Sample SOP

April 1, 2016Sample DRAFT

Version Issue Date Prepared by Reviewed by Approved by Remarks

Supplier Creation, Modification &

BlockingProcurement – Local

PurchaseProcurement –

import PurchaseGoods Receipt

Process

Invoice Verification

(C) KC Mehta Co. All Rights Reserved. 1

Sub-Section IProcurement Process

Foreign & Local Bank Payment Credit Note

April 1, 2016Sample

x Process Activity Control Activityx

DRAFT

Report Description Frequency

Supplier Registration and Evaluation

Process Owner: Procurement HeadInterfaces: End user, Procurement Officer, Accountant, Chief Financial Officer (CFO), Finance Manager

Records / Forms: Requisition note / form Supplier Registration Form Supplier Evaluation Form Approved Supplier Form

End UserFill up a requisition form, providing reasons for finding of a new supplier and the item details accordinglyReference No. 1.1

Respective HODWill review the filled requisition and will provide its Approval /Rejection of the requisition in systemReference No. 1.2

Filled Requisition Form

Is Requisition note approved?

Procurement OfficerNew supplier’s are identified based on a criteria; officer will also visit and interact and get the registration form filled upReference No. 1.3

Supplier Registration Form

Procurement HeadAfter evaluating the supplier; it will provide its approval and comments on the supplier evaluation form and will send to accountant for commercial check and complianceReference No. 1.5

Head Office

Procurement HeadWill evaluate the criteria like facility, suppliers on the basis of supplier evaluation form Reference No. 1.4

Yes

Supplier Evaluation Form Is Sample

Order required?

ENDNo

Supplier Rejected

Sample Order Successful?Yes

No

YesNo

Approved supplier formContd...

1.1 When a new supplier is required for a new service line or product or when an existing supplier needs to be changed; the eligible end user shall first fill up a requisition form stating the reasons and submit it to its respective HOD for approval.1.2 Respective HOD will review the requisition form filled up; assess the requirements stated and the need for a new supplier; shall then accord its approval or reject the requisition by providing appropriate reasons.1.3 A) Requisition approved: the procurement officer will then conduct it’s search for new suppliers, communicate with them to send their company’s profile and also fill up a vendor registration form and send it within the stipulated time provided by the SPEL company. Suppliers can be identified based on criteria's like:- Past experience, Recommendations, Advertisement, Visit to Trade fairs, Visit of supplier’s representatives, Magazines / catalogues etc.The procurement officer will also conduct an evaluation of the supplier and rank them.And send them to procurement head for approval.“Evaluation criteria to include whether a vendor is a first stage or a second stage dealer; the credit that the vendor will pass, the quality, the financial terms of payment, etc. to be evaluated and score rated before any decision is made.”B) Requisition rejected: The requisition note will be closed by intimating to the end user who raised the request.1.4 Procurement head will review the vendor registration form; the score card evaluation done by procurement officer and select the vendor considering the factors such as facilities provided, quality, financial position and market prestige of the vendor. If required, a sample order from the vendor will be place and then evaluated.1.5 Procurement head will provide its approvals and comments to the supplier evaluation form and will send to accountant for commercial check and compliance.

Vendor Master Created and Approved in the system QuarterlySupplier’s evaluation / criteria policy, analysis and reports Yearly


New Supplier

April 1, 2016Sample


DRAFT


Contd...

Supplier Registration and Evaluation

Finance ManagerWill verify the details of the vendor entered in system against physical document and provide its approval of the vendor master in the systemReference No. 1.7

END

Process Owner: Procurement HeadInterfaces: End user, Procurement Officer, Accountant, Chief Financial Officer (CFO), Finance Manager

Records / Forms: Authorised List of supplier’s from the system and their physical records

Updated System Vendor Master

Database

Head Office

AccountantCo-ordinate with purchase officer for commercial details of the new supplier (if required) and then create a vendor code in the system and send for approvalReference No. 1.6

Procurement OfficerWill file the physical vendor’s master data record in the vendor’s master file database maintained with them as per the company’s policyReference No. 1.8


1.6 Once the filled up vendors registration form is received from Purchase department, the Accountant will cross-verify the details of the supplier with respect to their necessary tax and statutory compliance registration details by coordinating with the purchase officer (if required) and then create a new vendor code and fill in it’s mandatory and optional details available and send the documents to ahead for approval. 1.7 Finance manager will verify the vendor master details in the system along against the physical form filled up and will approve the vendor master created in the system 1.8 Once the vendor master is approved and created in the system, the Procurement officer will have to file the physical vendor’s master data record in the vendor’s master file maintained by the company for future reference purposes.Note: 1. The tax master will have to be mapped and updated against each vendor master code as per the business type of the vendor and these tax masters will automatically effect the transactions based on the criteria’s defined against vendor master.2. The purchase item master will also be created and mapped against the vendor master for each item that will be procured from such vendor.

April 1, 2016Sample


DRAFT


Supplier Modification / Blocking Head OfficeSTART

Has supplier intimated about its

updated info.?A routine check of

the supplier?NoFrequent issues with the supplier

reported?No

Procurement OfficerWill collect necessary documents from the supplier and send the details to the accountant for updating in the systemReference No. 1.9

Yes

AccountantWill verify the details and input the same in the system and send for approvalReference No. 1.10

Finance ManagerWill verify documents and provide its approval/modification/rejection Reference No. 1.11

Updated Vendor Master

DatabaseEND

AccountantExtract a list of suppliers with their status change and those with whom no transactions have been done over a period of timeReference No. 1.12

YesProcurement HeadReports the issue with the Finance Manager for the supplier with adequate reasons for the sameReference No. 1.16

Yes

Procurement OfficerWill get the updated information from the supplier & will submit for approvalReference No. 1.13

AccountantWill update the suppliers details in system (if any)Reference No. 1.14

Finance ManagerWill approve / modify / decline the changes made in the supplier’s masterReference No. 1.15

Finance ManagerWill block the supplier master in the system and send for approvalReference No. 1.17

CFO / MDWill provide it’s approval / rejection for blocking of a supplier from the supplier database

Reference No. 1.18

Suppliers’ database needs to be updated regularly by monitoring their transaction patterns over a period 1.9 Intimation by Supplier: Informs company about changes in his status or profile, then procurement officer shall collect necessary details, verify and send it to the accountant for updating the vendor master database. 1.10 Accountant will input updated details in the system and send for approval1.11 Finance manager will review the changes made, cross-verify such changes with existing source data, along with the necessary tax structure updates required. Authorization by finance manager will finally update the vendor master database. 1.12 Accountant will extract a list of suppliers for determining their status change over a period of time. - Supplier – With more than 20 transactions a year – Once in 3 years- Supplier – With less than 20 transactions a year – Once in a year 1.13 Procurement officer will then collect updated information of such suppliers and send it to accountant for updating vendor master in the system. 1.14 Accountant will update the suppliers’ record according to the latest information as provided by the Procurement officer. 1.15 Finance manager will review the changes made along with the necessary tax structure updates required and authorise the same which shall update vendor master.1.16 Procurement head reports frequent issues faced with a particular supplier to the finance manager and his advice on blocking the supplier from the vendor master list. 1.17 Finance manager will review and check the pending deliveries; after completion of which will initiate to block the supplier master in the system 1.18 CFO/ MD will provide its approval/ rejection for blocking of a supplier from the supplier database.

Review Suppliers – With less than 20 transactions a year YearlyReview Suppliers – With more than 20 transactions a year Once in 3

yearsProcess Owner: Procurement HeadInterfaces: Finance Manager, Procurement Officer, Accountant, Chief Financial Officer (CFO), Managing Director,


Records / Forms: Updated supplier’s updated business record Supplier’s statutory tax changes record Blocked supplier’s record

Updated / Blocked suppliers report Yearly

April 1, 2016Sample


DRAFT


START

End CustomerSend a final confirmation on the items that they wish to buy from the company and send their PO’s / schedule as part of their confirmationReference No. 1.19

Customer Purchase Order

PlannerRaises a purchase requisition for procurement of goods, materials, etc. & will quote customer’s order number in the requisitionReference No. 1.20

All Plant Locations

Customer PO / Customer Schedule?

End User / Planning dept.?No Re-order Level

Trigger?No

YesEnd User / PlannerWill identify the requirement for a material and then raises an internal requisition for procurement of goods, materials, etc.Reference No. 1.21

Yes

System will trigger for raising a requisition based on the information feeded

Yes

Purchase Requisition Form

Process Owner: Procurement HeadInterfaces: Customer, End user, Planner

Records / Forms: Customer Purchase Order Internal Requisition Order Form Preliminary Technical Review (PTR) Form

Sales Process

Purchase - RM/ Packaging/Bought out/ General

Respective HODsReviews requisition; it will Approve / Modify / Decline requisition made based on available monthly / annual budget (if any)Reference No. 1.23 Local /

Import Purchase

1.19 End Customer, sends a final confirmation of the items by sending their purchase order / schedule details as proof of confirmation for purchasing a required product.1.20 Planner raises a purchase requisition for procurement of goods, materials, etc. as per customer’s order / schedule.Imp: Here, it will be mandatory to quote the customer order number in the Purchase Requisition Form.1.21 Authorized End user / Planner, based on the information available, identifies the requirement for a material will raise an purchase requisition for procurement of goods, materials, etc. 1.22 When the re-order quantities configured is triggered in the system; the system will auto-generate a purchase requisition in the system and send to respective HOD for approval1.23 Purchase requisitions raised through different sources, will be reviewed by respective HODs and will approve / modify (if required / decline the purchase requisition based on the information and budget available if any. Note: A. A procurement Policy can also help in guidance for the approval mechanism of the order requisition against their value.B. For material / items: No requisitions or Purchase Order can be raised in the system for which an inventory master has not been created.C. Annual / Monthly Budget will be available with different departments under respective Ledger code and all the requisitions made will track specific budget code so that Actual v/s Budget comparison can be made. The budget will be blocked at the Purchase Requisition level and amount will be reduced from budget when a P.O. is raised. Regular purchase items will be kept out of Budget parameter.

1.22

Purchase Requisitions – Raised, Approved / Modified / Rejected MonthlyException report - Items purchased without a Purchase Requisition MonthlyPurchase Requisitions status report – Open v/s closed Quarterly

GRN / SRN? GRN

SRN Process


April 1, 2016Sample


DRAFT


Process Owner: Procurement HeadInterfaces: Procurement Officer, Managing Director

Records / Forms: Supplier’s Sales Quotation Supplier’s agreement (if required) Local Purchase Order (created / approved) Legal documents

Procurement officerBased on approved requisition; officer will check supplier database and invite quotations from different suppliers (if reqd.)Reference No. 1.24

Procurement OfficerDifferent quotations will be entered in the system and a comparison for L1 and L2 vendors will be retrieved from the systemReference No. 1.25

Procurement Head / MDWill Review and Approve / Decline the LPO in the systemReference No. 1.28

Procurement OfficerSubmit Approved LPO & legal documents to local suppliersReference No. 1.29

Goods Received ProcessEND

Local Purchases - RM/ Packaging/Bought out/ General

Approved Purchase Order

Procurement OfficerWill raise a Purchase Order in the system and send for approvalReference No. 1.27

Local Purchase

Request for Sales Quotation

Procurement Head / MDWill review sales quotation, negotiate and finalise with the supplier (i.e. payment through LC/Advance/Regular)Reference No. 1.26

Does requisition require a new

supplier?

