Production Cycle and Revenue Cycle Information Systems

Study Notes

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.

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.

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.

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.

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.

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.

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