ACCT90030 Purchasing Cycle Of AOD - Assignment Solution

PRESENTATION BRIEF

After reviewing the purchasing cycle of the AOD, this report will briefly outline strengths and weaknesses depicted in the process. Based on the findings, recommendations would be made along with key performance indexes (KPIs). 

Strengths and Weaknesses of AOD’s Process

Primary Goal

The primary goal of the purchasing process was to obtain discounts on purchases of bulk inventory by approved selection of suppliers. The process also allowed to streamline the delivery process time and aided in reducing the delivery charges significantly. The aim of the purchasing process is to provide the inventory items to the stores at right time. 

Strengths

It is the purchasing officer who can place order of inventory online and choose the right amount of inventory to be distributed to each of the stores of AOD. The order, inventory and sales data is presented by the corporate computer in consolidated form to the purchasing officer. The consolidation of data has reduced the time and cost associated with ordering and purchasing process. 

Current process allows the purchasing officer to obtain as much as 10% discount due to placing the orders in bulk form that was otherwise not possible. This process also centralized the inventory, sales and orders data that can be further used by analysts in getting future predictions about demand of certain items. Moreover, current purchasing process also allows AOD to distribute the needed inventory at convenient time to the corresponding stores which has minimized the cost. Analysis is also done at centralized level using analysis software tool due to which each store can get insight on operational performance at micro level. The current process also sends finalized order receipts to vendors and store’s supervisor to notify them about orders of certain items. This improves validity and timeliness of the information. 

Weaknesses

The inventory data of the current process might fail without having range limit and immediate inventory updating. The lack of checking inventory items and supplier’s order number prior to dispatching the inventory to the relevant stores might fail to achieve the primary goal that is to provide the inventory to stores at right time. Moreover, without suppliers’ inventory inspection, the current process control cannot guarantee the high quality of inventory being distributed to stores. 

Besides, the primary goal of the purchasing process is to achieve discounts of upto 10% on each item. This system can flop as the purchasing manager might fail to identify which items can be adjusted to get discount. For example, some stores might not get sales of specialty coffee as much as other stores. Meanwhile the purchasing manager decides to buy more packs of specialty coffees in order to achieve maximum discounts. This would cut off the advantage of discount as more specialty coffees would mean idle inventory sitting on racks of stores. 

The purchasing payment process also depicts some weakness including receipt of monthly invoice instead of daily. Upon receiving monthly invoice, it can be said that the payments are being processed late due to which suppliers can back-off from dispatching the orders at right time. 

There is also a risk of data entry errors resulting in accounts payable not being paid on time. This would result in discount terms not being optimized. The process also can result in an invoice being paid or entered twice. The process also lacks the banking of issued cheques and payments.