Reengineering the Purchases/Cash Disbursement System
The automated system just described simply replicates many of the procedures in a manual
system. In particular, the accounts payable task of reconciling supporting documents
with supplier invoices is labor intensive and costly. The following example shows how
reengineering this process can produce considerable savings.
The Ford Motor Company employed more than 500 clerks in its North American
accounts payable department. Analysis of the function showed that a large part of
Ford’s accounts payable clerks’ time was devoted to reconciling discrepancies between
supplier invoices, receiving reports, and purchase orders. The first step in solving the
problem was to bring about fundamental changes in the business environment. Ford
initiated trading partner agreements with suppliers in which they agreed in advance to
terms of trade such as price, quantities to be shipped, discounts, and lead times. With
these sources of discrepancy eliminated, Ford reengineered the workflow to take
advantage of the new environment. The flowchart in Figure 10.3 depicts key features of
a reengineered system.
Data Processing
The following tasks are performed automatically:
1. The inventory file is searched for items that have fallen to their reorder point.
2. A record is entered in the purchase requisition file for each item to be replenished.
3. Requisitions are then consolidated according to vendor number.
4. Vendor mailing information is retrieved from the valid vendor file.
5. Purchase orders are prepared and sent to the vendor. Alternatively, these may be
transmitted using EDI technology.
6. A record of each transaction is added to the open purchase order file.
7. A transaction listing of purchase orders is sent to the purchasing department for
review.