Business Process Review

Fresh Healthy Juice Boosters, Inc.

Report on Business Process Review
November 5, 2012

THE CORRESPONDENT OF MAZARS IN THE PHILIPPINES

 Inventory Management

ISSUANCE TO
Start ORDERING RECEIVING STORAGE MONITORING End
PRODUCTION

2
 Inventory Management:
Ordering of Raw Materials (Supply Chain)
1
Supply Chain Supply Chain Head and
determines
Yes the Management
Start product quantity
Importation? Heads undergo A
meeting for approval
to order of importation plan
1
1
No
To: p.4

International Company’s import

Sends order to To: p.5
suppliers send brokers arrange
A international import permits with (receiving)
a pro-forma
suppliers Bureau of Customs
invoice
Supply Chain Head

N1

Note/s:
1. Bulk of the Company’s raw and packaging materials are imported from US-based suppliers, Sysco and East Bay. The Supply Chain
Clerk fills out an order template that are sent to the suppliers through electronic mail.

Risk/s Existing Control/s Proposed Control/s

1 Inaccurate/inconsistent bases of
ordering may result to either product
run-out, thus lost sales or spoilage
due to oversupply.
None Ordering should be triggered by the
stores since the stores have first-hand
information about the current level of
inventories and timing and volume of
demand.

3
 Inventory Management:
Ordering of Raw Materials (Supply Chain)

Supply chain head Budget officer Supply chain

From: prepares Purchase PRF and department head prepares PO
p.3 Requisition Form manager approve
B
purchase Order
(PRF) PRF (PO)
N2

Managing Supply chain Supply chain head

receives To: p.5
director head sends PO
B
Supply Chain Head

confirmation on the (receiving)

approves the to local receipt of order
PO suppliers from local suppliers

Note/s:
2. Supply Chain Head fills out Purchase Requisition Form (PRF) with the following details:
 Supplier’s name  Quantity
 Warehouse name  Unit
 Date requested  Description
 Date required  Monthly consumption
 Item type  Quantity on hand

4
 Inventory Management:
Ordering of Raw Materials (Supply Chain)

From:
p.3
Supply Chain Checks the Approved goods
Has No are forwarded to
receives the received goods End
Defects? JENTEC
goods for defects (warehouse)
From:
p.4 N3
Supply Chain Head

Yes

To:
p.6

Note/s:
3. Supply Chain inspects received products in accordance to Jamba's Product Receiving & Storage/Product Quality & Food Safety
Standards.
 
Only Jamba-approved products should be accepted, brought into warehouse and kept properly according to Jamba's Product
Receiving & Storage/Product Quality & Food Safety Standards.

5
 Inventory Management:
Ordering of Raw Materials (Supply Chain)

Rejection Report Notify local

Rejection Report Supply Chain
From: No Supply Chain suppliers
Imported returns rejected
p.5 issues Rejection regarding the
products? goods
Report rejected goods
Supply Chain Head

Yes Other relevant

Photographs
Information
Deliveryof Damages
Receipt
Bill of Lading File
Claim Form
Supply Chain issues Wastage Report
wastage report and
fills out Claim
Form/Debit Memo

Other relevant Supply Chain

Photographs
Information forwards
Deliveryof Damages
Receipt End
documents to
Bill of Lading
Claim Form foreign suppliers
Wastage Report

6
 Inventory Management:
Ordering (Store)
2

Store Manager
Start checks level of
store inventories
N4 1
2
SOF
3 SOF
SOF Order
Store Manager SOF Yes
from To: p.9
SOF
Store Manager fills out Stock JENTEC?
prepares order Order Form
(SOF)
1
3 No To:
p.10
Store Manager

Notes:
4. The timing and the quantity of inventories to be ordered are determined based on Store Manager’s historical experience.
 
Delivery of ordered goods is scheduled according to dates stated in the order sheet as determined by the Store Manager. Orders
for the following week’s operations are scheduled as follows:
Supplier Order Date Product

Purple Oven Corp. Wednesday before 12 noon Pastries (pretzel and tomato twist)

Max’s Bakeshop , Inc. Friday or Saturday Pastries (smoke house, spicy chorizo and etc.)

