purchase clerk Purchase clerk MELBOURNE Flowchart 4: Production Team Production Manager Production Officer Production Computer Each Thursday morning Request sales forecasts Retrieves and displays sales forecast Sales Forecast Created by the accounting department as part of the budget process Sales forecasts Requests next week's production schedule Retrieves and displays production Production schedule schedule Production schedule Request current warehouse inventory Retrieves and displays warehouse inventory Warehouse inventory Warehouse inventory Each Thursday Can assume this process works and is well controlled Approves and enters new production schedule 000-10-20-0-0 0-0-0 Works out new production schedule 11pm 10 Identifies new production orders KAProduction schedule New Bill of Calculates requirements requirements materials 11am next morning Error routine k=No assume effective Confirm requirements? -Yes Create and print manufacturing requirements Manufacturing requirements Delivers to Purchase Clerk Purchase clerk MELBOURNE Flowchart 5: Purchase Requisition Purchasing Clerk Office Manager's Computer Warehouse Manager Production Officer 0-D-D Warehouse requirements Hand delivered by 2pm each Friday Contains item #, Qty and description Manufacturing requirements Hand delivered by 2pm each Friday. Contains item #, Qty and description. New orders tray Adds warehouse requirements to manufacturing requirements Order requirements Both warehouse and manufacturing requirements Warehouse inventory Request new purchase requisition form Checks last requisition form number - adds one, extracts inventory information Purchase requisition Display new purchase requisition form via drop-down list Selects item number Captures items number required field Enters quantity Yes Captures quantity Another item? No Update data store No Completed orders Order requirements Requisition form Print requisition form General Manager's in-tray MELBOURNE Flowchart 6: General Manager General Manager General Manager's Computer Each Monday morning General Manager's in-tray Retrieves requisition forms Requisition form Preformatted with columns for item Qty and description. Pre-numbered. Sequence check Error routine not shown, assume effective Selects and read lowest number requisition Production schedule Assume effective Warehouse inventory Retrieves relevant data Identifies relevant system and data/report Sales forecast Display relevant data Sales Reports Includes sales history, sales trend, for each product category and each product - both business wide and by store. As well as inventory on hand (both warehouse and stores) Approve? No Yes Error routine (assume effective) Yes Sign form; mark as approved Approved requisition form Approved requisition form Another requisition? No End MELBOURNE Flowchart 7: Purchase Order Purchasing Officer Purchasing Officer's Computer Each Tuesday 10:30am Retrieves approved requisition form Approved requisition form Approved - requisition form Requests new purchase order Extract new purchase order form - allocate next number Purchase order Display new purchase order form Item number Extract inventory details Warehouse inventory Display vendors Identifies vendors who supply inventory item Vendors Select vendor from list Capture vendor ID bobo ih O HO DOTTO Display vendor items Extract items vendor supplies D required Yes field, numeric only, drop down list. Option to save order if additional items not available Select item number Capture item number required field, numeric only Enter quantity Capture quantity Purchase order Completed requisition form Vendors Dk Yes Another item No Save purchase order Purchase order Approved - requisition form (entered) No Warehouse inventory Another PO? Email purchase order Mark requisition form as entered No No Vendor Warehouse Close PO screen MELBOURNE Flowchart 8: Purchasing Manager Purchase Manager Purchasing Computer 3rd Monday of each month Sales orders Warehouse Inventory Create sales report Requests sales report Sales Reports Includes sales history, sales trend, for each product category and each product both business wide and by store. As well as inventory on hand (both warehouse and stores) Identify items that are not selling well Assume effective Display Sales report - low volume items non-manufactured items that are not selling well and sales history Select first item Further details of item displayed on request (not shown assume effective) Continue to stock? Update inventory - mark as not to be ordered No Not to be ordered is a seperate attribute, null (can be ordered) or Not to be ordered Warehouse inventory Yes Select next item (if any) If "yes" is selected, computer automatically displays next item until all items are chosen End c) An explanation of how management could measure the success of the ERP System implementation. Specifically, this section will: i. Identify two appropriate performance measures to assess the impact of the change. The KPIs should relate to the key examples provided above. ii. Explain how each of the measures will be calculated, and what data will be used, including how the data can be collected if necessary. measures are assess in iii. Explain why these suitable to the changes performance/information expected because of the ERP System implementation