SIB530 Mini-Case Study Assignment

Assignment requirement:

Prepare a management report analysing the issues and provide recommendations to management.

Your report should be no more than 4 pages (11-pointer, 1.15 line spacing)

Case - Synergy Inc.

Jeff Cooper is the newly appointed Supply Chain Director for a global company, Synergy Inc. Within one week of joining the company, Jeff is already facing a crisis.

Some of Synergys large suppliers are threatening to stop supplying raw material to the company. Without a continuous supply of raw material, the company may have to shut down the factory within 2 weeks, and this will have an immediate impact on their delivering products to their customers.

Jeff had a meeting with a few of the larger suppliers. They are complaining bitterly about the late payment of their invoices, in some cases, the suppliers are not getting paid for more than 3 months, and the payment in arrears has grown to over $1 million. The issue of late payment has been an issue for a few years. Suppliers has complained to the Synergys senior management a number of times, but the problem was never completely resolved. At the meeting with the suppliers, Jeff promised to look into the problem and get back to the suppliers within one week.

After talking to the Controller, Jeff found out that most of the outstanding supplier invoices are stuck at the Accounts Payable department due to failure in the 3-way match process. The Accounts Payable Manager is also complaining the documents received from various departments rarely match, for example,

the receiving report provided by the warehouse does not match the purchase order, or

the price on the purchase order does not agree with the supplier invoice.

The Accounts Payable manager has been instructed by the Auditor that payments to the supplier can only be released if:

the discrepancy of an invoice is less than 0.5% of the PO amount or less than $500,

if the discrepancy is over $500, it must be sorted out with the Purchasing Department and the supplier to have the documents corrected

if the discrepancy is not resolved then it has to be written off as a cost against the Supply Chain department, and this require the approval of the VP Operations.

Upon investigation, Jeff discovered that the Purchasing Department, the Accounting

Department and the Warehouse are not on the same computer system platform. When a PO is released, the Purchasing Department would send a paper copy of the PO to the warehouse so they can receive the supplier shipment against the PO. Another copy of the PO is sent to the Accounts Payable department so they can check against the supplier invoice and release the payment.

The Warehouse Manager complained that the shipment quantities on supplier delivery note is almost always different than what is on the PO, and Accounts Payable department complained that the supplier invoice amount is almost always different than those in the PO.

Jeff checked a number of POs, warehouse receiving report and the supplier invoice and found that the PO has been revised a number of times before the shipment is received by the warehouse. The usual reason is the PO quantities or delivery date change due to production or customer requirements. Occasionally the Purchasing Department is successful in negotiating a better discount from the supplier.

Every time a PO is revised, the Purchasing Department would send a revised copy of the PO to the warehouse and the Accounts Payable department. As a result, these 2 departments received multiple copies of the same PO, sometimes the paper copy never arrived at their department and sometimes they dont know which copy is the latest and correct copy.

As a result, the 3-way match is almost impossible and usually failed, thus payments to supplier cannot be released.

Another serious issue is that supplier shipment and invoice are not received at the same time, and this cause problem for the Accounting Department in updating the Balance Sheet journal entries.

Just as Jeff was working long hours trying to find a solution and prepare a response in next weeks meeting with the suppliers, he got more bad news.

A buyer was fired for sending POs to his wifes company for non-existing products, and approving the suppliers invoice, and payment was released to the buyers wifes bank account.

The company is considering implementing SAP, an ERP system. The Consultant helping the implementation advised Jeff that the ERP system is probably the best solution to your problems.

Jeffs manager, VP Operations, asked Jeff to prepare a presentation to a management meeting to address the following issues:

the root causes of late payment to suppliers

how an ERP solution would help to improve the purchase-to-pay process, and the 3-way match process

prevent any dishonesty behaviour in the purchasing process, and how an ERP system can support this initiative.

Since material receipt and invoice receipt do not happen at the same time, you need to find out how SAP handles this in the accounting ledgers.

Marking Rubric

Your report should be

Formatted per Case study report guideline

4-6 pages (11 pointer, 1.15 spacing), excluding executive summary and conclusion.

Section	Mark
Executive Summary	/5
Background Description	/10
Analysis of the root causes of late payment	/20
Explain how an ERP solution would help to improve the purchase-to-pay process	/20
Explain how SAP handles purchasing transactions in the accounting ledgers	/15
Explain how an ERP system can prevent any dishonesty behaviour in the purchasing process	/15
Recommendations	/10
Conclusions	/5
Case Total	/100

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