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RECEIPT AND INSPECTION OF MATERIALS Materials /inventory may be received from Suppliers Production department User department

Receiving procedure The supplier, on receipt of the purchase order, fills up the buyer's requirements and arranges for delivery of the materials in accordance with the instructions relating to the quantities, time, route, mode of transport etc. mentioned in the purchase order. The section or department that is entrusted the responsibility of receiving materials and getting them inspected is known as 'Receipt' or 'Receiving' department/section. In a small company, the function of receiving materials is generally looked after by the store department. The activities involved are as under: (i) Receipt or collection of materials

Materials to be delivered by the suppliers are received accompanied by the supplier's 'Delivery Challan', 'Delivery Note 'or' Delivery Advice which may either be in duplicate or triplicate. The original copy of the delivery challan is retained by the receipt department. The duplicate copy is stamped 'subject to physical count and inspection 'and is signed by the receipt clerk and is handed over to the supplier's representative. When materials are received with the supplier's delivery challan, the person

from the receiving department takes out the copy of the relevant purchase order and verifies to ensure; that the goods were actually ordered and have been received the supplies are in accordance with the delivery schedule (i.e. excess supply is not received) Purchase order number, part name, part number, broad purchase category and so on are mentioned clearly and correctly (ii) Unpacking and inspection of the goods

Once the store man is satisfied that the goods were actually ordered then unpacking of the goods immediately takes place. This is mostly done in the store receiving yard or it could be in the quarantine storage area. The goods are checked based on the purchase order and the suppliers delivery note thus the store-man checks on;

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the quantity ordered and quantity delivered or as indicated in the delivery note weight if the goods were ordered based weight size of the goods were ordered on basis of size expiry date of the commodities pack lots check for damages

* Mostly in the private sector the store man usually notifies the user department immediately a delivery is made so that they aid in making sure that the right quality of goods has been received and ascertain that the goods conform to the technical specifications set in the purchase order. Inspection (in public sector) Inspection and acceptance is done by inspection and acceptance committee. This committee is composed of a chairman and at-least other two members appointed by the accounting officer or the head of procuring entity on the recommendation of the procurement unit. Immediately after delivery of the goods works or services the committee; inspects and where necessary test the goods received inspects and review the goods, works or services in order to ensure compliance with the terms or specifications of the contract accept or reject on behalf of the procuring entity the delivered goods works and services ensures that the correct quantity has been received ensure goods, works and services meet the technical standards defined in the contract ensure that the goods, works or services have been delivered or completed on time and any delay noted ensure that all required manuals or documentation have been received issue interim or completion certificates (iii) Storage and generation of goods received information

After inspection, the goods are segregated into accepted/rejected or rework categories and only the fully accepted quantity is forwarded to the stores. The quantity is physically verified and a goods received note is generated. This could be done manually or the system if any. The storekeeper then updates the stock control records or cards, kardex/ledger or bin cards. when updating the bin cards for goods received use a red biro pen

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(iv)

Invoicing and Payment

Once the storekeeper has completed the goods received reports a copy of Goods Received Note (GRN), original invoice, delivery note, copy of Local Purchase order is attached together and forwarded to finance/ accounts department to facilitate the payments for the supplier. Issuing procedure 1. User department raises a requisition to get goods from the store or warehouse, alternatively the requisition may be send via the electronic systems to the store 2. Once the requisition has been received by the store man, he checks to ensure that its dully signed by the relevant authority 3. The store man confirms the availability of the goods and picks the required amount from the racks and raises an issue not indicating the quantity that has been issued, the requested number in which issues have been issued against and the person receiving the items signs in the issue note which a copy is kept by the store man 4. The quantity issued is updated in the bin cards/ stock control cards. Make sure the quantity issued is accurately subtracted in order to get actual stock balance. Use a blue or black biro pen to update the bin cards. Green colour is usually used by auditors in event of auditing the bin cards Issuing of tools The store man should have a tools register for issuing tools. It may have the following contents Date issue of Employee name PF Type tool of Serial number Date returned Comments (condition)

Preservation of materials/inventory Materials could be preserved in the following ways Painting especially for items prone to corrosion Coating Refrigerating Packaging Treating with chemicals