Rodzon Marketing Corp. Friday before 12 noon Spreads

Dole Philippines, Inc. Friday before 12 noon Ingredients

JENTEC (warehouse) Any day before 12 noon Raw Materials and Packaging

7
 Inventory Management:
Ordering (Store)
Risk/s
2 Possible over/under purchase of goods may
lead to Company’s losses due to spoilage
3 Operational inefficiency in monitoring and
tracing transactions may result to delay in
payment of the Company’s trade
obligations potentially leading to additional
charges for interest and penalties and
further declined orders/reduced credit
Store Manager
limit/pre-termination of credit facility.
Existing Control/s Proposed Control/s
None Ordering of goods should be prompted in the
stores since the stores are familiar to the
operation. Then forwarded to Supply Chain for
monitoring and sending of orders to suppliers
None The Company should consider the preparation
of pre-numbered Stock Order Form to provide
an organized way to keep track of ordered
items and to have easy listings of all orders for
a specific vendor.
8
 Inventory Management:
Ordering (Store)

Store Manager Supply chain

From: sends stock order head reviews and To:
p.7 sends SOF to p.10
form to supply
warehouse
chain (JENTEC)
N5
Store Manager (GM)/Supply Chain Head

Notes:
5. The Store Manager sends store requirement (SOF) for imported raw and packaging materials to the Supply Chain through e-mail.
The Supply Chain Head sends a copy of the stock order form to JENTEC for delivery.

The following are the local suppliers of the Company:

Supplier Product Remarks

Purple Oven Corp. Baked goods (pretzel and tomato twist) Directly contacted by SM

Max’s Bakeshop , Inc. Baked goods (smoke house, spicy chorizo, etc.) Directly contacted by SM

Rodzon Marketing Corp. Spreads Directly contacted by Supply Chain Head

Dole Philippines, Inc. Fruits Directly contacted by Supply Chain Head

SOFs for Purple Oven Corp. and Max’s Bakeshop, Inc.’s products are prepared by the Store Manager. The SOFs are sent directly to
domestic suppliers. Orders for Rodzon Marketing Corporation and Dole Philippines are sent through e-mail to the Supply chain
Head who sends the orders to the suppliers.

9
 Inventory Management:
Ordering (Store)

Supply chain
From: Direct Yes SM sends SOF to
head sends SOF
p.7 contact? Supply Chain D
to domestic
Head suppliers
N6
No
4

Store Manager
sends SOF to
other suppliers
1
Store Manager (GM)/Supply Chain Head

D
SOF Receives
confirmation on the
receipt of order RECEIVING
from warehouse or
From: suppliers
p.9

Notes:
6. Local suppliers are accredited and approved by US Jamba.

Risk/s Existing Control/s Proposed Control/s

4 Unapproved purchases may result to
oversupply of goods which may
expose the Company to losses for
spoilage and wastage.
None Final approval from Supply Chain Head
for prepared orders should be obtained
to closely monitor and control the
inventory level in the warehouse and
stores.

10
 Inventory Management:
Receiving

Security guard Checks if the quantity

of received goods To:
registers the details
ORDERING of delivery into the agrees with the Sales p.12
Invoice (SI) and
logbook Delivery Receipt (DR)
N7 N8 1
5
Team Member

Notes:
7. Security guard records into his logbook the details of the delivery.:
• Suppliers’ name
• Names of delivery personnel
• Invoice number
8. Team members count the received goods. Counted goods are ticked mark in the Store Order Form (from JENTEC), delivery receipt
and sales invoice (from other suppliers) as evidence that the quantity had been counted.

Risk/s Existing Control/s Proposed Control/s

5 Possibility of receiving goods that is
not included in the ordered goods in
the absence of order form on hand
upon receipt of such goods.
Check the physical attributes of the Checking should be done by a team
received goods. member and the delivery personnel.
It would be better if the Company ticks
Issuance of a Product Complaint/Rejection mark the delivery receipt rather than
Report (PCRR) the sales invoice.

