SARBANES-OXLEY Supply Chain Management Implications

There exists tremendous opportunities for our supply chain management practice and some areas whereby SAO issues may play are:

1. Long term purchase agreements with suppliers. Has the company provided a listing of these obligations?

2. Cancellation or Restocking Charges: Are these documented and how have they affected the financials?

3. Lease agreements: Fees associated with early terminations have a definite financial impact and must be accounted for as well.

4. Open Purchase Order commitments. Poorly controlled agreements can lead to inaccurate cash forecast requirements.

5. Inventory Write Offs and Poor Inventory Accuracy. Great opportunity for us since this is an area where we see supply chain organizations struggling with ensuring that their records are up to date, and that the materials in inventory are truly what they are stated to be. We constantly see companies whose inventories are listed as “new” and either the material is obsolete or actually deteriorate to the point of being junk or unusable.

Source: Inside Supply Management, April 2004 issue. Author: Anthony Tarantino, Ph.D.

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