Document your supply chain's effect on company performance

APICS, The Educational Society for Resource Management, and Protiviti Inc., a risk consulting and internal audit firm, announced an alliance to bring supply chain risk management thought leadership to the business community. To mark the launch of this alliance, APICS and Protiviti released a white paper for logistics professionals: "Capitalizing on Sarbanes-Oxley Compliance to Build Supply Chain Advantage: A Back-to-Basics Approach to Internal Control and Supply Chain Integrity."

The Sarbanes-Oxley Act (SOA)requires officers of public companies to certify various representations regarding the fairness of financial statements and the effectiveness of diclosure controls and procedures. Section 404 of SOA requires management to file an internal control report with its annual report. The report must articulate management's responsibilities to establish and maintain adequate internal controls over financial reporting at year end and management's conclusion on the effectiveness of these internal controls.

"Businesses [have] lost their competitive advantage due to management's inability to retain control and the inefficient, unpredictable and chaotic nature of the supply chain process," the report's authors note. "Ineffective supply chain operations not only drive inefficiencies but also increase the likelihood of financial misstatement."

Although Section 404 focuses on internal controls over financial reporting, the fundamental approach to achieving compliance has a complementary impact on supply chain infrastructure design, transaction integrity and reporting measures, both in a financial and operational nature. For supply-chain-related processes, the suggested approach begins by defining and linking six supply chain components: business strategies and policies; business processes; organization and people; management reports; models and methodologies; and systems and data. Users are also advised to document and assess critical supply chain processes, design and implement controls, and report on the final state.

The final SOA Section 404 rules were adopted by the SEC on May 27, 2003. If your company is listed and must comply with the accelerated filing requirements, you will need to comply with the new rules by your fiscal year ending on or after June 15, 2004. Managers will want to position their companies to send a positive message to share holders, analysts and others about their commitment to reliable and fair financial reporting. Electronic copies of "Capitalizing on Sarbanes-Oxley Compliance to Build Supply Chain Advantage" are available at www.apics.org. Proviti will present the paper at the upcoming 2003 APICS International Conference and Exhibition, October 6-9, in Las Vegas.

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