11
 Inventory Management:
Receiving

6
Quantity
From: agrees Yes Inspects quality Met Yes To:
p.11 of delivered Company’s p.15
with SI Specification?
goods
and DR? 1
N9 6

No
No
To:
p.13
Team Member

Note/s:
9. Store Manager inspects received products in accordance to Jamba specifications. Only Jamba approved products should be
accepted and brought into BOH and ensure all products are kept properly according to Jamba's Product Receiving &
Storage/Product Quality & Food Safety Standards. However, there is no formal inspection form issued to document the
inspection/receiving of the goods. In case there are products which are not in compliance with Jamba's specifications, the
products are not accepted. Team members inspect and document the product quality and attributes in the Product
Complaint/Reject Form then notify the suppliers for the rejected goods through phone call or e-mail and rejected items are
returned to suppliers.

Risk/s Existing Control/s Proposed Control/s

6 Lack of appropriate documentation
in inspecting goods may result to
higher returns due to bad orders
which lead to losses due to spoilage.
Check the quality of the received goods.
Issuance of a Product Complaint/Rejection
Report
Checking should be done by a team
member and the delivery personnel
based on Jamba’s standards.
Ensure that all of the criteria are met.

12
 Inventory Management:
Receiving

PCRR Store Manager

Store Manager PCRR Complaint Yes notifies suppliers
From: issues Product on for the End
p.12 Complaint / Quantity ? discrepancy on
Rejection Report quantity
(PCRR)
N10
No Photos
Complaint / Store Manager To:
Store Manager takes a
Rejection
Complaint / returns off spec p.14
RejectionReport
Report goods
picture of off
Supply Chain Head/Team Member

specification product N11 1

(quality defect)

Note/s:
10. Store Manager issues Rejection/Complaint Report in two (2) copies which contains the following details: receiving store, name
and position of receiving team member, date, nature of complaint/rejection ( quality or delivery), product , invoice number and
remarks (physical attributes). A copy of the Rejection/Complaint Report is given to the supplier’s delivery personnel together with
the rejected goods. Local suppliers, except for Dole Philippines, Inc. issue new sales invoice to reflect the new cost of the
approved and received goods.
11. Returned goods are evidenced by a Product Complaint/Rejection Report. This report is prepared by the receiving team member,
noted by the Store Manager and acknowledged by the delivery personnel.

13
 Inventory Management:
Receiving

From: Is it from Yes

Jentec replaces
p.13 warehouse
(JENTEC) rejected goods

N12

No
7 End
Store Manager
Store Manager
notifies local
Supply Chain Head/Team Member

reduces SI amount
manually suppliers for
rejected goods
1
7

Note/s:
12. Rejected goods from the stores are no longer inspected by the Supply Chain upon return.

Risk/s Existing Control/s Proposed Control/s

7 Tampered invoices may be
questioned by the BIR and may not
be claimed as allowable tax
deductible and VAT input item.
None The Company should require Dole
Philippines, Inc. to either issue new
Sales Invoice reflecting the accepted
goods or a memo supporting the sales
return.

14
 Inventory Management:
Receiving
SOF Transport
Company

SOF
IIR
SDF JENTEC
DR
Store Manager
From: Store Manager signs the SDF and
SI
Received Yes SOF

receives the Issuance and from Head

p.12 Office
goods Inspection Report JENTEC? SOF
(IIR)
N13
DR File
Store Manager

Storage

No
SI 1

DR 1 Supplier

SI 2

DR 2
File

Note/s:
13. Store Manager signs the Store Order Form, and Issuance and Inspection Report issued by warehouse (JENTEC) after approving
and checking the goods.

15
 Inventory Management:
Storage

8
Store Manager
Frozen
Yes Store in the
Receiving records received
goods?
goods in an excel
freezer
monitoring file 1 N15
N14 8

No

Transfers to the To:

BOH storage p.17
Team Member/Team Leader

Note/s:
14. Store Manager records received goods in an excel inventory monitoring file for stores.
15. Received perishable products that require refrigeration are stored in freezers. Each freezer has designated goods to be stored
inside. Stores personnel ensuring that required temperature for goods stored in freezer is in place.
Team members check twice a day the temperature and condition of the frozen products based on the Company’s Product
Receiving/Storage/Product Quality & Food Safety Manual. Team member documents it to the Company’s Daily Food Safety
Checklist. Store Manager checks the work done and the Store Manager reviews and signs the checklist.
Upon checking, any noted spoilage are documented in the Wastage/Spoilage Form and charged as loss of the branch.

