Blades R UsComprehensive Case

(Prepared by Edward P. Kiernan and

Abigail Olken, Lehigh University)
Blades R Us is a growing manufacturing
firm
that produces high-pressure turbine
blades.
The company supplies these to airline
companies
as replacement parts for use in large
commercial
jet engines. The high-pressure turbine
is the segment of the engine that
undergoes
the most stress and heat. This requires
that
these parts be replaced frequently, so
Blades
R Us operates a relatively large firm with
constant
demand for its products. It operates out
of Philadelphia, Pennsylvania, with a
workforce
of approximately 1,000 employees. Its
annual output is based on demand, yet
at full
capacity, it has the ability to produce
100,000
blades a year. The companys largest
suppliers
are casting houses, which take a rough
shape
of the final product to very demanding
specifications
given by Blades. Blades R Us then
does the final detail work to bring it to
FAA
regulations.
The general business environment of
Blades R Us is one in which it sees
expansion
in its future. This is because of the recent
boom in the commercial airline industry.
In
addition, with the recent attention to
airline
safety and the discovery of bogus parts
used
in engines, the airlines will be doing
better

checks and needing to replace parts

more frequently
to ensure safety.
Blades R Us has been around for some
time, and therefore has no computeroperated
accounting systems. Some of the
problems the
company faces include (a) lack of
inventory
control; (b) keeping track of items in
production
or production that was completed in
one day; (c) a need for trends and
tracking of
the largest customers so that future
demand
might be more accurate; (d) supervisory
issues
dealing with theft of parts, near
substandard
parts, and hiding of scrap; and (e) large
inventories
on hand of both FG and RM.
Procurement Procedures
The company reviewed the records
associated
with the RM inventory files. Mr. Sampson,
the inventory manager, was in charge of
this
procedure. Once he finished his manual
review
of the inventory, he issued two purchase
requisitions.
He kept one of the purchase requisitions
in the inventory department, filing it in
a cabinet. He sent the second purchase
requisition
to the purchasing department.
Ms. Connolly in the purchasing
department
would take the requisition and complete
a purchase order in triplicate. One copy
was
sent to the supplier, the second was filed
in
the purchases department filing cabinet,
and
the third was sent back to Mr. Sampson
in the

inventory, department. Mr. Sampson

would
use this PO to update his inventory
records
so he knew exactly how much inventory
was
on hand at all times. Once the inventory
was
updated, the PO was put in the filing
cabinet
in the inventory department with the
original
purchase requisition.
The supplier would receive the PO and
send the requested blades, including a
packing
slip with the shipment. At the same time
shipment was made, the supplier would
also
send an invoice to the AP department.
In receiving, Mr. Hiro simply used the
packing slip that was included with the
goods
to make three copies of the receiving
report.
The first copy was sent to the purchasing
department,
where it was filed. The second copy was
sent to accounts payable (AP), and Mr.
Hiro
filed the third copy in the filing cabinet.
The AP department would file the
receiving
report until the invoice from the supplier
arrived. Then Mr. Maldonado would check
both the receiving report and invoice to
make
sure everything sent was actually
received. Mr.
Maldonado would then hand off the
documents
to Mr. Bailey so that he could do the
appropriate posting and filing of the
checked
documents. Mr. Bailey would post the
changes
to the voucher register and purchases
journal,
sending a journal voucher to the GL
department
after the purchases journal was updated.

Mr. Bailey would then put the receiving

report
and invoice in the appropriate file. Also in
AP,
Mr. Dresden would scan the records to
see
when it was time to write checks to the
different
vendors. Whenever a due date arrived,
Mr. Dresden would write a check in two
copies.
The first copy would be filed in the
cabinet,
and the other would be sent to the
appropriate
vendor. Then Mr. Dresden would update
the AP subsidiary ledger and send an
account
summary to the GL department.
The GL department was a tight ship.
Mr. Callahan would receive the account
summary
and journal voucher and then post the
necessary changes to the GL. After
posting, the
documents were filed in the GL
department.
Conversion Cycle Procedures
The conversion cycle at Blades R Us
begins
with the production planning and control
department receiving the inventory
levels from
the FG warehouse. If the number of a
given
part in the FG warehouse is below the set
minimum, then production for the part is
to
be run. The production planning and
control
department gathers the BOM and the
route
sheet for that part and makes up the
production
schedule and work orders. A copy of the
work order, route sheet, BOM, and
production
schedule is filed at the production
planning
and control department. A copy of the

production schedule, work order, and

BOM
is sent to the work centers.
Once the work centers receive the
paperwork
from the production planning and control
department, production is initiated. The
work order is sent to the FG warehouse,
and
the production schedule and route sheet
are
filed. Time cards are filled, out and given
to
the payroll department. Materials
requisition
forms are filled out in order to attain the
necessary
materialsone is filed, and the other is
sent to the inventory control department.
When inventory control receives the
materials
requisition, they send the desired
material
to the work center, update the inventory
records, and then file the material
requisition.
The inventory control department makes
the
decision to buy RM based on a
predetermined
minimum of parts in inventory and a set
order
number. The inventory records are
periodically
reviewed, and when the number of a part
in inventory falls below the set minimum,
a
purchase requisition is completed. One
copy
is sent to the purchasing department and
the
other is filed. The purchasing department
sends

inventory control a purchase order, which

it
then uses to update its inventory records.
The
purchase order is then filed.
Blades R Us has made the decision to try
to become a world-class company. It
realizes
that it will have to make many
fundamental
changes to achieve this goal. One of the
first steps that they have decided to take
is
to implement an MRP system. They feel
this
will help them to keep better track of
their
inventories, WIP, and customer demands
and
trends. They also realize that there are
many
weaknesses in the other pieces of their
conversion
cycles, and they would like to take steps
in improving those as well.
Required:
READ THE CASE CAREFULLY
a. Create a data flow diagram of the
current
system.
b. Create a document flowchart of the
existing
system.
(50 POINTS)
NOTE: DEADLINE OF SUBMISSION ON
OCTOBER 19, 2015. SEND IT ON MY
EMAIL WITHIN THAT DATE. DEDUCTION
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