CASE STUDY AIS510

PBL SESSION 1
a)

What kind of information do you think Tesci gathers?

Data are facts that are collected, recorded, stored and processed by an information system

to produce information. For example, the business needs to collect data about a sale such as data
and total amount; the resource sold which are good or service, quantities sold and unit price, and
the people who participated who are customer and salesperson.
Information is data that have been organized and processed to provide meaning to a user.
The value of information is the benefit produced by the information minus the cost of producing
it. Benefits of information are reduced uncertainty, improved decisions, and improved ability to
plan and schedule activities. The costs are the time and resources spent to produce and distribute
the information. Information costs and benefits can be difficult to quantify, and it is difficult to
determine the value of information before it has been produced and utilized.
There are seven characteristics that make information useful and meaningful. Relevant
information is needed to reduce uncertainty, improves decision making, or confirms or corrects
prior expectations. Information must be reliable because it free from error or bias and accurately
represents organization events or activities. Complete information does not omit important
aspects of the events or activities it measures. Timely is about information provided in time for
decision makers to make decisions. Information that presented in a useful and intelligible format
is called understandable information. Verifiable information is two independent, knowledgeable
people produce the same information. While, accessible information is available to users when
they need it and in a format they can use.
Based on the case of Tesci Stores (Malaysia) Sdn Bhd, they had introduced their
Kelabcard. The information needed to filled the Kelabcard application are customer names,
contact information including email address, demographic information such as postcode,
preferences and interests, and other information relevant to customer surveys and offers. Once
the customer has the Kelabcard, they are qualifying for the discounts. Therefore, Tesci should set
up their computers record everything a customer purchases.

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The information that Tesci gather must be relevant in order to reduce uncertainty and
confirms or corrects prior expectations. Tesci need the information to understand their customer
needs and provide them with a better service. Reliable information that they gather must be free
from error or bias which may be useful in internal record keeping process. Besides that, complete
and timely information may help Tesci to make a better decision. Tesci may use the customers
information to contact their customer for market research purposes either by email, phone or fax.
Tesci also able to improve their products and services when they able to gather understandable,
verifiable and accessible information from customers.
In a nutshell, all organization needs information in order to make effective decisions. In
addition, all organizations have certain business processes that they are continuously engaged in.
To make effective decisions, organizations must decide what decisions they need to make, what
information they need to make the decisions, and how to gather and process the data needed to
produce the information.

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b)

How do you think Tesci has motivated customers to sign up for its Kelabcard programme?
Tesci may motivate their customers to sign up for its Kelabcard programme by offer
discount to their customer. Besides that, customers may gain a point for every Ringgit that they
spend at any of Tesci stores as well as the partner stores, and have a special promotion once they
have being a Kelabcard member.
Generally, loyal customer has a high potential to sign up for this Kelabcard since they
may enjoy a low price compare to a non-member of Kelabcard when they buy goods at any Tesci
stores. Every single item that they bought from Tesci will entitle for discount. Hence, Tesci may
encourage more sales which are prompt customers to make additional purchases. This will
benefit both parties either the Tesci itself where they may increase their sale and attract others to
retail in their store. For the customer, they might buy the items with a discount rate where
approach them back to Tesci to buy the items.
Another way to motivate customers to sign up for Tesci Kelabcard is customer may
collect point for every Ringgit they spend. Tesci Kelabcard holder benefit when shopping at any
Tesci Stores. For example, they enjoy 1 point for every RM1 they spend, and double points on
special offers. These points are stored and built up and 4 times a year the holder receives
vouchers to the value of points they have saved. Vouchers can be spent in store on shopping or
used on Kelabcard Deals where they are worth 4 times the value. They also entitled to free
access to the Kelabcard clubs which include healthy food, baby and toddler, and food.
Special promotion given to customer may attract them to sign up their Kelabcard. Mostly
people will spend a lot of their money during a big sale. They believe that is the right time for
them to control their cash flow. Hence, Tesci may win greater share of wallet and able to make a
profit to their business operation. Besides that, it helps in keeping customers from deflecting.
Special promotion can be done in seasonal basis. For instance, during festive season, Tesci may
organize a special promotion to member of Kelabcard either by allow them to buy an exclusive
product with a low price. Special promotion also can be in form of rebates.