Risk/s Existing Control/s Proposed Control/s

8 Manual recording of goods is
susceptible to human error and
alteration can easily be override by
others.
Possibility of theft may arise since
the data accessible to store staff and
the information can be altered easily
to cover up for lost/stolen items.
None The Company should have inventory
bin cards.
Movements should be reflected in the
cards and signed by the involved
person.
This should be reconciled with the
actual count at the end of the day.
16
 Inventory Management:
Storage

The team Team member Goods are

From: member secures attaches day dots issued to Yes
p.16 production
Issuance
the stocks based on the perishable
on FIFO method goods ?
N16 N17
Team Member/Team Leader

No

Monitoring

Note/s:
16. First In, First Out method of inventory issuance is observed in the Stores. Team members place the goods in a top-to-bottom and
left-to-right arrangement. Good’s condition is monitored regularly in order to mitigate spoilage of product in storing.
17. Received goods have assigned shelf life/expiration date. Team members attach day dots on the goods to monitor shelf life. Team
members follow specific guidelines in placing dates based on the Company’s Product Receiving/Storage/Product Quality & Food
Safety Manual.

17
 Inventory Management:
Issuance to production
9 10

Yes Team member Wastage /

Team member
For Revenue Spoilage are log
Storing production?
issues stocks to logs the issued
stocks Process upon
production
1 occurrence 1
N18 9 10
No
Regular Wastage &
checking of Spoilage
Inter -
refrigerated Tracking Sheet
Branch
Transfer products

File
Store Manager/Team Member

Monitoring

Note/s:
18. Issuance of stocks from BOH is done manually. Bonifacio High Street branch monitors the withdrawal of stocks through a white
board showing the movement in the BOH, while Alabang Town Center store uses log sheet (Raw Materials Log & Packaging
Materials Log) to monitor issuance of stocks from BOH. Log sheet includes the following details: date, quantity, item and signature
of issuing team member.

Risk/s Existing Control/s Proposed Control/s

9 Lack of monitoring and
unauthorized issuance of goods
issued to production exposes the
Company to losses due to
mishandling or misappropriation of
inventories.
The Company provides a log sheet for
monitoring inventory withdrawal.
The Company should have inventory
bin cards.
Movements should be reflected in the
cards and signed by the involved
person.

This should be reconciled with the

actual count at the end of the day.
18
 Inventory Management:
Issuance to production
Risk/s
10 Non-accounting of actual/physical
losses due to spoilage and wastage
and causes of losses logged in the
monitoring sheet exposes the
Company to recurrence of such
losses.
Store Manager/Team Member
Existing Control/s
The branch provides a log sheet for
monitoring wastage/spoilage. They log
upon occurrence.
Proposed Control/s
The Company should require a
wastage/spoilage report from the
person responsible and the incident
should be reviewed and checked
physically by an on duty Team Leader or
Store Manager and document
necessary action plan.
The Company should set a monthly
limit for wastage/spoilage incidence to
minimize occurrence of losses.
19
 Inventory Management:
Inter-Branch Transfer
11
Requesting Store Manager
Check No
branch inquire declines
Issuance inventory / Available? End
the availability of request for
supplies
N19 goods 1 transfer
11

Yes

Store Manager notifies

To:
the requesting branch
for the availability of p.21
goods
Store Manager/Team Member

Note/s:
19. The Store Manager inquires via phone call the availability of goods in the other branch.

Risk/s Existing Control/s Proposed Control/s

11 Lack of approval of Supply Chain
Head for inter-branch transfers may
result in unauthorized transfers of
goods.
It also exposes the Company to
double take-up of inventories if
such store-to-store deliveries are
not properly taken up in the
originating store’s records.
None The Company should instruct the
branch to seek prior approval from
Supply Chain Head and notify the
Accounting Head prior to store transfer.
The requesting branch should issue a
formal stock transfer report stating the
goods to be transferred, date, requester
and be signed by all involved parties.
The Supply Chain Head must closely
monitor and control the transfer
documents and Accounting Head must
closely coordinate with the stores to
account for the cost of the transferred
goods.

