Standard Operation Procedure (SOP) of Purchase

Working Area

Standard Operation Procedure (SOP) of Purchase is most import procedure of an organization. Every organization should be maintain Standard Operation Procedure (SOP) for better perform. It is most useful system to eliminate none value added time in any kind of process of an organization. The details maintaining procedure are below-

 

PURPOSE-To lay down a procedure for purchasing and to evaluate suppliers and develop them so as to select suppliers on the basis of their ability to meet the quality requirements.

SCOPE-This procedure covers

a) Purchase of items such as Equipment, Instruments, Furniture, Office Stationary, Spare and Consumable.

b) Registration of potential suppliers.

c) Evaluation and development of existing suppliers.

RESPONSIBILITIES-

Collection of quotation-Purchase Assistant

Preparation of purchase Order-Respective Departmental Head

Approval of purchase order- Board Director/GM (HR& Admin/Unit In charge

Evaluation of suppliers- Respective Departmental Head

PROCEDURES-

Reasons for purchase

An item purchase request is raised with different intentions such as:

  • A new item to replace an existing obsolete/damaged item.
  • An item which is already in use but additional ones are needed to meet the complete requirement.
  • A new item to facilitate a function that was done manually/not done till date.

Collection of quotation and authorization

  • A user/user department raises a request for an item. This shall be furnished with the proposed use, users, functional specifications, safety specifications if required, as well as the brand available in certain cases.

 

SOP

Purchase SOP

  • b) The Respective Departmental Head scrutinizes the requirement in items of cost, critically of the requirement, quality of products, service and spares availability, vendor/supplier status, and initiates the communication with the vendors. Where the cost comes within his authorization for initiating purchase orders, he initiates the process. Where the cost exceeds his authority to decide, he puts it up to the GM (HR & Admin) to decide.
  1. Purchase Authority (Maintenance & Electrical Equipment & Machinery)

The purchase committee Members are-

  • Board Director/GM (HR&Admin)
  • Respective Departmental Head
  • Engineering Department
  • HR & Admin
  • Accounts Department
  • Store In-charge
  • End user/Indenter

Purchase order preparation-

  • Respective Departmental Head prepares the purchase order,
  • Purchase order is placed only for suppliers from the list.
  • Purchase order contains the following information

. Clear description of goods/services to be procured

. Quantity rate and value

. Requirement of test certificates, if any

. Delivery schedule

. Mode of dispatch and payment terms

. Warranty

. Free Service

. VAT/AIT/Tax

. Inspections clauses

  • Purchase order is verified and reviewed for its completeness by head of Department /Unit In charge.
  • Copies of purchase order are distributed to Store accounts department.

 

Approval of Purchase order-

a) After preparing the purchase order it shall be submitted to BM (HR & Admin) for Verification. (L/C, Purchase)

b) After verification that will be transfer to board of director for approval (L/C Purchase)

c) Any other purchase order will be approved by the respective departmental Head / Factory In charge.

d) Approved purchase order will be sent to the supplier or manufacturer.

 

Ordering the Material-

a) Materials are ordered by the Respective Departmental Head.

b) Orders are placed through the phone/mail/direct.

c) In case of costly items order shall be given directly to the vendor/ supplier.

 

Local Purchase-

a) Local purchases are done for less value and less quantity items.

b) In case of emergency also local purchases arc done.

c) A fixed amount shall be kept in hand as cash by the accounts department.

d) Local purchases are done from that cash and the bills are submitted to the Accounts Department.

e) The expense amount is reimbursed from the account department.

f) The amount is approved by the Respective departmental Head / unit in charge.

Receiving and accepting goods-

a) At the time of receiving materials, all the documents like Challan, Invoice, Purchase order, Tax receipt of check posts (if applicable) etc. are checked in order to ensure the same are tallied with all the terms and conditions of purchase order, Quantity, Quality, Bill Amount, Warranty/ Guarantee Certificate etc.

b) Necessary Test Reports are received for the materials, which require such test reports are checked by the purchase assistant.

c) The quality of all receive items including Equipment, pre-printed stationary etc., are checked and makes sure that they up to the standard.

d) In case of chemicals, expiry date & condition of package are checked.

e) After verification, the items received are taken into the stock and register and register stock is update.

f) The items are placed on its proper places and issues having expiry on first in first out basis (FIFO).

g) In case of furniture & fixtures the quality of the items like gauge of the sheets used, types of wooden materials used, painting quality, lock and key etc. are checked.