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c)

What can Tesci accomplish with the Kelabcard data it collects? Think in terms of strategy
and competitive advantage.
Since Tesci had gather information about their customer, they might use the data to
accomplish any improvement in their business operation. Therefore, Tesci may impose any
suitable strategies and competitive advantage.
One of the strategies is cross marketing. This is the most effective strategy where a sales
marketing secret that works better for business that have the same target audience, but are not
direct competition with each other. Doing cross promotions with other businesses increase
Tescis profit, sales and beat their competition. Tesci can discover their customer unique buying
habits by using the data provided by them before. In the other word, cross marketing is an
analysis of customer data allows Tesci to discover unique buying habits. For instance, men who
purchased diapers for newborns buy more beer than the normal male which presumably because
they are more likely to stay at home and less likely to go out.
Second strategy is Tesci should improve decision making. Decision making taking into
those steps which are identify problem, select a method for solving the problem, collect data
needed to execute the decision model, interpret the outputs of the model, evaluate the merits of
each alternative and choose and execute the preferred solution. By using data on purchases and
the ethnic makeup of the neighborhoods surroundings the stores, Tesci is able to stock goods that
have a greater customer appeal. Tesci may replace the store which the customer was not buying
complete meals with the stores which offered more foreign products.
Third strategy and competitive advantage is customer loyalty. Loyalty program is a
structured marketing effort that reward and therefore encourage loyal buying behavior which is
potentially beneficial to the Tesci. Tesci should use Kelabcard data to neutralize competitors
most significant advantage. For example, Tesci may identify certain items that price-sensitive
shoppers frequently purchased and lowered their prices. This kept the customers most likely to
shop at competitors store from defecting.

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Next strategy would be customized coupons and promotions. This strategy can be
powerful drivers in closing business with the shoppers. Coupons and promotions are
controllable, trackable and resources for accelerating revenue. Tesci makes it easy to run targeted
marketing campaign, offer products on a promotional basis and deliver fully-customizable
landing pages with their capabilities. Customer purchases and customizes its marketing can be
analyzed based on the results. For example, Tesci mails active Kelabcard customers two coupons
for frequently purchased items and two coupons for items they are likely to buy or Tesci wants
them to try. Hence, Tesci may be a good at understanding their customers tastes and preferences.
New product rollouts shows by an analysis of Kelabcard data that affluent customers
were not buying certain products like fruit, cheese and wine. This event is a critical time for an
early stage for Tesci that need to determine their survival. For example, new product rollouts led
to introduction of a quality brand that successfully attracted affluent customers. Besides that, the
data use to figure out quickly how new initiatives are working. For instance when Tesci rolled
out ethnic foods for Indians, data analysis showed that white affluent customers were also buying
the products.
Last strategy is improved supplier relationships. The data that Tesci collect is used to
improve their supplier relationship. The data provide by the applicant can be analyzed with their
interest in buying goods. Outside companies may take an advantage of Tescis data to improve
their decision making. The supplier able to track customer interest on items they usually
purchased. For instance, a supplier of detergent introduced their product to Tesci, they used the
Kelabcard data to track whos purchased it and who continued purchased it. Further analysis
showed that those who bought the detergent also were big buyers of toiletries products. This
allowed supplier to develop a marketing program that offered treatments to those who continued
to buy the detergent.

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d)

Explain three disadvantages of the Kelabcard programme.

For all the success, Tesci has faced many challenges and the Kelabcard program does
have disadvantages. Security, costly and changes in data received are the disadvantages of
Kelabcard program that Tesci may face.
Most customers tend to be more private in nature and they feel the information gathered
about them by Tesci is a violation of their rights. Tesci has developed their database carefully to
avoid conflicts with the Data Protection Act, but this has not stopped lawsuits and court
challenges from various newspapers and consumer groups. Privacy conscious consumers
encourage customers to swap loyalty cards to thwart businesses from tracking their shopping
habits.
Next disadvantage is high cost. Keeping customer loyalty incurs high cost such as
operating cost and advertising cost. Tesci able to buy data to achieve similar results for less than
loyalty program cost but it too expensive. On the customer side, they will incur additional cost to
renew their membership annually. Besides that, they need to pay for replacement card when the
card is lost. This situation will encourage them to think twice either to continue the membership
or not. Hence, Tesci will lose their loyal customer if they decide not to continue their
membership.
Another disadvantage is the data received by Tesci would not be same all the time.
Customer may change their data without Tesci knowledge unless they inform to Tesci on their
data changes. Thus, Tesci must gather their customer data frequently in order to maintain updated
information. For instance, the customer had move to other region, as their address would change
which differ from their registered address with Tesci before. The other example can be email
address of their customer. Tesci unable to reach their customer in order to expose them with new
promotion and any update newsletter.

