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Supply Chain Concept: Why Should Supply Chain Industry need to Understand Sarbanes Oxley (SOX)?
Tags :
Section 401, Section 404, Section 409, SOX, SOX in Supply Chain
Industry :
Management & Strategy Consulting, Management & Strategy Consulting
Functional Area : Logistics & Supply Chain, Business Models, Logistics & Supply Chain |
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Hi
There three key sections in SOX which has implication on Supply chain. Have listed them down:
1. Section 404 – Internal Controls - SOX section 404 specifically requires that companies create and maintain viable controls.
a. Inventory & Inventory write offs
b. Material Transfers
c. After the facts Purchase Orders
d. Segregation of Duties
2. Section 401 (a) – Off Balance Sheet Obligations
a. Vendor Managed Inventories where we have a financial obligation to pay for cancellation or other penalties.
b. Long Term Purchase Agreements that have penalty clauses
c. Lease Agreements where there is a financial obligation to our company if we terminate the lease.
d. Letters of Intent where we commit to our supplier base in order to get in a long lead time production schedule. If there is a cancellation clause with financial impact, then this in essence is an off balance sheet transaction.
3. Section 409: Timely Reporting of Material Events
a. Late supplier deliveries that will cause revenue forecast to be missed.
b. Outsource providers who cannot provide the goods and services which will result in missed statement of revenues based on relying on provider’s services to continue to produce the revenue stream.
Kindly let me know if we need to add more or refining above points.
Regards
Mihir Kumar Jhaveri, PMP, CSCM
Senior Manager
There three key sections in SOX which has implication on Supply chain. Have listed them down:
a. Inventory & Inventory write offs
b. Material Transfers
c. After the facts Purchase Orders
d. Segregation of Duties
a. Vendor Managed Inventories where we have a financial obligation to pay for cancellation or other penalties.
b. Long Term Purchase Agreements that have penalty clauses
c. Lease Agreements where there is a financial obligation to our company if we terminate the lease.
d. Letters of Intent where we commit to our supplier base in order to get in a long lead time production schedule. If there is a cancellation clause with financial impact, then this in essence is an off balance sheet transaction.
a. Late supplier deliveries that will cause revenue forecast to be missed.
b. Outsource providers who cannot provide the goods and services which will result in missed statement of revenues based on relying on provider’s services to continue to produce the revenue stream.
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