Reference no: EM132214438
MedSupply is in the industry of medical device sales. Its main competition is other major medical device companies. Its market share is small compared to the industry leaders, but it hopes to increase its share by becoming more responsive to its customers’ orders through reengineering its sales order processing system. That is, MedSupply is moving from a semi-automated system to an event-driven ERP system. MedSupply has approximately 150 employees, and the main office is located in Chicago, IL.
MedSupply sells primarily to small medical practices who have already established credit with the company. Last year, MedSupply market share dropped in comparison to its competition. A survey revealed that one reason was because customers were not getting their orders on time. The board of directors also suspects that internal control weaknesses exist that might lead to internal fraud. Hence, the reason management has decided to implement an ERP system. The following is a description of the sales/collection process of MedSupply.
When customers need to order medical devices, they call MedSupply to place an order. Using a computer, the sales representative records the order and prints two copies of a formal sales order. At the same time, the sales representative prints one copy of a stock release document for all ordered items that are currently in stock. For backordered items, the sales representative prepares a separate stock release when those items are available. The sales representative staples the one copy of the approved sales order to the stock release and sends it to the warehouse department. The other copy of the sales order is filed numerically in the sales department.
Jane, a warehouse employee, receives the stock release and sales order and picks and scans the goods using a handheld scanner. She forwards the goods and the stock release document and order to the shipping department. Stephanie, a shipping clerk, prepares the packing list and three copies of the shipping notice for the devices she is going to load on the truck. The shipping companies arrive every day at 4:30 PM, and Stephanie gives them the original shipping notice and the devices to be shipped. After she knows the goods are on their way to the customer, the stock release, a copy of the shipping notice, and the sales order are stapled together and sent to John in the billing department. The last copy of the shipping notice is filed in her department numerically.
If a customer returns medical devices received, the warehouse clerk records the return and prints two copies of a return receipt. One copy of the return receipt is filed in the department numerically. The other copy is forwarded to the billing department.
Once John in the billing department receives the sales order, stock release, shipping notice, and/or return receipt, he prepares the invoice, makes a copy of it for filing in the department, and mails the copy to the customer. John then sends the original invoice and supporting documents to the accounts receivable department.
At the end of each month, the accounts receivable department mails customer statements to customers with balances owing. MedSupply accepts installment payments in some cases. Two mail room clerks receive the customer checks and sends them along with a listing of all checks received in the batch to the cash receipts office.
Jennifer, the cash receipts clerk, receives the checks and updates the cash receipts journal. The controller prepares a deposit slip and deposits the checks at the local bank branch.
Required:
Draw an REA model with cardinalities for the operating events in the sales/collection process described above. Make sure you differentiate between the operating and the information events.