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PBL SESSION 2
a.

State and briefly explain four (4) examples of Revenue Cycle Activities.
Revenue cycle is a recurring set of business activities and related information processing

operations associated with providing goods and services to customers and collecting cash in
payment for those sales. There are four basic business activities that performed in the revenue
cycle which are sales order entry, shipping, billing and cash collection.
Sales order entry is process of taking the customers order, checking and approving
customer credit and also checking inventory availability. All of these processes is recorded in the
sales order document. The document is usually an electronic form displayed on a computer
monitor screen. By using a computer monitor screen, it can lead to a threat during sales order
such as the important data about the order will be either missing or inaccurate. This can be
preventing by using Enterprise Resources Planning (ERP) system by using a variety data entry
edit control. For example, complete checks on the data in order to make sure all of the data are
entered.
The other activity is shipping which refer to fill customer orders and shipping the desired
materials. It involves two steps which are picking and packing order and shipping the order. One
potential threat that can be incurred during the process is the risk of picking the wrong items or
in the wrong quantity. This problem can be avoided by using bar-code and RFID scanners. This
is because, the system can compare the items and quantities recorded with the information on the
sales orders.
The next activities is billing customer. The primary objectives of the billing are to ensure
that customers are billed for all sales that invoices are accurately maintained. The main threat for
this activity is failure to bill the customers that will result in erroneous data about the sales,
inventory and accounts receivable. This threat can be control by do a segregation duties
regarding the shipping and billing function.

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Last but not least, cash collections or collecting and processing payments from
customers. The primary objective of this activity is to safeguard customer remittances. Since it
involves cash, therefore, the main threat is theft of cash. Segregation of duties is also the most
effective control procedure to reduce the risk of such theft.

b.

State and briefly explain four (4) examples of Expenditure Cycle Activities.
Expenditure cycle consists of the processes a company undergoes to determine the

materials needed and the costs of those materials to produce a finished product. The four
examples in expenditure cycle activities are ordering goods, supplies and service, receiving
and storing, approving supplier invoices and cash disbursements.
Ordering goods, suppliers and service is the process that involve identifying what,
when, and how much to purchase and from whom to purchase. One of the threats of this process
is purchasing goods of inferior quality. This risk can be reduce by requiring suppliers to possess
quality certification and collecting and always monitoring supplier delivery performance in order
to make sure the goods that they produce are in high quality.
Next activity is receiving and storing of ordered items. This process incurred when the
deliveries from suppliers are arrived. The general threat is by accepting unordered items that will
results in cost associated with unloading, storing and later returning those items. The best control
procedure that can be used is to instruct the receiving department to accept only deliveries for
which there is an approved purchase order.
Besides that, approving supplier invoices for payment. One threat that can be occur is
errors on supplier invoices, for example, miscalculations of the total amount due. This problem
can be prevented by verification of the invoice accuracy in order to make sure the amount or
quantity in the invoice is correct.

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Last but not least, cash disbursement is the activity of settling a debt by paying for the
goods and services received completes the expenditure cycle. The risk that occurs in this cash
disbursement is paying for goods that not received. The best ways to prevent the risk is by make
a comparison between the quantities indicated on the vendor invoice with the quantities entered
by the inventory control person, who accept the transfer of those goods from the receiving
department.

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C.

