As more advanced technology became available at Blackwell industries, the present business processes changed as business relationships changed. Competition and productivity imperatives have stressed automation and enhanced inventory management. Blackwell industries can no longer afford to manually enter purchase orders; since it is too time consuming, costly, and error prone. Moreover, competitive pressures have permitted clients to demand timely processing and delivery and on-demand information about their orders. At the same time, Blackwell’s own purchase personnel wants to know who they are selling to and why. Many questions are asked: Who are our customers? What products do they want? What products don’t they want and why? How do we deal with profitable products and part with those which are not?
As a result, the management of Blackwell industries has decided to design a Purchasing System that satisfies the demanding needs that arose. The new system comes with a set of information components that collect (input), manipulate (process) and disseminate (output) data and information and provide a feedback mechanism to meet the business objectives. In other words, the new Blackwell Purchasing System will give proper guidelines of how tasks are undertaken in the purchase department so as to keep the standards of the company’s operations high. This is because a well laid out Information System will always ensure that the company is working on an updated system.
Blackwell Purchasing System is a computerized system based on economic order quantity model that integrates the powerful aspects of computing and accounting to make the purchasing process more efficient and most importantly reduce supply costs. This is by cutting down administrative costs, shorten the length of the purchase and make it flexible and easier to manage purchasing budgets through creation of reports. The system would be designed to meet the following objectives;
i. To determine the quality and quantity needed at a certain period.
ii. To maintain information on suppliers of products
iii. To obtain the best possible price to issue and buy products
iv. To create a paperless environment
Blackwell Industries is explicitly known for its sporting goods. Increase in demand for the goods had to be accompanied by proper and organized management of their records. In addition, with their current system they are unable to optimize their sales and properly manage their inventories. However, the new system is set out to overcome the challenges of the initial system and utilize the powerful aspects of computing like speed, accuracy and efficiency to make sure Blackwell Purchasing system becomes fast, reliable, secure and user-friendly.
The new system is a relational database management system that will be made up of materials inventory and purchase order master files in addition to a supplier history file and a reorder file. In designing the system, the set of components involved had to interact to meet the requirements of the business. Analysis of the system involved used of a data flow diagram (DFD), which is a sort of a road map that graphically shows the flow of data through a system. DFD provides an easy-to-follow picture of the flow of data through a system. In this case, use of a DFD was used to demonstrate how data flows through the Blackwell purchasing system (Appendix 1).
In addition, the use a flowchart is applied to demonstrate all the operational parts of a system, that is, show all the parts of the system in the processing of data. Figure 2 and 3 are flow charts showing a system developed to calculate and store inventory records (Appendix 2). This will be divided into two modules; 1) Main Update program and 2) Purchase Order Preparation program.
Data input in this system will require an online transmission system (Direct Data Entry – DDE). This will involve the server (main computer) to be linked directly to the source of data whereby the use of transmission equipment will be required to transmit data from online terminal located in appropriate departments. That is, the data is keyed in to a VDU or workstation by the personnel in the respective department. It is then checked and displayed on the screen, thereafter entered for processing. These inputs will include materials inventory receipts and issue transactions (Gelinas, Dull and Wheeler, 2010).
Initial processing is the determining of whether the input is either receipt or issue transaction as illustrated from the left part of the flowchart. The right part of the flowchart shows the aggregate processing of all the sales transactions from all the stores, done on the computer at the central site. Also shown on the left side of the chart, is a query from a store to the central server. Explanation of the steps involved in the flowchart for the above system is as below;
The sales clerk inputs sales transaction data via online terminals, prompting the main update program to determine the type of transaction. If transaction is receipt the program updates the material inventory master file records, open purchase order master file records and supplier history records. A master file is a fairly permanent file in that it contains both data of a static nature, like customer’s name and address as well as changing data such as the “balance owing”. As each issue instruction is being processed, the program will also check the quantity on hand in the master inventory record. If it falls below the reorder point, a reorder will be written to a temporary file on a separate disk.
