Chapter%2011 - CHAPTER 11 THE EXPENDITURE CYCLE PURCHASING...

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CHAPTER 11 THE EXPENDITURE CYCLE: PURCHASING AND CASH DISBURSEMENTS SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 11.5 A firm’s use of technology to improve its expenditure cycle activities (inbound logistics) can help suppliers to improve their outbound logistics (shipping) in several ways. For example, if a company adopts the use of bar-coding or RFID (radio frequency identification) tags to expedite the handling of inventory, its vendors can streamline their shipments by adopting similar technology. In addition, EDI can be used by vendors to notify customers that shipments are on their way, so that the customer’s warehouse receiving function can be prepared. EDI and satellite technology also enable both the supplier and customer to track the status and location of all shipments in transit. By using shipping companies whose trucks are equipped with data terminals linked to satellites, it is possible to track the exact location and to redirect trucks in case of an urgent need in another location. Truck drivers also can be directed to certain loading docks that would be available for unloading thereby shortening truck turnaround time. Customers have an incentive to share innovations with their suppliers because this may both further improve the efficiency of the customer’s inbound logistics activities and also enable suppliers to lower prices. 11.6 This question should generate good discussion on inventory management, anticipating demand, and vendor relations. The primary risk of minimizing or eliminating inventory is the risk of not being able to meet demand. If a business does not have enough inventory on-hand or not be able to acquire enough inventory to meet demand, then the business is likely to lose sales to competitors who do have enough inventory to meet demand. In addition, at a basic level, if a business carries insufficient inventory or no inventory, why would a customer buy from them? Could a customer simply bypass the business and go directly to the manufacturer and presumably
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This note was uploaded on 10/02/2010 for the course ACCT 5457 taught by Professor Polm during the Fall '10 term at Rensselaer Polytechnic Institute.

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Chapter%2011 - CHAPTER 11 THE EXPENDITURE CYCLE PURCHASING...

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