Provided that Proterm Automobile Industries Sdn Bhds revenue and expenditure
cycle activities depend on the integrated database that contains information about
suppliers, inventory and purchasing activities, explain the threats and controls be
experienced by Proterm Automobile Industries Sdn Bhd in its expenditure cycle.
All expenditure cycle activities depend on integrated database that contains information
about suppliers, inventory and also purchase activities. Proterm Automobile Industries Sdn Bhd
has experience several threat and controls in its expenditure cycle. There have five activities
occur in the expenditure cycle which is consists with general issues throughout entire
expenditure cycle, ordering, receiving, approving supplier invoices and also cash disbursements.
The treats may happen in general issues throughout entire expenditure cycle in Proterm
Automobile Sdn Bhd areinaccurate or invalid master data. This is because of several errors
such as error in the supplier master data could result in ordering from unapproved suppliers,
purchasing materials inferior quality, untimely deliveries, sending payments in the wrong address
and fraudulent disbursement to fictitious suppliers. Errors in inventory master data can result in
production delay due to unanticipated shortages of key materials or unnecessary purchase and
excess inventory. While errors in purchasing master data can result in unauthorized purchase and
failure to take advantage of negotiated discounts. In order to control this threat, the best way is to
restrict access to expenditure cycle master data and configure the system so that only authorized
employees can makes changes in the master data.These threats can also be mitigate by employ
the data processing integrity control. The processing data entry control can ensure that the data is
processed correctly and authorised. For example, Proterm Automobile Industries Sdn Bhd can
make a proper segregation of duties for their employees. A proper segregation of duties here
means that by permitting only a certain person who are responsible for recording or keying any
data of the supplier the information and authorised it. They also need to make sure the
information is reliable and acceptable.
Next threat is unauthorized disclosure of sensitive information such as banking
information about suppliers and special pricing discounts offered by preferred suppliers. This
threat can be control by to configure the system to employ strong access controls that limit who
can view such information. Access control should be utilized by using password or IDs. It is very
important to avoid others people to view important or sensitive information of the company.
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For examples, Proterm Automobile Sdn Bhd information about their operations should be
confidential and only review by related employees. To avoid the other companies or party access
their information, they should employ strong access controls.
Third threat is loss or destruction of data.Since all of the information or data are
recorded on a computer system, it more risky when the computers are broke down or not
functions well. Loss of the data could cause error in external and internal reporting. To control
any data is loss, the company should make at least one backup files to all the transaction in the
day. The sales files, cash receipts files, accounts receivable master files and most recent
transaction files should be backup regularly. For examples, in dealing with many suppliers in
their daily operations, Proterm Automobile should backup all the transaction occurs daily. It can
reduce any information loss due to unexpected problems occur.
Lastly, the threat in the general issues is poor performance. This threat may give
problems to the company where it may damage vendor relations and will reduce profitability of
the company. A poor performance will affect the employees loyalty if the company cannot fulfill
the customer satisfaction and expectation. For examples, Proterm Automobile Sdn Bhd also
should consider the buyer expectation of their products by perform the best quality of the
products and also in delivering the products to the buyer where they should use Just-In-Time
methods.
Ordering is the first major in the expenditure cycle. The company will make an order of
some goods based on the inventory or stocks that they have in their hands. One threat is that
inaccurate inventory records.This will make the inventory stock outs and excess of the
inventory. The excess of the inventory will incur excess carrying cost and have to mark the
inventory down. While inventory stocks out will make the company lose sales. To control or
avoid this from happen, the company should apply the perpetual inventory control method. This
method is used to ensure that information about the inventory stocks is always current. Besides,
by using bar-coding and RFID tag is the one option. The most or more efficient is by using RFID
tag because there is no need for human to align the bar code on the product with the reader.
Second threat in ordering is purchasing inferior-quality products. This treats may give
a problems to the company because it can result in costly productions delay. Besides, scrap and

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rework cost will make these materials more expensive than the high quality alternatives. To
control this, the company should compile file of approved supplier known to provide goods of
acceptable quality. With all the information of the suppliers will help the company to purchase or
ordering the goods at the same suppliers. Besides, the company should track and review the
performance of the suppliers and also hold purchasing managers responsible for the total cost of
purchases which is also including the scrap costs and rework. For examples, Proterm Automobile
Sdn Bhd should purchase a material from approved supplier or reliable suppliers. It is because
the reliable supplier will provide a better quality of the products which required by them.
Purchasing from unauthorized suppliers is the one of the threat in ordering. This threat
can result in numerous problems. The items purchased by unauthorized suppliers may result in
goods inferior quality and high price. The purchases also may cause legal issues such as violation
of imports quotas. In order to control this, the company should ensure that purchase the goods
with approved suppliers. Besides, it is important to restrict access to the approved suppliers and
periodically review the approved suppliers list for unauthorized changes.For example, Proterm
Automobile Industries Sdn Bhd makes a purchasing from their supplier and since the
information are not authorized, it will bring to the wrong invoices of the purchased price and the
quantity ordered.
Second major business activity in expenditure is receiving. Receiving department is
responsible in receiving the goods by the suppliers. The inventory department is responsible to
storage the goods. Where the objectives of these activities are verify the receipt of order
inventory and safeguard the inventory against loss and theft. Several threats include in inventory
is receiving unordered goods, errors in accounting receive and theft of inventory.
The problems may arise in receiving is accepting unordered goods. This will give a
problem to the company because it may results in unnecessary costs to unload, store and return
the items. In order to control this threat, they should instruct receiving department to accept good
only if there is an approved copy of the purchase order. So, this require the receiving department
should to access to the open purchase order file.
Besides, other threat that involved in receive is making the mistakes counting items
received. The problem may occur is where the inventory may records inaccurate, possibly

