Buy Strore Inv

8/8/2019 Buy Strore Inv

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PURCHASING

MANAGEMENT



AREAS OF CONCERN Economic purchase operation

Continuous market survey

Purchase policy: hand-to-mouth buying:speculative buying

:hedging and forward buying

Value analysis and value engineering Inventory control

Standardization



ITEMS TO BUY Stock items

Non-stock items

Capital items



PROCESS OF PURCHASING Open tendering

Limited tendering

Single tendering ± proprietary item

Verbal tendering



PRINCIPLES OF

PURCHASING Right quality

Right quantity

Right price

Right time

Right place Right source



PURCHASE CYCLE Requisition > scrutiny of need

>float enquiry > receive offers

> evaluate bids > place order

> vendor¶s confirmation

> follow up > inspection >delivery

> approve materials

> stores receipt voucher

> claims settlement >

close order



QUANTITY TO PURCHASE Economic order quantity

Price discount offers

Just-in-time management

Seasonal product purchasing



OTHER AREAS OF

CONSIDERATION Make or buy decision

Lead time analysis

Variations in delivery & price > F.O.B / C.I.F /F.A.S / F.O.R / EX-WORKS

Two part tender document: >technicalspecification offer >commercial offer with price

and delivery schedule Forecasting

Insurance and claims for damages



HEDGING Special application for commodities like:

sugar, leather, rubber, coffee, cotton

cocoa, wool, vegetable oil etc.

Techniques to minimize risks related with

fluctuation in price



FORWARD BUYING A buyer may enter into a long term forward

buying contract with a vendor

In forward buying deliveries are staggered

and need is also spread out

It is a safeguard for continuity of supplies

It protects price



SALE OF GOODS ACT There must be buyer & seller

There must be definite goods & must be in

deliverable state

Effects transfer of property or title of the

goods

Must be concluded by delivery in one hand

and payment of price on the other



ESSENTIALS OF VALID

CONTRACT A lawful offer accepted unconditionally

Free consent of the parties

Object is lawful

There is a valid consideration

Be capable of performance Must not be void

Must be in writting



INTERNATIONAL

PURCHASING EXIM policy

Locating foreign supplier

Need of foreign exchange

Processing import license

Letter of intent Letter of credit

International contracts



IMPORT OF GOODS

O.G.L. Items

Bi-lateral arrangements

Proprietary items

O. E. M. Import substitution



CONDITIONS OF CONTRACT:

WORLD BANK NORMS The stipulations provide procedures and

process involved in inviting international

competitive bidding through bidders

pre-qualification

The World Bank contract conditions do not

permit any sort of negotiations with thelowest bidder for modifying or withdrawing

any of the conditions stated in the offer



VENDOR EVALUATION To select reliable vendor for successful

purchasing action

Periodical analysis is needed to build upeffective source from their past performance

Attributes for evaluation > delivery,reliability, technical know how, financialstrength, testing & control facility etc.



VENDOR RATING Quality performance ratio = (No. of deliveries

without rejection) / Total no. of deliveries (50 Pts)

Delivery points = (Quantity delivered in time) /(Total quantity on order) (30 Pts)

Price points = (Lowest price) / (Price quoted)

(15 Pts)

Service points = (No. of prompt response) / (Total

No. of requests) ( 5 Pts)



RATING SCALES Total performance

= 50 QPR + 30 DPR + 15 PPR + 5 SPR

Excellent = 81 to 100 points

Very good = 71 to 80 points

Good = 61 to 70 points

Satisfactory = 50 to 60 points



ETHICS IN PURCHASE Ethics in purchase calls for strict adherence

to code of conduct, which includes >

To buy without prejudice

Work for honesty

To denounce bribery

To respect one¶s obligation to organization



Stores Management



Objectives of Stores Management To ensure availability of materials for

uninterrupted operation

To take safe custody of materials

To preserve qualitative aspects of materials

held in stores

To contribute to cost effectiveness in

operation



Primary functions of stores To receive materials in stores

To issue materials to user department

To keep records of all transactions of

receipt and issue

Maintaining accounts of stores

Stock verifications and reconciliation of

book balance



Secondary functions of stores Codification of all stock items

Standardization of items and variety

reduction

Inventory control and stock control

Materials handling and transportation

Adopting measures for maintaining and

preserving stock items



Types of stores Central store

Regional store

Divisional store

Field store



Types of stock records Bin card: simple record of receipt and issue

with balance quantity

Kardex: replaces the traditional bin card

Stock ledger: shows value of the stock items

with their transactions

Computerized ledger: replaces the manually

operated stock ledger by on-line operation



Methods of pricing materials On cost price basis

On the basis of average price

On the basis of weighted average price

On the basis of moving average price

On the basis of market price On standard price basis





INVENTORY MANAGEMENT It is a scientific process of monitoring and

regulating the flow of inventory in

operation management

Inventory management aims to ensure

uninterrupted supply of materials to

operation department economically





INVENTORY LEVELS Prepare Material Directory showing list of

all items with specifications

Carry out classification of items Fix norms of : minimum level

maximum level

safety stock levelre-ordering leveleconomic order quantity



DETERMINISTIC MODELS

FOR CONTROL ECONOMIC ORDER QUANTITY

= v ( 2.D.C0 / Ch.C )where D = Annual demand

C0 = Ordering cost per order

Ch = Inventory holding costC = Cost per unit

Reordering Level= avg. demand x lead time



PROBALISTIC MODEL FOR

CONTROL Safety stock absorbs fluctuations in demand

as well as lead time:

Models for control are > Fixed Quantity Order system: Q ± System

Safety stock and reordering level

Periodic Review system: P ± SystemSafety stock and review period

Single time purchasing system



SELECTIVE INVENTORY

CONTROLS ABC analysis: based on consumption value

VED analysis: based on importance of item

FSN analysis: based on rate of consumption

SDE analysis: based on availability of item

HML analysis: based on unit price of item XYZ analysis: based on annual stock value



VED VRS ABC MATRIXVITAL ESSENTIAL DESIRABLE

A Tight control Moderate

stock

Almost no

stock

B Moderate

stock

Moderate

stock

Very low

stock C High stock Moderate

stock

Low stock



CONTROL PROCESS Activity Group ± I Group ± II Group ± III

Control Tight moderate loose

Forecast Accurate estimate rough

Quantity Exact exact estimated

Reports Weekly monthly quarterly Follow up Maximum periodical exception



Exercise Prepare a list of household items under the

following heads:

Groceries

Clothes

Kitchenware

Furniture Electrical appliances

Others

Documents

Buy Strore Inv