20
 Inventory Management:
Inter-Branch Transfer

IBTR
Head Office

IBTR Requesting
Branch
Team member Store Manager
Transfer of Inter-Branch
From: prepares reviews and Transfer Receipt
inventory / inventory /
p.20 signs Inter- (IBTR)
Store Manager/Team Member

supplies for supplies to

branch Transfer
Branch
N20 transfer N21 Receipt

Originating
Branch

Note/s:
20. Per inquiry, with BHS’s Store Manager delivery charges and loss/spoilage in transit are shouldered by the requesting branch.
21. The requesting Store manager communicates the requested product, quantity, delivery date and the mode of transfer. to the
other branch’s Store Manager. Team member from the other branch prepares the Inter-branch transfer receipt. The prepared
inter-branch transfer receipt is approved by the SM. Once delivered, the personnel of receiving branch signs the document to
acknowledge the receipt of the goods.

21
 Inventory Management:
Monitoring

Issuance
Store Manager/Team Member

Team Member
Daily Food
performs checking of Store Manager To:
the perishable goods Safety Checklist
and prepares Daily reviews and p.23
Food Safety Checklist signs checklist
(DFSC)

Storage
File

22
 Inventory Management:
Monitoring

Storage 12
Monthly Inventory Store Manager
Store Manger Sheet
Daily (BOH/FOH)
Inventory submits reports
End
checks the level Inventory Sheet (BOH/FOH) to Head Office
of the Count upon request
1
inventories N22 12

From:
p.22
File
Store Manager/Team Member

Note/s:
22. The branch sends their updated ending inventory every month end.
Risk/s
12 Inaccurate/inconsistent untimely
transmittal of reports to Head Office
may result in losing timely
information that may result to
deficiency tax assessments/forfeited
benefits of input VAT and
deductibility of costs/expenses.
Existing Control/s Proposed Control/s
None The Company should require the
Branch to submit a monthly report to
ensure timely review of the results of
operations (i.e. summary of inventories,
summary of wastage/spoilage,
purchase & order summary; and
summary of inter-branch transfers).

23
 Inventory Management:
Monitoring - Inventory Count

13 Monthly Inventory
Team member (BOH/FOH) To:
Team member Team member records
Sheet
Daily Inventory

performs daily counts the the counted goods in Sheet (BOH/FOH) p.25
Monitoring the daily and month
and month end goods from
end inventory sheet
inventory count BOH and FOH
1
13 N23

File
Store Manager/Team Member

Note/s:
23. Inventory counts are done at day end and at month end which serves as their inventory balance.

Risk/s Existing Control/s Proposed Control/s

13 Lax controls over monitoring of
received and issued goods to
production may encourage
employee theft.
None The monitoring spreadsheet must be
accessible to limited store personnel.
Further, the monitoring spreadsheet
must be timely and accurately updated
upon receipt and issuance of goods.

The result of count should be compared

with the monitoring spreadsheet and a
variance analysis must be prepared on
a monthly basis to properly document
and account reasons for variances.

24
 Inventory Management:
Monitoring - Inventory Count

Enough
From: Store Manager Yes
stocks for
p.24 assess the need next day End
to order operation?
Store Manager/Team Member

No

No
Branch
Ordering
Transfer

Yes

Inter-
Branch
Transfer

25
 Inventory Management
Report on Business Process Review
FRESH HEALTHY JUICE BOOSTERS, INC.
Summary of Observations, Findings and Recommendations
Observation and Finding Recommendation Type of control Priority
Inventory Management
Inaccurate/inconsistent bases of ordering may Ordering should be triggered by the stores since the Manual Prevent High
result to either product run-out, thus lost sales or stores have first-hand information about the current
spoilage due to oversupply. level of inventories and timing and volume of
demand.

Operational inefficiency in monitoring and tracing
transactions may result to delay in payment of the
Company’s trade obligations potentially leading to
additional charges for interest and penalties and
further declined orders/reduced credit limit/pre-
termination of credit facility.
The Company should consider the preparation of pre- Manual Detect Moderate
numbered Stock Order Form to provide an organized
way to keep track of ordered items and to have easy
listings of all orders for a specific vendor.

Unapproved purchases may result to oversupply Final approval from Supply Chain Head for prepared Manual Prevent High
of goods which may expose the Company to orders should be obtained to closely monitor and
losses for spoilage and wastage. control the inventory level in the warehouse and
stores.