GRN Entry-

a) Once the material is accepted Goods Received Note (GRN) is entered based on the type of material.

b) There is separate provision in software for GRN entry.

c) Purchase Assistant ensures whether the material is an asset or consumable item.

d) Entry is made based on that.

e) Following columns are filled by the purchase Assistant.

(i) Serial number

(ii) Product name

Documents Verification-

a) Goods Receipt Note is attached to the in warded documents and the bill send for verification to Assistant HOD.

b) Assistant HOD, after verifying the documents post the items to stock.

c) After that verification the Assistant HOD send the bill to the Respective Departmental Head for passing the bill for payments to Accounts Department.

Storage of Goods-

a) Store In-charge is responsible for the storage of goods.

b) Accepted Materials are taken into the stock to be place in proper location.

c) Temperature controlled items are at the specified temperature.

d) Chemical shall be stored in separate places,

Tracking of Goods-

a) Storage placed is labeled for each item.

b) Goods item list is hanged on every rack.

c) Goods are arranged in alphabetical order in each shelf. ,

Stock updating-

a) Stock updating is done by the store ln-charge.

b) Only verified stock is entered in to the stock.

c) Inward stock shall be kept in Under Inspection area.

d) Store In charge verified and signs the inspected items documents and that shall be forwarded to the

Purchase Manager for further verification and submission to Accounts Department for payment.

Stock Verification-

a) All received goods kept under inspection

b) Store keeper verifies all the items.

c) Any damaged or mismatching items are rejected.

d) Rejected items are transferred to the Rejected Items area.

Stock Maintenance-

a) Store In-charge is maintained the stock level.

b) Store In-charge take necessary stock reports periodically and counter verifies the physical stock with system stock.

c) He monitors the re-order level and gives proper intimation to purchase In-charges for material to be procured on daily basis.

d) The items, which are very urgent in nature, are intimated to the Respective Departmental Head immediately on getting the request from the indent.

e) Minimum stock level shall be maintained for the short period stable materials.

f) Physical verification of stock is carried out and the periodically of the verification is in accordance with the classification of the items.

(i) Item A- High value items- every month

(ii) Item B- Moderate value items- once in 2 months

(iii) Item C- Low costs items – once in 3 months

 

Expiry Checking-

a) Store ln-charge assigns the staff for expiry checking

b) Expiry of items is checked at the end of the month.

c) Entire items are checked for out of date.

d) Before opening new kit/ reagent, expiry is checked.

e) Next expiry items are sent back to the supplier.

f) The period of near expiry shall be defined and prefixed.

Material Issu-

a) Ready stock item are issued to the indenters based on their indents within the time limit.

b) Materials are issued on FIFO basis.

c) Old stock/ useless items are removed from the storage places.

d) Materials are issued based on the consumption of the end user.

e) Consumption patterns are monitored periodically and proper alerting measures to be taken on that department, to avoid improper utilization.

f) Reports which are essential to monitor the consumption pattern are taken periodically.

Returning materials to Stores-

a) If any material is returned to stores by the departments, the materials received are usually inspected, received and the stock Register is up date.

b) The reason return of material is specified in stock Register.

 

Disposal of damaged or expired items-

a) Damaged and expired items are disposal in time.

b) Disposal is done with the permission of Managing Director.

c) Next expiry items are replaced from the supplier if possible.

 

Records-

a) Purchase Reason Note

b) Design, Drawing Approval Copy

c) Budget Approval Copy

d) Comparative Statement Approval Copy

e) Purchase Order (Large/Small)

f) Purchase Indent/Requisition

g) Approved list of Suppliers GRN

h) Invoice copy

i) Bill copy

 

Standard Operation Procedure (SOP) of Purchase

 

What are the information carried out on Export LC or Master LC

Beneficiary Name & Address
Country

Dollar Amount in words.

DEAR SIRS,

IN ACCORDANCE WITH THE VERSION OF THE UCP RULES (ISSUED BY THE ICC) AS SPECIFIED IN THE CREDIT, WE ADVISE HAVING RECEIVED THE CAPTIONED DOCUMENTARY CREDIT IN YOUR FAVOUR
FROM HK+SHANGHAI BANKING CORPORATION LTD.

(SWIFT ADDRESS:****)

27.  SEQ OF TOTAL: I/3
40A FORM OF DC : IRREVOCABLE, TRANSFERABLE

20 DC NO: DC LCK*********
31C DATE OF ISSUE: *********
40E APPLICABLE RULES :UCP LATEST VERSION
31,D EXPIRY DATE AND PI-,ACE: 2OOCT17 IN COUNTRY OF BENEFICIARY
50 APPLICANT: Buyer Name, Address & Country
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