CHAPTER 10: Order Entry/Sales

This is our first application chapter

Objectives
With each specific application (OE/S, Billing, Cash
Receipts, Purchasing/AP, Cash Disbursements), we
want to be able to answer these questions:

1. OPERATIONS:
What are the essential operations associated
with this application?
2. MANAGEMENT:
Who are the managers, what do they do, what
decisions do they make?

3. LOGIC:
What are the inputs, outputs, processes and
interrelationships?

4. CONTROLS:
What are the risks, exposures and controls
normally identified with this application?
What are the essential operations associated
with this application?

The primary function of OE/S is to

create/manage information flows
supporting:

 Sales order dept. work routines; credit dept. work

routines; shipping department work routines

Examples: capture data, grant credit, pick item,

ship goods

 Decisions of sales/marketing managers

Critical? Definitely!
Who are the managers, what do they do, what
decision do they make?
 Information requirements are based on both horizontal
perspective and vertical perspective.
Here is horizontal or "within" information flows. Note
types of information. Transaction-oriented.

Among the three functional entities shown (marketing, finance

and logistics), can we identify any potential goal conflicts that
could exist, e.g., between marketing and logistics, between
marketing and finance or between logistics and finance
Here is a partial vertical. Note position of sales order in
relation to total marketing. Strategic management.
What are the inputs, outputs, processes and
interrelationships? These are our old friends, let’s
briefly review

Context (external entities) Activities:

(i) system receives and responds to customer inquiry
(ii) system receives customer order and acknowledges the
order
(iii) system ships the goods and notifies billing to begin
billing process
Logical
(i) Customer file, A/R, inventory and sales order files are master
files. Sales transaction file is in B/AR/CR
(ii) After the goods and the picking ticket have been sent to
shipping, a copy of the completed picking ticket should be filed
(not shown). It is a "history" file that provides an "audit trail"
reflecting goods moved out of the warehouse and into shipping.
Summary and Systems Flowchart
Note interfaces with external entities
Note files
Note new documents
What are the risks, exposures and controls
normally identified with this application?

Control Matrix for order entry sales (note that

there are two information processes)
Controls that are new or tailored to OE/S
(remember that these are in addition to the ones
learned in the last chapter):

Customer credit check (security of resources,

IV)
Independent shipping authorization (Security of
resources, IV: under shipping notices; sales
order notifications)

Independent customer master data maintenance

(security of resources, IV)
And, putting names on the one for one check and the
tickler files:

Open sales orders (Tickler or pending files) (IC:

under shipping notices)

One-for-one checking of goods, picking ticket

and sales order (security of resources, IA, IV
under shipping notices); text has split this out
into two plans

Typical Systems Goals: timely acknowledgement of

 customer order, timely shipment of goods,
accurate assessment of customer credit
worthiness)

Example Case, Do-it-Right Company

 Do-it-Right Company

Do-it-Right Company is a wholesale distributor of computer supplies. Customer

orders are received in the mailroom where clerks sort orders from the rest of the
mail, group them into batches, prepare a transmittal sheet with a batch total, and
forward the orders and the transmittal sheet to the order entry department.

A clerk in order entry checks that the batch is complete, logs the batch into a batch
control log, and begins to process the orders. The clerk enters the orders into a
network computer. The data entry involves a two-step process in which the order
entry clerk enters in the customer code. The customer data in the master file is
checked to see that the customer exists and has an acceptable credit record. If
everything checks out, the clerk enters the rest of the order.

The procedure results in the creation of an entry in the sales order event data store.
At the end of the day, the data is processed against the customer data and the
inventory data to create a picking ticket (sent to warehouse), a sales order
notification (sent to shipping department), and a customer acknowledgement (sent
to the mailroom for mailing to the customer). At this time, the sales order is also
recorded to the sales order master data.

