PURCHASE PROCEDURES:
Policy statements are guidelines and should be difficult to understand. It is necessary to avoid extensive and excessive policies. The purchasing policy provides guidelines and guidance in the following categories. It defines:
(a) Purchasing rules
(b) Conduct of purchasing personnel
(c) Social and minority business objectives
(d) Operational issues
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The procedure describes the sequence of steps that lead to the completion of a specific identified task. The purchasing procedure comprises the following steps as shown in Fig.
purchase procedure1. Recognition of the need:
The beginning of the procedure begins with the recognition of the need by the sector in need. The complaint is submitted to the purchasing department using the prescribed Purchase Requisition Form sent by the authorized person, directly or through the Stores Department. The purchase requisition clearly specifies the details such as material specification, quality and quantity, suggested supplier, etc. Generally, low-value miscellaneous and commonly used items are purchased for inventory, while more expensive and special items are purchased according to production programs. . Generally, corporate-level executives are authorized signatories to such demands. Such purchases are approved by the Board of Directors. Reference to approval is made in the requisition and a copy of the requisition is sent to the secretary for overall planning and budgeting purposes.
2. Supplier Selection:
The supplier selection process involves two basic aspects: searching for all possible sources and listing the identified sources. Complete information about the supplier is available from various sources, such as commercial directories, advertisements in specialized magazines, direct mail from suppliers, interviews with suppliers, salespeople, suggestions from commercial partners, visits to fairs, participation in industry conventions, etc. . Identifying more and more sources helps in selecting better and more cost-effective suppliers. It should be noted that the lowest bidder is not always the highest bidder. When everything except the price is equal, the lowest bidder will be selected. Important considerations in selection are price, ability to supply the required quantity, maintenance of quality standards, financial situation, etc. Please note that it is not necessary to follow this process for all types of purchases. For repetitive orders and purchases of low value items and small batches, previous suppliers with good records are generally preferred.
3. Placing the order:
Once the supplier has been selected, the next step is to place the purchase order. Purchase order is a letter sent to the supplier requesting the supply of said material. At least six copies of the purchase order are prepared by the purchasing department and each copy is signed separately by the purchasing officer. Of these copies, one copy each is sent to the warehouse, the supplier, the accounting section, the inspection department, and the requisitioning department and one copy is retained by the purchasing department for record
4. Order Tracking:
The follow-up procedure must be used whenever the costs and risks resulting from delays in material deliveries are greater than the cost of the follow-up procedure. The follow-up procedure attempts to ensure that the purchase order is confirmed by the supplier and delivery is promised. It is also necessary to review pending orders at regular intervals and communicate with the supplier if necessary. Typically, a routine request is made to the supplier by sending a printed postcard or circular asking them to confirm that the delivery is on its way or will be made as agreed. In the absence of any response or unsatisfactory response, the supplier may be contacted via personal letter, telephone, telegram and/or even a personal visit.
5. Receipt and inspection of materials:
The receiving department receives the materials provided by the supplier. The quantity is checked and computed with the purchase order. Receipt of materials is recorded on specially designed receipts or receipt forms, which also specify the name of the supplier and purchase order number. It also records any discrepancies, damaged status of the shipment, or inferiority of materials. The purchasing department is informed immediately upon receipt of materials. Typically, a copy of the receipt is sent to the purchasing department.
6. Invoice Payment:
When merchandise is received in satisfactory condition, the invoice is checked before being approved for payment. The invoice is checked to verify that the merchandise has been properly authorized for purchase, that it has been properly ordered, that the price is in accordance with the agreed terms, that the quantity and quality confirm the order, that the calculations are arithmetically correct, etc.
7. Record keeping:
Record keeping is an important part of efficient purchasing function. In industrial companies, most purchases are repeat orders and therefore past records serve as a good guide for future action. They are very useful for deciding shopping times and selecting the best source of supply.
8. Maintaining relationships with suppliers:
The quantity and frequency of transactions with the same key suppliers provides a platform for the purchasing department to establish and maintain good relationships with them. Good relationships develop mutual trust and security over time, which is beneficial for both parties. The efficiency of the purchasing department can be measured by the value of the goodwill it has with its suppliers.
