The weakness is Managers may order unnecessary goods which means Goods are ordered only based only on in-store information, there is no forecast, no sales focus and there is no approval for goods ordered by management. This is breach of impact on information goal: validity. Inventory could be overstated if the unnecessary goods become obsolete. Please answer below question : 1. Write The justification behind this weakness of LAF's purchase process. 2. why it can be considered as weakness?
Question
The weakness is Managers may order unnecessary goods which means Goods are ordered only based only on in-store information, there is no forecast, no sales focus and there is no approval for goods ordered by management. This is breach of impact on information goal: validity. Inventory could be overstated if the unnecessary goods become obsolete. Please answer below question : 1. Write The justification behind this weakness of LAF's purchase process. 2. why it can be considered as weakness?
Solution
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The justification behind this weakness of LAF's purchase process is that it lacks a systematic approach. The process is solely based on in-store information without considering other crucial factors such as sales forecasts or market trends. This could lead to overstocking of items that are not in demand, resulting in wastage of resources. Additionally, the absence of an approval process for goods ordered by management could lead to misuse of authority or poor decision making, further exacerbating the problem.
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This can be considered a weakness because it can lead to inefficiencies and financial losses. Overstocking of unnecessary goods means that capital is tied up in inventory that is not selling, which could have been used elsewhere in the business. Furthermore, if these goods become obsolete, they may have to be written off as a loss, directly impacting the company's bottom line. Also, without an approval process, there is a risk of miscommunication or misjudgment in ordering goods, which could further contribute to these issues. This weakness could also compromise the validity of the information goal, as the inventory could be overstated, leading to inaccurate financial reporting.
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