At the end of the sales day, the store server runs a program to transmit the stored sales transactions over data communication lines to the Purchase Order Preparation program, which processes it for inventory purposes by first sequencing it by supplier code number retrieved from the supplier history file. Thereafter all reorder records for the same supplier will be consolidated into one purchase order. When all reorder records for a supplier have been processed, the EDI will generate and transmit into one purchase order. The order will be added to the open purchase order master file (Appendix 3).
In a separate process, in any department, the managers can use a terminal to query the main update program open purchase order file for any specific records. However, at the end of each day the open purchase order file will be processed to identify any purchase orders for which delivery is past due, an overdue deliveries report will be generated. At the end of each month, batch processing takes place in the supplier history and open purchase order files to generate supplier performance and cash flow commitment reports.
Blackwell purchasing system is geared to improving both efficiency and professionalism. The automation in purchasing is flexible to the administrative processing of the purchasing requisitions and is linked to the materials planning systems. Weele (2010) discusses that system involving ordering data being entered manually into the purchasing system increases the risks of wrong data entry which compromises the reliability and validity of the system. In addition, this makes the work of the management very laborious and time consuming. Contrastingly, with the redesign of Blackwell purchasing system, the central processing of data coupled with online mode of processing transaction ensures that as soon as transactions are available, they are processed to produce the information sought. Batch processing concepts also applies in the processing of cash flow commitment reports.
Redesign of Blackwell purchasing system offers the following benefits; a) the files are maintained up to date, b) the information is readily available for current decisions since it fed back to the workstations in the appropriate departments where they are needed, and c) file records enquiries by the managers are possible through the terminals (workstations).
Blackwell purchasing system needs to incorporate demand management which helps in the production plan by determining the amount of weekly or daily production needed to meet the demand for individual products. On the other hand, detailed scheduling uses the production plan defined by the demand management process to develop a detailed production schedule specifying details such as which item to produce first and when production should be switched from one item to another. Materials requirement planning determines the amount and timing for placing raw material orders with suppliers. Purchasing uses the information from materials requirement planning to place purchase orders for raw materials and transmit them to qualified suppliers.
Even though, Blackwell Purchasing System proves to be of more benefit to the organization, some few recommendations will be appropriate to ensure optimum output of the system. They include; incorporation of JIT method into the current system. In Just in Time (JIT) purchasing, materials are ordered from suppliers to be delivered just as they are needed by the production processes. JIT purchasing relies on maintenance of low inventories thus dependent on whether the suppliers are reliable both in terms of delivery times and quality of materials supplied. Therefore, JIT purchasing system relies mostly on the communication reliability between the company and the suppliers. (Burke and Wilks, 2006 )
Another method that can be applied is Enterprise Resource Planning (ERP) system. ERP means the techniques and concepts for integrated management of businesses as a whole from the viewpoint of the effective use of management resources to improve the efficiency of enterprise management. ERP package is a fully integrated information system that automates most basic business functions. Therefore, this enables an organization to work in a more integrated way as it can support business organizations in product planning, parts purchasing, managing inventories and interacting with suppliers, tracking orders and many others. With the recent adaptation of ERP in almost all the industries, it proves also essential to consider ERP in developing Blackwell’s purchasing system. (Lucey, 2008)
Effective implementation and management of Blackwell Purchasing System proves a challenging task. The transition from the current system to the newly redesigned system is difficult as new skills have to be learned, that is, new procedures and processes have to be followed, and so on. Therefore, examining what the program accomplishes and which processes will be needed and whether they can be performed by standard routines is realized by the outline of the flowchart of the main parts of the system. However, if the management and the implementation team do not do their job properly, ensuring that employees are told what to expect and given proper training, the potential benefits and effort saved through automation of tasks and jobs. Conclusively, to proper access the feasibility for the system, creditability and cost associated will be its determinants.
Burke, L. & Wilks, C. 2006. Learning System 2007 Management Accounting Decision Management. Burlington: CIMA publishing
Gelinas, U., Dull, R. & Wheeler, P. 2010. Accounting Information Systems. 9th ed. Mason: South Western Cengage Learning
Lucey, T. 2008. Management Information Systems. 10th ed. London: Thomson CIMA
Weele, A. 2010. Purchasing and Supply Chain Management: analysis, strategy, planning and practice. UK: Thomas Rennie