Production Cycle and Revenue Cycle Information Systems

Production Cycle

• The production cycle is a recurring set of business activities and related information processing operations associated with the manufacture of products.
• The production cycle information system sends information about raw materials needs to the expenditure cycle information system in the form of purchase requisitions.
• The production cycle information system receives information from the expenditure cycle system about raw material acquisitions and other expenditures included in manufacturing overhead.

Product Design

• The objective of product design is to create a product that meets customer requirements in terms of quality, durability, and functionality.
• Operations list specifies the sequence of steps to follow in making the product, which equipment to use, and how long each step should take.
• Bill of materials specifies the part number, description, and quantity of each component used in a finished product.
• Tools such as product lifecycle management software, CAD software, and digital manufacturing software can help improve the efficiency and effectiveness of the product design process.

Revenue Cycle

• The sales order contains information about item numbers, quantities, prices, and other terms of the sale.
• For paper-based transactions, the legitimacy of customer orders is established by the customer's signature.
• Most business-to-business sales are made on credit.
• A credit limit is the maximum allowable account balance that management wishes to allow for a customer based on that customer's past credit history.
• Credit approval must occur before the goods are released from inventory and shipped to the customer.
• Management needs to regularly review the accounts receivable aging report to minimize losses.

Inventory Management

• Accurate inventory records are important to prevent both stockouts and excess inventory.
• The accuracy of the perpetual inventory records requires careful data entry during performance of revenue cycle activities.
• Proper handling of sales returns is important to prevent inaccurate inventory records.
• Replacing bar codes with radio-frequency identification tags can eliminate many of these problems by automatic data entry.
• Sales forecasts help companies better predict inventory needs and thereby reduce the risk of stockouts or carrying excess inventory.

Sales and Shipping

• CRM systems help organize detailed information about customers to facilitate more efficient and more personalized service.
• The picking ticket generated by the sales order entry process triggers the pick and pack process.
• The shipping department should compare the physical count of inventory with the quantities indicated on the picking ticket and with the quantities indicated on the sales order.
• The bill of lading is a legal contract that defines responsibility for the goods in transit.
• The packing slip lists the quantity and description of each item included in the shipment.
• Shipping the wrong items or quantities of merchandise and shipping to the wrong location can cause customer dissatisfaction, resulting in the loss of future sales.

Billing Process

• The basic document created in the billing process is the sales invoice, which notifies customers of the amount to be paid and where to send payment.