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leading to stock outs and lost sales. To controls this threat is by providing the bar code in ordered
goods, designing the receiving form so that the clerks cannot see the quantity ordered and
receiving clerks not only just receiving the items or goods receive but also to sign receiving
reports to create accountability. Furthermore, by offering bonuses for catching discrepancies and
having inventory control count the items transferred from receiving also the others controls in
threaten the inventory.
Theft of inventory which is the last threats in receiving is occurring because of the
losses of the assets and inaccurate records. The threats can be controls by store inventory in
secure locations with restricted access. Moreover, document all intra-company inventory transfer.
For examples, goods move from receiving to warehouse and goods moving from warehouse to
production floor. Besides, periodic physical count on inventory and comparison to records can
help in control the threats by more critical items should be counted more frequently. Lastly,
segregation of duties like separates those who have physical access to inventory from those who
keep records and separate both those who have custody and those who can authorize inventory
adjustments from those who work in the receiving and shipping functions.
The third main activity in the expenditure cycle is approving supplier invoices. The
accounts payable department approves supplier invoices for payment. One of the threats in the
approving suppliers invoices is errors on supplier invoices such as discrepancies between
quoted and actual prices charged or miscalculations of the total amount due. This threats will
incur a big problems to the company where the company force to pay overprice of the suppliers.
To control this threat, company should always check mathematical accuracy of invoices where
the employees should double check the figure in the invoices. Next is to obtain receipts from
procurement card users and verify monthly statement accuracy. Besides, the most efficient ways
to control this error company should adopt Evaluated Receipt Settlement (ERS) approach. By
this approach this may help the company to pay accurate amount of goods prices as stated in the
purchase order which is come together with the goods. For examples, Proterm Automobile Sdn
Bhd will pay for goods when received at the price stated in the purchase order.

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Second threat is mistakes in recording and posting to accounts payable. This error
may result in additional errors in financial and performance reports that can contribute to the
poor decision making. When the employees record any mistakes in recording, it will effect in the
company making decision whether in long-term of even short-term decision making. To prevent
these problems is to compare the difference in supplier account balances with the total amount of
invoices process either before or after processing checks. Besides, the total of all suppliers
accounts and the amount of the accounts payable control account in the general ledger should be
reconciled periodically.
The final activity in expenditure cycle is paying supplier or cash disbursement. The first
threat in this activity is failing to take advantages to purchase discount for prompt payment.
This threats a problem to the company because it can reduce profitability of the company. Proper
filing can significantly reduce the risk. The company should file all the approved invoices
according to due date and track the way. Besides, by preparing cash flow budgets can help the
company to determine whether the company has adequate cash flow to take advantages of early
payment discount.
Next threat is paying for items not receive. This may lead to an increasing cost of the
company where the company forces to pay for the goods that not receive. The best ways to
control this threat is to compare quantities on invoice with quantities reported by receiving and
inventory control department. The inventory control department needs to verify the quantities on
the receiving report before it can used to support payment of a supplier invoices. Besides, the
company has tight budgetary controls and provides careful review of department expenses. For
examples, before making any payments regarding to the items order Proterm Automobile Sdn
Bhd employees in receiving and inventory should communicate together and doing the checking
in the quantities that they receive. This is to avoid the company from paying the goods that not
receive to them.

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Lastly, another threat that the Proterm Automobile Sdn Bhd should face is cash flow
problems. This threat is very common in almost all companies. If the companies have cash flow
problem, it may cause the company will make a wrong decision making due to the problem in
the cash flow. For examples, the cash inflow of the company is bigger than cash outflow. So, to
avoid this cash flow problem, the company should do a cash flow budget. For examples in
avoiding this cash flow problems happen in Proterm Automobile Sdn Bhd is by always monitor
all transaction occur in daily operation. To

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