Background

Winterfall Tech is a local company dealing with the distribution of OEM digital signage and liquid crystal display (LCD) monitor/video walls in the ASEAN region. Mr Singh, the CEO of the company, had received feedback from his Chief Operating Officer (COO) that two customers in Myanmar have cancelled their orders due to delays in the delivery process. Mr Singh has asked the COO to form a process design team to evaluate and improve their internal processes.

Below is the description of the distribution and shipping process taken from their process design team report.

Winterfall Techs Distribution and Shipping Process Orders ready for shipment (those that have not been blocked or those that have been released) will be visible to the distribution planner, who is responsible for planning the shipment and packing of the goods. The distribution planner will access the sales order file, sort the orders by customers geographic location and print a consolidated orders report. For each order, the distribution planner will manually calculate if the transportation cost of an order is smaller than or equal to 8% of the order amount or if the customer has indicated that it is willing to pay for the transportation cost. If either condition is met, the distribution planner will mark the order to be ready for shipment in the ERP system. Otherwise, the shipment will be delayed until transportation costs become acceptable, which often requires waiting for additional orders. In the latter case, the sales order clerk will be informed about the delay, who will then relay the delay message to the customer. However, as he is the only employee dealing with this task, there are times that he may miss some of the orders where customers are willing to pay for the transportation cost or miscalculate the transportation cost. This results in additional communication between sales order clerk and customers over the delayed shipping. The distribution planner then exports the records for sales orders that are ready for shipment from the ERP system to an excel file and name it Shipment Preparation. The distribution planner uses this Shipment Preparation excel file to group the shipments for transportation into two categories: domestic transportation and export. For export shipments, the distribution planner has to separately prepare a booking confirmation form and email it to the export carrier. For domestic carrier, the distribution planner has to fill a paper form and fax a copy to the carrier. Sometimes the paper form may be misplaced and the distribution planner has to fill it up again. The paper form is sent to the warehouse clerk. The planner then emails the warehouse clerk the Shipments Preparation excel file that indicates the list of sales order that needs to be picked, packed and shipped for the week. The shipping process starts when the warehouse clerk receives the excel file from the distribution planner. Using the excel file, he goes into the ERP system to select the sales orders that are supposed to be packed for shipment. He generates the outbound delivery order, prints the shipping label and picking list for each order from the ERP system. The warehouse clerk will then pick and pack the goods based on the picking list and the instructions for consolidating the goods for shipment stated in the excel file. For domestic shipment, he will attach the paper form to the other documentation. If the warehouse clerk cannot find all the items associated with an order, he contacts the customer, who in turn decides whether the shipment should proceed even though some items are missing. If the customer agrees, the warehouse clerk will amend and update the sales order in the ERP system, and reprint the shipping label and picking list for the order. However, the warehouse clerk has to revert to the distribution planner if the shipment can go ahead given the transportation cost rules. If it is ok, the distribution planner will give the go ahead. But if it is not, then the shipment has to wait. However, there are situation where the customer refuses to receive an incomplete order, then the items of that order are put back on the shelves and the picking list and shipping labels are placed in an awaiting order availability file. The orders that have been completely packed will then be placed in the open loading dock based on the information stated in the excel file together with the shipping labels to be picked up by the carrier. The warehouse clerk will indicate in the Delivery file that the goods have been shipped and the picking list will be filed in the delivered orders file. As the warehouse clerk is often busy, he may or may not be available to meet the carrier agents.

Required:

Analyse Winterfall Techs distribution and shipping process as described above. Identify control threats and weaknesses in the distribution and shipping process that are potentially contributing to the problems. Apply the relevant internal and/or IT controls to help mitigate and deal with the control threats and weaknesses identified.