Reel Ltd supplies manufacture fishing equipment and sells to wholesale customers on credit. Wholesale customer orders are mailed or faxed to the sales department. When the order is received, the sales clerk checks the customer’s creditworthiness from the computer terminal. After the customer credit is verified, the clerk then keys in the sales orders into his computer. A digital copy of the order is distributed to the warehouse and the shipping department terminals for further processing. The computer system automatically records the sales in the sales journal. Finally, the clerk files the hard copy of the customer order in the sales department.

After receiving the digital sales order, the warehouse manager prints out two reports: the stock release and the shipping notice. Using the stock release copy, the warehouse clerk picks the selected goods from the shelves. The goods, accompanied by both documents, are sent to the shipping department. The warehouse manager then updates the inventory subsidiary ledger and the general ledger from his computer terminal.

Once the shipping clerk receives the goods, the stock release, and the shipping notice, he matches them to the corresponding digital sales order from his terminal. Assuming everything matches, he prints out three hard copies of the bill of lading and a packing slip. Two of the bill of lading copies and the packing slip are sent, along with the goods, to the carrier. The stock release copy and the shipping notice are sent to the accounts receivable department. The third bill of lading copy is filed in the shipping department.

When the accounts receivable clerk receives the stock release and shipping notice, he manually creates a hard-copy invoice, which is immediately mailed to the customer. After mailing the invoice, the accounts receivable clerk goes to his terminal and updates the accounts receivable subsidiary ledger and general ledger from the information on the stock release. After the records are updated, the clerk files the stock release and shipping notice in the accounts receivable department.

Customer payments come directly to the general mailroom along with other mail items. One mail clerk sorts the incoming mails, opens the customer payment envelops, removes the customer’s cheques and remittance advice and reconcile the two documents. To control the cheques and remittance advices, the same mail clerk manually prepares two hard copies of the remittance list. He sends one copy to the accounts receivable department along with the corresponding remittance advices. The other copy of the remittance list accompanies the cheques to the cash receipt department. The cash receipt clerk deposits the cheques to the bank on the next working day and updates the general ledger.

The invoicing, cash receipts and e-payment modules of the accounting information system (AIS) in Reel Ltd are all going to be updated. Five years ago, when the current AIS was implemented, all employees were not happy with the system. The accounting manager feels that IT personnel did not interact sufficiently with them in the past.

Required:

(a) Critically evaluate why prototyping should be used for the new AIS system development project. State THREE (3) reasons to support your answer.

(b) Reel Ltd wants to explore how e-commerce technology will affect its value chain. Identify and explain TWO (2) valid examples of how the value chain of Reel Ltd can benefit from e-commerce.