Possibility of receiving goods that is not included Checking should be done by a team member and the Manual Prevent High
in the ordered goods in the absence of order form delivery personnel.
on hand upon receipt of such goods. It would be better if the Company ticks mark the
delivery receipt rather than the sales invoice.

26
 Inventory Management
Report on Business Process Review
FRESH HEALTHY JUICE BOOSTERS, INC.
Summary of Observations, Findings and Recommendations
Observation and Finding Recommendation Type of control Priority
Inventory Management
Lack of appropriate documentation in inspecting Checking should be done by a team member and the delivery Manual Prevent Moderate
goods may result to higher returns due to bad personnel based on Jamba’s standards.
orders which lead to losses due to spoilage.
Ensure that all of the criteria are met.

Tampered invoices may be questioned by the BIR The Company should require Dole Philippines, Inc. to either issue Manual Prevent High
and may not be claimed as allowable tax new Sales Invoice reflecting the accepted goods or a memo
deductible and VAT input item. supporting the sales return.

Manual recording of goods is susceptible to The Company should have inventory bin cards. Application Control High
human error and alteration can easily be override
by others. Movements should be reflected in the cards and signed by the
involved person.
Possibility of theft may arise since the data
accessible to store staff and the information can This should be reconciled with the actual count at the end of the
be altered easily to cover up for lost/stolen items. day.
.

27
 Inventory Management
Report on Business Process Review
FRESH HEALTHY JUICE BOOSTERS, INC.
Summary of Observations, Findings and Recommendations
Observation and Finding
Inventory Management
Lack of monitoring and unauthorized issuance of
goods issued to production exposes the Company
to losses due to mishandling or misappropriation
of inventories.
Non-accounting of actual/physical losses due to
spoilage and wastage and causes of losses logged
in the monitoring sheet exposes the Company to
recurrence of such losses.
Lack of approval of Supply Chain Head for inter-
branch transfers may result in unauthorized
transfers of goods.
It also exposes the Company to double take-up of
inventories if such store-to-store deliveries are
not properly taken up in the originating store’s
records.
Recommendation Type of control Priority
The Company should have inventory bin cards. Manual Detect High
Movements should be reflected in the cards and
signed by the involved person.
This should be reconciled with the actual count at
the end of the day.
The Company should require a wastage/spoilage Manual Detect High
report from the person responsible and the incident
should be reviewed and checked physically by an on
duty Team Leader or Store Manager and document
necessary action plan.
The Company should set a monthly limit for
wastage/spoilage incidence to minimize occurrence
of losses.
The Company should instruct the branch to seek Manual Detect High
prior approval from Supply Chain Head and notify the
Accounting Head prior to store transfer.
The requesting branch should issue a formal stock
transfer report stating the goods to be transferred,
date, requester and be signed by all involved parties.
The Supply Chain Head must closely monitor and
control the transfer documents and Accounting Head
must closely coordinate with the stores to account
for the cost of the transferred goods.
28
 Inventory Management
Report on Business Process Review
FRESH HEALTHY JUICE BOOSTERS, INC.
Summary of Observations, Findings and Recommendations
Observation and Finding Recommendation Type of control Priority
Inventory Management
Inaccurate/inconsistent untimely transmittal of The Company should require the Branch to submit a Manual Detect High
reports to Head Office may result in losing timely monthly report to ensure timely review of the
information that may result to deficiency tax results of operations (i.e. summary of inventories,
assessments/forfeited benefits of input VAT and summary of wastage/spoilage, purchase & order
deductibility of costs/expenses. summary; and summary of inter-branch transfers).

Lax controls over monitoring of received and issued The monitoring spreadsheet must be accessible to Manual Detect High
goods to production may encourage employee limited store personnel.
theft.
Further, the monitoring spreadsheet must be timely
and accurately updated upon receipt and issuance of
goods.

The result of count should be compared with the

monitoring spreadsheet and a variance analysis must
be prepared on a monthly basis to properly document
and account reasons for variances.

Possible over/under purchase of goods may lead to Ordering of goods should be prompted in the stores Manual Prevent High
Company’s losses due to spoilage since the stores are familiar to the operation. Then
forwarded to Supply Chain for monitoring and sending
of orders to suppliers

29