In the warehouse, the picking ticket is used to assemble the customers’ orders. The
completed order (goods and attached picking ticket) are forwarded to the shipping
department. The shipping clerk removes the sales order notification from a
temporary file and compares the goods to the picking ticket and to the sales order
notification. The clerk then enters the sales order number into the shipping
department terminal, and the computer accesses the sales order master data and
displays the order on the shipping clerk’s computer screen. The shipping clerk
enters in the items and quantities being shipped and, after the computer displays
the shipment data, accepts the input. Once the shipment is accepted, the computer
updates the sales order master data and creates a record for the shipments event
data. The computer also prints a packing slip and bill of lading on a printer in the
shipping department. These shipping documents and the goods are given to the
carrier for shipment to the customer.
Control Matrix for Do-It-Right
Ensure Ensure Ensure Control Goals of the Information System
effectiveness of efficient security of
operations by employ- resources
For sales order inputs (i.e., For sales order notification For Sales order
achieving the ment customer order), ensure: inputs (i.e., shipment data), master file, ensure
following systems of ensure:
Recommended control plans goals: resources
A B IV IC IA IV IC IA UA UC

System Goals:
Case A: Auto Supplies, Inc. (Order Entry)
Background: Auto Supplies, Inc. is a wholesale distributor of auto parts, such as bulbs,
brakes, upholstery, and related items. Customers receive an updated catalog annually and
place orders over the phone.
Narrative:

When a customer calls in with an order, a clerk asks for the customer ID and
name. The clerk keys in the customer number, and the computer retrieves the customer
record from the customer database and displays it on the clerk’s screen. The clerk
compares the customer name to the data on the screen to ensure that the customer is
legitimate. If everything checks out, the clerk enters the customer’s order. After the
order is entered, the computer compares the amount of the order to the available credit
to ensure that the purchase does not exceed the credit amount limit.

This results in the creation of an entry in the sales event data store and an
allocation of inventory. At the end of the day, the sales event data are processed
against the customer data and the inventory data, and the sales order is recorded in the
sales order master data store. At the same time, a customer acknowledgement is
printed in the mail room and is mailed to the customer. Also, a picking ticket is
printed in the warehouse and is used to assemble the customer’s order.

Case B: Auto Supplies, Inc. (Shipping)

The completed order (goods and attached picking ticket) is forwarded to the shipping
department. The shipping clerk keys the sales order number into the computer, and the order
is displayed on the screen. The shipping clerk keys in the items and quantities being shipped,
and after the computer displays the shipment data, the clerk accepts the input. After the
shipment is accepted, the computer updates the sales order and inventory master data and
creates a record for billing (in the billing-due list data store). The computer also prints a
packing slip and bill of lading on the printer in the shipping department. These shipping
documents and the goods are given to the carrier for shipment to the customer.
Systems Flowchart Auto Supplies (Order Entry)
Order entry Computer Mailroom

Customer

Sales order
master
data

Display customer
information
Key in customer Customer
number master
data
At the end
of the day
Create shipping
Customer Sales
documents and
data event
update files
data

Error routine Inventory

Review data
not shown master
data Picking ticket

Check credit and

record order
Key in the
order
Warehouse
Customer
acknowledgement
Printed in the
Order
warehouse
display

Error routine
not shown Customer
Systems Flowchart Auto Supplies (Shipping)
 Warehouse Shipping Department Computer

Start

Printed at end of
Case A
Picking
ticket
Key sales Display order
order number Sales order
master
Assemble data
order
Order

Picking ticket
Key items & Display shipment
quantities data
shipped

Shipment
data
Billing
due data
Update sales order
master data and billing
Accepts
due data. Print packing
inputs
slip and bill of lading.

Accepted
input

Customer
Packing slip master
data
Bill of lading Inventory
master
data

Carrier
Control Matrix for Auto
Supplies Case A and B
Ensure Ensure Ensure Control Goals of the Information System
effectiveness of efficient security of
operations by employ- resources
Case A Case B For Sales order
achieving the ment For sales order inputs (i.e., For sales order notification master file, ensure
following systems of customer order), ensure: inputs (i.e., shipment data),
Recommended control plans goals: resources ensure:
 A B IV IC IA IV IC IA UA UC

System Goals: