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1. INTRODUCTION:Fauji Fertilizer Company Ltd is a renowned name in UREA production. Monthly

________ amount of packing material is required and is procured throughvarious vendors. FFC success story is also related to quality of packing material

used by the Company. While giving preference to cosmetic aspect of Bags formarketing purposes, FFC also strives for finding pollution free solutions for itspacking material.

2. Scope: It is applicable to all types procurement related to packing material.

3. ProcedureWhile establishing health working relations with existing vendor, Proc HOendures expansion of vendor base for healthy competition. Best workingrelations with all registered vendors would be established. The performance ofexisting registered vendors would be evaluated quarterly. Vendors having poorperformance and high state of rejection would be de-listed. New vendorsrequesting for registration would undergo the following procedure:

3.1 Vendor Registration Procedure:

3.1.1 Vendors request Proc Deptt for registration by providingintroduction letter and profile of their company.

3.1.2 Vendor profile is carefully studied and, if found suitable, theirpremises are visited by a board of Officers from Packing Committeeto check type of equipment used, production capacity, financialhealth, skill level, safety arrangements etc.

3.1.3 After all necessary checking and if vendor is dealing with requiredmaterial by FFC, vendors are put up to SM-P for final approval.

3.1.4 After SM-P approval, vendor is then forwarded to SAP MM Team(along with approved documents) for addition in SAP system.

3.2 Performance Evaluation: Performance of previous quarter would be evaluated. Evaluation toinclude:

a. Qualityb. Timely deliveryc. Conditional acceptance/rejectionsd. Use of raw material

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e. Any other violation of FFC standard procedures

3.3 Issue of RFQ:

RFQs will be issued to the registered vendors only except in extremecompassionate cases having urgent (MD/SM-P) approval. Vendors withpoor performance in last quarter will not be issued RFQ as penalty.

3.4 Bid Opening Procedure:For bid opening of WPP bags/liners, following procedure will be followed:

a. Only sealed bids addressed to SM-P will be accepted.b. Sealed bids are to be dropped in tender box.c. Bids without earnest money would not be accepted.d. Bids to open on given date and place in presence of all

vendors/reps.e. Bids to be opened by BOC committee comprising of

members from Proc, Internal Audit and Admin.

3.5 Price Matching:

3.5.1 After bid opening and evaluation of quotations, all vendors areasked to match the lowest price received.

3.6 Quota Allocation:Quota to be strictly allocated to the vendors as per followingconsiderations:

a. Past performance (particularly during crises period)b. Equipment held by the vendorc. Technical skills available with vendord. Alternate source of powere. Financial positionf. Printing standard

g. Lab facilityh. Use of raw materiali. Safety arrangements

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3.7 Schedule/ Deliveries:

Schedule for deliveries is issued to vendors along with PO. Number ofbags/liners to be delivered is clearly mentioned month wise. No delay in

given schedule be accepted unless otherwise beyond the control of thevendor.

3.8 LD Procedure:In case vendor fails to deliver the material within the delivery period, apenalty @ 1% per week up to 5% (max) will be imposed.

3.9 Consignment Inspection Procedure:3.9.1 25 Bags randomly selected from each consignment of about

50,000-60,000 bags must pass test as per following testingprocedure: a. Measure of weight, length, width and seam stitching bottom.

Margin of minimum 20 bags randomly selected. All must passthe test.

b. To determine ends picks(weave) of first 05 bags out of 20 bagsat six places on each bag ends and picks(weave) should beminimum 10 x 10 per square inch. All must pass the test.

c. To measure denier of 05 bags out of 20 bags whose weightappears to be lesser than the specified. It should be 1000=+/-2%. All must pass the test.

d. Quality test check of 2% of whole consignment will also bemade.

e. The consignment should be rejected if any one of the abovetests is not according to specification limits.

f. In case of acceptance of consignment not fully within thespecification limits (acceptance under reserve), the supplier willbe requested to change all bags getting damaged during

inserting, filling and stitching operations. g. No deviation from specification will be allowed and bags

weighing less than 106 grams +/-2% will be rejected outright.

3.10 Acceptance/Rejection of Supplies:

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3.10.1 On receipt of bags/liners at plant site, FFC will arrange various testsand inspection of material. General Manager (Plant) or his nomineeshall decide within seven working days after receipt of eachconsignment if it is accepted or rejected. The supplier or his

nominee shall be allowed to be present during inspection, if he sodesires. 3.10.2 For each acceptance of consignment, an acceptance certificate

shall be issued to the supplier. In the case of rejected consignment,the supplier shall be immediately notified.

3.10.3 The consignment not conforming to the specification contained andrejected as a result of inspection, may be removed by the supplierand sorted outside the plants boundary limit at his own cost. Thesorted out consignment may be offered again for inspection. FFCLmay accept the re-offered bags/liners, if any,if they conform to thespecifications.

3.10.4 In case a consignment is twice rejected, vendor will lift out materialat his own risk and cost.

3.10.5 SM-P may allow inspection for 3 rd time otherwise the consignmentwill be permanently rejected.

3.11 Recycling of Rejected Material:Recycling of rejected consignment shall be strictly prohibited. In case bagsfrom a rejected consignment are found in a new consignment, the latershall be rejected outright without any further tests. Repeated rejectedrecycling by the vendor will render the agreement liable for termination.

3.12 Risk Purchase:

3.12.1 If the supplier fails to deliver the bags as per schedule and as perrequirement, FFCL shall treat such failure breach of agreementmade with the vendor.

3.12.2 In this situation, FFCL can resort to risk purchase and recover the

amount of damages, if any, from the supplier. FFCL shall have theright to forfeit earnest money, security deposit, encashment ofBank Guarantee or withhold payments against pending bills

3.12.3 If the loss sustained by FFCL is more than any of the above, thesupplier shall pay the balance amount within 30 days of demand.

3.13 Supplier to Remove Rejected Supplies:

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3.13.1 In the event of any supplies being rejected the supplier shall, upon

notification of such rejection, remove forthwith the rejected itemsat his own cost.

3.13.2

If the supplier fails to remove the rejected items within 2 weeks ofthe notification, the supplier will be liable to pay storage charges atthe rate or 0.5 paisas per bag/liner per day to FFCL.

3.13.3 FFCL shall arrange insurance of such consignment at suppliers costfor the period if the consignment is not lifted from FFCL premisesby the supplier.

3.13.4 The decision of General Manager (Plant) or his nominee as towhether supply is in accordance with the agreement specificationsor not, shall be final and the binding on the supplier, the items sorejected, shall be treated as if these have not been supplied, andthe supplier shall not be entitled to claim any payment thereof.

4. Counterfeit:To avoid fake/counterfeit products, barcode and security measures be introducedon Bags. Marketing group to also review and change cosmetic aspects of bagsevery year to counter this problem.

5. Vendor Training and Education:FFCL is committed to minimizing environmental pollution and new technologiesand methods are forwarded to vendors for their education and use in their Bagsproduction e.g. Oxi biodegradable technology for bags.