Question

Case Study:

O’Brien Corporation is a midsize, privately owned, industrial instrument manufacturer supplying precision equipment to manufacturers in the Midwest. The corporation is 10 years old and uses an integrated ERP system. The administrative offices are located in a downtown building and the production, shipping, and receiving departments are housed in a renovated warehouse a few blocks away.

What are the threats that may face production operations and what could be the possible controls for those threats? [3 points]

Customers place orders on the company’s website, by fax, or by telephone. All sales are on credit, FOB destination. During the past year sales have increased dramatically, but 15% of credit sales have had to written off as uncollectible, including several large online orders to first-time customers who denied ordering or receiving the merchandise.

Customer orders are picked and sent to the warehouse, where they are placed near the loading dock in alphabetical sequence by customer name. The loading dock is used both for outgoing shipments to customers and to receive incoming deliveries. There are ten to twenty incoming deliveries every day, from a variety of sources.

The increased volume of sales has resulted in a number of errors in which customers were sent the wrong items. There have also been some delays in shipping because items that supposedly were in stock could not be found in the warehouse. Although a perpetual inventory is maintained, there has not been a physical count of inventory for two years. When an item is missing, the warehouse staff writes the information down in log book. Once a week, the warehouse staff uses the log book to update the inventory records.

The system is configured to prepare the sales invoice only after shipping employees enter the actual quantities sent to a customer, thereby ensuring that customers are billed only for items actually sent and not for anything on back order.

Question: What are the threats that may face production operations and what could be the possible controls for those threats? [3 points]

plz no hand writing or pic

Answer 1

Answer:

The threats that may face production operations are:

1. Customer credit records are not being check before purchases are approve and products are not being paid.

2. Orders from new customers are not required to have validation: which lead to large shipments being shipped but payment never receive.

3. Shipments aren't reconciled to sales oreders, resulting in sending customers the wrong item.

The possible controls for the above threats are:

1. Credit must be checked for every customer and customers who do not meet the company approval standards orders should be denied.

2. Written customer purchase orders receive through mail as verification of phone or fax orders. Also, digital signatures on all on-line customers orders.

3. The system should match the shipping information to sales orders and alert the shipping employees of any differences.