CHAPTER 14

THE PURCHASING CYCLE

Procurement of quality material at a reasonable price is one of the most important function of the Materials Department.

THE PURCHASE CYCLE

Production dept. requisition to the stores Stores giving purchase requisition to purchasing

Purchasing dept. giving tender and getting quotations

Purchasing dept. evaluating the quotations, vendor Getting the material delivered in receiving section, inspecting Ready in the store for issue to production department

THE PURCHASING PROCESS

1.

RECOGNITION OF THE NEED New Routine Purchase department is formally informed about the needs of a particular item Purchase requisition form or purchase indent

THE PURCHASING PROCESS

1. RECOGNITION OF THE NEED
XYZ Company Ltd Materials Requisition Form No:_____________ Date:______________ Kindly issue the following material for use in _________ department at______ working station for _________ job. Sr. no. Item/Description Qty unit of measurement Required delivery Approx Schedule cost

Suggested vendors, if item is new and any remarks, if any. Section Incharge Head, Stores management The material requisition form

THE PURCHASING PROCESS

2.

QUOTATION REQUEST

Receiving the purchase requisition

Contacting all potential supplier Make sure to be clear and no ambiguity

THE PURCHASING PROCESS

3. Evaluation of quotations and selection of supplier

Receiving interested suppliers quotations Preparation of the comparative data Ranking supplier on the basis of price (taxes, freight, insurance, discounts, etc) Technical and complicated items/design & develop

KTC corporation ABC building Lahore Your quotation ref: XYZ/quotation-001/04-05 Dated To: M/s XYZ Ltd, XYZ building Lahore Ref: your enquiry no: xyz/007/04-05 Dated_________ Due date________________

Date________

We refer to your above enquiry and are please to quote as follows: Item No. 1 : DP box Voltage meter no: 777, square, white Quantity : 2000 Price : Rs 110 each General terms and conditions: Yours faithfully A K Bhatti

Quotation received from supplier

THE PURCHASING PROCESS

GENERAL TERMS AND CONDITIONS

Payment 20% advance with order 80% against dispatch document through the bank P&F and insurance will be charged extra at actual rate Delivery 6-8 weeks from receipt of firm order Central sales tax. Extra Excise duty. Extra Inspection: At our works

THE PURCHASING PROCESS

4. PLACEMENT OF PURCHASE ORDER

Placing the order Legal commitment of the supplier

Follow and obey the terms and conditions

Sample Purchase Order XYZ Company Ltd Purchase Order Purchase order No: To_____________ _____________ Date________

Kindly supply the following material as per your quotation (Offer number) and Our final discussion dated___________
Sr. no Item/Description Quantity Unit Price Deliver schedule

Total item value: Packaging and Forwarding Discount Taxes Net purchase order value Signature of the buyer

THE PURCHASING PROCESS

5. RECEIVING THE GOODS

Duly received goods Goods Inward Note (GI note) Inspection

THE PURCHASING PROCESS

6. PAYMENT FOR GOODS

GI note signed and forward to account dept. Accounts dept. compares with original order and

quotation Checking for any other terms Payments

Vendors/ Suppliers 15 16 4 Purchase 3 2 Receiving of Purchase Service Group or inward 6 Inspection And Quality assurance

Accounts

14

12 8

13 Stores 11 production 10 Material and information flow in the purchasing process

The Tender System

Open Tender
The item is being procured first time The item is of high value category To update supplier database

Limited Tenders Single Tenders