vendor rating

PURCHASE SYSTEM

PRESENTED BY:- PRIYANKA

CHAUDHRY(99) AVISHEK KUMAR(121) NIDHI SUYAL(88) SAMRANA RAO(111) HEMANTA KR BAID(68) PUSHKAR DEY(103)

Purchase System

Purchasing refers to a business or organization attempting to acquire goods or services to accomplish the goals of the enterprise.

There are several organization that attempt to set standards in the purchasing process, processes can vary greatly between organizations.

Establish & communicate the

need

Scrutiny of indents

Origin:-

• I.C section (P.I. Items)

• Stores (consumables)

• PCD ( S.B Items)

• Maintenance (spares)

• Operating departments ( non- STD)

• Specs qty., dely. Date

• Authorised

• Routed through stores

• Action: Indent register.

C’sign indentor’s

copy.

Identification and selection of

source

Preparation of purchase order

Follow up

Pre dely. shortage

• Grouping of indents

• Identifying potential sources of supply

• Inviting quotes/ tenders

• Comparative statement

• Price negotiation & finalisation of

terms

-

Depends upon:-

• Criticality of item

• Urgency of need

• experience with supplier

• Alternative source

Control :- P.O serial no. - Duly acknowledged P.O Copy

Receiving & insepection

Storage &

records

Invoicing & Payment

• Incoming receipt register

• Challan receipt given with a note

“ subject to qty. verification &

inspection”

• Shortage/ report (discrepancy)

• GRN/ GRR/ GIN/ MIN

• GRIN/ RCIA

Control :-

GRIN ( duly stamped by inspection along with qty. inspected, passed & rejected with reasons)

BILL PASSING PROCEDUER

Supplier raises bill &Give to purchaser

Bill entry in purchase Register, passed for

payment

A/C verifies for correctness & prepared cheque

Purchase department (calls supplier)

Cheque handed over to supplier

LeaRNING CURVE

Learning Curve for Price Negotiation:

Developed by U.S aircraft industry.

Identification of Learning factor: Trail & error method

Applicable for “repetitive labour intensive jobs”.

Relationship between productivity and experience.

Also referred as %age curve.

LEARNING CURVE TABLE:

Varies with different programmes.

Can be developed by taking the ratio of the average hours of the total programmes to the average hours for the first half of the total units.

EXAMPLE:A special set of gears is being supplied to our co. at

Rs. 1150 each. The supplier cost break up for this is Material Rs 550 Labour Rs. 200Overheads Rs. 250Sub total Rs. 1000Profit @15% Rs. 150Total Price Rs.1150We have paid Rs. 1150 each for the 1st 5 gear set and

we want to buy 5 more. However the supplier is now willing to make corrections for a learning of 95%. What amount should we pay for the 2nd lot of 5 gear set?

Some points to be considered while purchasing

Finding and approving of suppliers.

Purchasing best quality, quantity at least total cost.

Ensuring the delivery of goods and services at the right time.

Verification of invoice.

Organizing all discussions with suppliers.

Speculative buying.

Advising on prices.

Acting as a window-on-world.

JUST IN TIMEJIT inventory systems expose the hidden

causes of inventory keeping and are therefore not a simple solution a company can adopt.

Just-in-time inventory system is all about having “the right material, at the right time, at the right place, and in the exact amount”, without the safety net of inventory.

The JIT system has implications of which are broad for the implementers

Vendor Rating: Vendors are monitored and evaluated

periodically for their performance.

Objective:To help the buyer in future source selection To provide the buyer with information,

helpful in subsequent negotiations. To provide the buyer with important

information which he can act upon for any corrective measure.

Contd…. Vendors can be rated on the basis of

various characteristics: 1.Timely delivery

2. Adherence to quality 3. Price 4. Other factors such as

a. Meet emergency ordersb. Supplying useful market

informationc. Willingness to try out new

designs.

Methods: 1. Categorical plan 2. Weighted point plan

Categorical plan: - This is a subjective method.

- Managers of concerned department prepare a list of factor important from their point of view/use. - Each of the major supplier is evaluated against each evaluator’s list of factors.

Contd… Evaluation is done in terms of :

Good / Superb Satisfactory / Favourable Poor / Unfavorable

Weighted point plan:The buyer decides onA. Factors important for the evaluationB. Weightages for each of the factorC. The vendors performance in respect of each

factor.

Contd.. No. of timely deliveriesIndex of delivery service = ----------------------------------- Total no of order placed

%age of good quality items supplied

Index of Quality = ---------------------------------------------- 100

Average priceIndex of Price = ------------------------------ Price at which supplied

EXAMPLE:

Sonepat Suppliers is 1 of the vendors.

* It has made 17 deliveries on time out of 20 orders placed on them.

* Has given an average of 5% rejects and

* Delivered items at the performance index of Rs. 110 when the average price performance index is Rs. 100.

Q. What is the overall evaluation / rating for Sonepat Suppliers?

Factor Weight Performance Performance evaluation

Delivery 40 17 out of 20 deliveries on time

40 * (17/20) = 34

Quality 30

5% rejects 30* (100 - 5 )/ 100 = 28.5

Price 30 Rs.110 as against average price performance index of 100

30 * (100/110) = 27.3

100 Total 89.8

The overall evaluation of Sonepat Suppliers is 89.8.

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