Implications of Supply Chain Management for Accounting Information Systems

Utilisation of Supply Chain Management (SCM) practice by businesses has a number of consequences for internal management information systems, many of which have been dealt with in the literature. Accountants and managers need to manage their supply chain carefully by working closely with the counterparts of their business entity’s suppliers in numerous areas including cost accounting, cost and inventory management, budgeting, risk assessment, management information systems, and management of strategic issues. Accordingly, the proper strategic management of the supply chain and the appurtenant risks is critical to the operational efficiency and financial well being of a business entity (Thomas, 1999). The ability of business entities to provide information to reassure external users of the business’s continued survival is critical in a global e-business environment where business failures continue to be all too common, despite the best efforts of regulators to foster corporate governance and improve the quality of assurance services. This paper contributes to discussion concerning the desirability of improving external reporting and audit assurance by identifying and reporting internally generated qualitative SCM information that is critical to achievement of business objectives. Strategic management processes in place in almost all businesses already produce vital strategic information related to continuous analysis and monitoring of environmental issues including those relevant to SCM. If SCM data is critical to business survival, why should it not be reported to external users, and on a continual basis? The discussion suggests that traditional definitions involving information needs of external users of financial information should be revisited by extending the accounting criterion of the ‘economic entity’ into a concept which is referred to in this paper as the ‘network business entity’ (NBE). While further research is required into clarifying the full nature and practical implementation of critical SCM data into external audited external financial reports, the paper concludes that externalising the value of internal SCM data will undoubtedly improve the decision making of the users of those financial reports.