Agreement with supplier

1.Approved Purchase Order2. Legal Documents

1.24 Procurement Officer will review the approved requisition and then will check its supplier database and check with them for the availability of the materials and if the quotation is for bulk quantity or amount, will receive different sales quotations from suppliers.Imp: If there is a need for a new supplier because of requisitions made cannot be sourced from existing supplier’s database, then the supplier authentication process will need to be followed before getting a quotation from the new supplier1.25 Once the quotation is received from different suppliers, the procurement officer will enter different quotations in the system and a comparison for L1 and L2 vendors will be extracted from the system. 1.26 Procurement head will review the sales quotation, negotiate and finalize with the supplier and approve a sales quotation of the supplier.1.27 Thereafter, Procurement Officer shall raise a Purchase Order by fetching quantity and item details from Purchase Requisition and inputting the agreed amount from the quotation of the supplier and submitting it to Procurement head for approval.Imp: The taxation details shall be taken care while the Purchase Order is created and approved. 1.28 As per defined authority matrix for approvals, the Purchase Order shall then be approved by Procurement Head / Managing Director.1.29 Once Local Purchase Order (LPO) is Approved, the Procurement Officer will forward it to the Supplier along with the legal documents.Note:1. Taxation structure to be verified before posting of Purchase Order2. Whether the Purchase Order is a BOM or Non – BOM item will be captured when the Purchase Order is raised and of the transaction trail will be followed

New SupplierYes

No

Open v/s Closed Purchase Orders MonthlyPurchase Orders raised without Purchase Requisitions WeeklyEach Supplier’s - Price variations / changes over a period Yearly


All Plant Locations

April 1, 2016Sample


DRAFT


Procurement OfficerWill request quotations from pre-listed suppliers in the system for the requisition raisedReference No. 1.30

Sales Quotation of Supplier (Import)

Agreement with the Supplier

Procurement OfficerWill raise an import purchase order in the system with relevant quantities agreed and the price inputted into the systemReference No. 1.32

Procurement HeadWill review the Import Purchase Order and will provide its approval and send the approved purchase order to supplierReference No. 1.33

Dy. Manager, StoresWill provide necessary documents to CHA agent for clearing of the import items into the country

Reference No. 1.35

CH AgentComplete the clearing process; release the goods and send them to the company along with documentsReference No. 1.36

Goods Receipt Process

1.30 Procurement officer will request quotations from pre-listed suppliers from the system and such quotations received will be sent to respective Procurement head / MD for approval1.31 Procurement head / MD will review, negotiate with supplier (if required) and finalize with the supplier and enter into an agreement with the supplier. 1.32 Procurement officer will then raise an import purchase order in the system with the relevant quantities and price agreed.1.33 Procurement head will review the purchase order as raised by the Procurement officer and will provide its approval and send the approved purchase order to the supplier. 1.34 Finance manager/ CFO will carry out an agreement with the supplier considering the terms (through LC/ Advance/ Regular)1.35 After placing of import purchase order, Deputy manager – stores will provide the necessary documents (such as Bill of Lading/ Airway Bill, Commercial Invoice cum Packing list and Bill of entry) to CHA agent for clearing of the import items into the country. 1.36 CHA Agent will complete clearing process, release the goods and send them to the company along with documents. Note:1. Before any order is placed, the right ledger code should be mapped so that the budget v/s actual expenses can be tracked2. Taxation structure to be verified before posting of Purchase Order3. BOM / Non – BOM item details will be captured while raising of the Purchase Order

1. Bill of Lading / Airway Bill2. Commercial Invoice cum Packing List3. Bill of Entry

Import Purchase

Procurement Head / MDWill review sales quotation, negotiate and finalise with the supplierReference No. 1.31

Approved Import Purchase Order

All Plant Location except EOUImport Purchases - RM/ Packaging/Bought out/ General All Plant Locations

Process Owner: Procurement HeadInterfaces: Procurement Officer, Managing Director, Dy. Manager-Stores, Clearing House Agent

Records / Forms: Supplier’s Sales Quotation Supplier’s agreement (if required) Import Purchase Order (created / approved) Legal documents

FM / Finance ExecutiveWill co-ordinate for liaising (if required) for the advance payment / opening an LC for the supplier

Reference No. 1.34


Open v/s Closed Purchase Orders MonthlyPurchase Orders raised without Purchase Requisitions WeeklyImport price fluctuations report Monthly

Sample SOP

Documents

Transcript of Sample SOP