Ludlow Winter Sports is a manufacturer of skis, snowshoes, and other winter recreational gear. The description here is limited to the process for ordering and receiving parts for repairing and maintaining manufacturing equipment. Please read the narrative and answer the questions that follow. A small inventory of parts is located in the plant maintenance office. When that inventory needs to be replenished, the maintenance manager fills out a purchase requisition and brings it to the purchasing department. A similar process is used when parts are not available in inventory and are needed immediately to repair or service a machine. Once received in purchasing, the buyer responsible for plant maintenance purchase requisitions looks up any approved supplier in the corporate book of approved vendors. If an appropriate vendor is not found, the buyer looks in a card file of local suppliers. When a vendor is chosen, the buyer enters the requisition into the purchasing computer system and prints the PO. The purchasing manager at Ludlow must sign all POs, about 75 each day. This is a tedious process. There is no review, just a signature. The PO is a two-part carbon, so each PO must be signed by hand. Several POs to the same vendor may be prepared each day. The purchasing manager gives the POs to a secretary, who mails the original to the vendor and files the copy in a paper file by vendor number. When goods are received from the vendor, a receiving clerk calls up the PO on the computer screen, does a quick visual inspection and count, and labels the shipment “on hold”. The clerk notifies the Quality Control (QC) department of the shipment. QC performs the required quality test and, if appropriate, changes the “on hold” label to “released”. At that point, the goods are moved to the warehouse, and the receipt is entered into the computer to clear the PO and update the inventory balance. The Case Above presents the following efficiency issues: Paper requisitions are not efficient and are prone to error. Automated processes would get POs to the purchasing office in a timelier manner. No priority assigned to parts needed immediately. No record of purchase requisitions maintained at the maintenance office (so additional orders might be made). No planning for required levels of inventory. Approved vendor file is paper-based and may not be complete (need a card file of local vendors). No consolidation of orders to each vendor (not practical without computerized purchase requisitions). Do all POs need to be signed? The approval process seems tedious an unnecessary “pro forma”. Paper POs are filed by vendor. Is there any way to track an order by part number? No record of receipts until after the complete QC (but they are listed as “on hold”) Automation of the purchasing and receiving processes at Ludlow to solve the problems noted in the preceding list might include the following features: Ludlow uses an enterprise system for these purchasing and receiving processes. The maintenance manager enters purchase requisitions online. The number of requisitions has been minimized by automatically replenishing many items when they reach reorder points. Purchasing uses a database of approved vendors. When an existing vendor will not satisfy a need, the buyer conducts research for other vendors on the Internet. Whenever possible, purchases to vendors are consolidated. The purchasing manager approves POs online, but only those that exceed a certain dollar limit. POs are not printed; they are stored in the Purchasing database and sent to the vendors electronically. When goods are received, they are immediately entered into the enterprise system. Goods that require QC are designated as such and are automatically assigned a status as “awaiting QC.” These goods are moved to the QC area. When QC members have completed their inspection, they change the status of the items from “on hold” to “available,” and the goods are moved into inventory or to the requester. Based on the information above, create a systems flowchart for the improved more efficient automated system (Purchasing and Receiving).
