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Fashion Limited is a retailer of ladies clothing and accessories. It operates in many countries around the world and has expanded steadily from its base
Fashion Limited is a retailer of ladies clothing and accessories. It operates in many countries around the world and has expanded steadily from its base in Europe. Its main market is aimed at to year olds and its prices are mid to low range. The companys year end was September.
In the past the company has bulk ordered its clothing and accessories twice a year. However, if their goods failed to meet the key fashion trends then this resulted in significant inventory write downs. As a result of this the company has recently introduced a just in time ordering system. The fashion buyers make an assessment nine months in advance as to what the key trends are likely to be these goods are sourced from their suppliers but only limited numbers are initially ordered.
Fashion Limited has an internal audit department but at present their only role is to perform regular inventory counts at the stores.
Ordering process
Each country has a purchasing manager who decides on the initial inventory levels for each store, this is not done in conjunction with store or sales managers. These quantities are communicated to the central buying department at the head office in Europe. An ordering clerk amalgamates all country orders by specified regions of countries, such as Central Europe and North America, and passes them to the purchasing director to review and authorise.
As the goods are sold, it is the store managers responsibility to reorder the goods through the purchasing manager; they are prompted weekly to review inventory levels as although the goods are just in time, it can still take up to four weeks for goods to be received in store.
It is not possible to order goods from other branches of stores as all ordering must be undertaken through the purchasing manager. If a customer requests an item of clothing, which is unavailable in a particular store, then the customer is provided with other branch telephone numbers or recommended to try the company website.
Goods received and invoicing
To speed up the ordering to receipt of goods cycle, the goods are delivered directly from the suppliers to the individual stores. On receipt of goods the quantities received are checked by a sales assistant against the suppliers delivery note, and then the assistant produces a goods received note GRN This is done at quiet times of the day so as to maximise sales. The checked GRNs are sent to head office for matching with purchase invoices.
As purchase invoices are received they are manually matched to GRNs from the stores, this can be a very time consuming process as some suppliers may have delivered to over stores. Once the invoice has been agreed then it is sent to the purchasing director for authorisation. It is at this stage that the invoice is entered onto the purchase ledger.
REQUIRED:
a Identify and explain deficiencies in the system;
b Explain the possible implications of each deficiency;
c Provide recommendation to address each deficiency.
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