Figure 3 supply chain product management at loblaw r

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Unformatted text preview: ms.21 Control environment of the process: Assess the strategic controls, management controls, and detailed process-level controls. After much discussion, Mary Lou and her managers decide to examine in more detail the product/service delivery process, referred to at Loblaw as supply chain product management. The team believes that these processes may contain significant business risk and, therefore, audit risks. Figure 3 Supply Chain Product Management at Loblaw R e t a il Clie n t C o r e B u siness Processe s a n d T h e i r S u b Processes Brand and Im age Delivery Form at development & site selection Brand managem ent Visual merchan dising A d v er t ising & promotion - Proprietary cr e d i t Cu st om er sa P r o d u c t / S e r v i ce D e l i v e r y Ca t egory Managem ent Supplier S elect i o n Logistics & Distribution Stock Managem ent Store staffing Operational standards Customer loyalty s Price Managem ent Custom er Service Delivery C ustomer service policies le After sales service Cu st om er sa le s To acquire more knowledge of the supply chain product management process, Mary Lou and her team decide to conduct a series of interviews with various managers and associates at Loblaw who are responsible for the decisions, activities, and controls within this business process. In preparation for the interviews, the audit team breaks down the supply chain management process into Loblaw’s five subprocesses. (See Box 6 and Appendix II for a description of subprocesses). 21 Note the strategic lens concept of inherent business (or process) risk is broader than the traditional audit conception of inherent risk as “the likelihood of a significant misstatement occurring, ignoring the effect of internal control.” However, it has always been understood that audit risk is conditional on client business risk. For example, AU Section 312 in the U.S. authoritative guidance states that “External factors also influence inherent risk. For example, technological developments might make a particular product obsolete, thereby causing inventory to be more susceptible to overstatement.” 18 n KPMG/University of Illinois Business Measurement Case Development and Research Program July 1999o Mary Lou starts the series of interviews by speaking with Richard J. Currie, president and Stephen A. Smith, senior vice president and controller. Mary Lou summarizes these interviews for Mark and Laura by telling them, “Supply chain performance measures monitored by senior corporate management include distribution costs per case, inventory turnover ratio, and on-time delivery to stores.” Mary Lou reports that senior corporate managers only review a small subset of the performance measures employed by the process managers. Mark and Laura each select members of the supply chain product management team to interview and later summarize the results in a series of workpaper memos. Summary of Category Management Interviews The Loblaw category management team determines which stock keeping units (SKUs) within each product category to sell. Current strategies include adding private-label (e.g., “President’s Choice™”) products where appropriate. Box 6 Supply Chain Product Management Overview Significant business processes: • Category management • Supplier...
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