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PURCHASING TECHNIQUES AND BASIS OF MATERIAL COSTING Special buying systems (i) Hand to Mouth Buying Hand to mouth buying also called "buying according to the requirements" refers to the frequent purchases of an item in small quantities. The important characteristics of hand to mouth buying are: Purchases are made only when the demand arises. Purchases are made to cover immediate requirements. Quantity purchased is generally small, though, at times, large quantity may be purchased. The terms of contract are negotiated. Competitive bids are generally not obtained, as there is no sufficient time. Suitability of the method These method apply to: Items required for prototypes and for products under development Items which are used infrequently and would not be required to be stocked, because of which they are purchased when they are needed for definite consumption. Machine tools, special building materials, office furniture etc. are some of the examples of this group the immediate requirements of a stock item caused either due to a delay in delivery from regular suppliers or due to an increase in consumption the immediate requirements of items, whose prices are expected to fall in the near future; the procurement of replacement spares ' items which have a limited shelf life and are not stocked for fear of perishability Items which are bulky (e.g. packing materials like wooden boxes and thermocole sheets, cotton waste etc.) and need a lot of storage space. 2. Scheduled Buying Scheduled buying is the process of procuring an item in staggered deliveries according to the delivery schedule furnished to the supplier by the buyer. The salient characteristics of scheduled buying are as follows:

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A purchase order covering annual requirements (alternatively a purchase order without specifying the order quantity, called open order) is placed with the supplier. The supplier is given the estimate of the procurement needs covering a mutually agreed period of time. It is a common practice to give 2-3 months confirmed schedule and 2-3 months tentative schedule.

Fresh delivery schedules are given to the supplier prior to the completion of the previous schedule. Fresh schedule supersedes the previous schedule.

Suitability of the system Scheduled buying is best suited for Items of regular use such as cutting tools, castings, forgings, lubricants etc. Items produced to the buyer's design and requiring long lead time to manufacture. Proprietary items from suppliers who insist on long-term schedules. 3. Forward Buying Forward buying refers to the procurement of sufficient quantity of an item in advance of its need and at a time when the prices are low (and/or expected to rise). The important characteristics of forward buying are as follows: Purchases are made to cover production requirements for a considerable period Quantity purchased is generally large The atmosphere is usually favourable for negotiation Purchases are made when the prices are low. The buyer also gets a discount on large purchases. 4. Speculative Buying Speculative buying refers to the buying of large requirements of an item, when its price is low with the intention to sell a bulk of it at a higher price for speculative profits. Some important characteristics of speculative buying are: Purchases are in no way related to the company's production programme. An item which is not required for production may be purchased. Speculative buying does not base decisions on quantity. Its single aim is to make speculative profits. The quantity purchased is thus generally high and is as much as the company finance can permit to buy.

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5. Contract Buying Usually, all purchases are by contract. The term contract buying is applied to those special contracts which call for deferred delivery over a period of time. According to Spriegal, "Contract buying is the purchasing made under contract, usually formal, of needed materials, the delivery of which is frequently spread over a period of time." Some important characteristics of contract buying are: Contracts are given to suppliers for a large amount of future requirements or for a certain period (say a year). Quantity received per occasion is generally small. The cycle time between two consecutive receipts may be a week, fortnight, a month or any period considering the value of requirements, distance and the mode of transport. The buying department usually finds sufficient time to secure competitive bids and negotiate terms of contract. 6. Blanket Orders Blanket orders refer to the purchase of a variety of items from a single source, usually a middleman. Some important characteristics of blanket orders are: A blanket order specifies the categories of items covered by the order The items covered by the order generally have low unit value More than one middleman may be selected to avoid hold-ups in case of non availability of an item with one 'Market-price' is generally specified on the order, which may include a specified method of determining price variations; The supplier is given requirements regarding who supplies and bills at the 'prevailing prices less agreed discount' on the phone. The records of the supplier are open to inspection on demand. Alternatively, the buyer may contact vendors on phone, enquire about price and buy from one who quotes the lowest the other terms of contract being common to all. 7 Seasonal Buying

Seasonal buying refers to 'buying of the annual requirements of an item during its season.' This method is used for items available in a particular season only