Procurement Procedure

Procurement Procedure

Standard procurement procedure steps have been elaborated below, this is procedure for purchases made at request of user. Procedure for annual purchases & regular inventory purchases is bit different.

1.    User Identify Requirement

In first place user of the inventory items will prepare a request (requisition) and specify the requirement of item needed.  User may also identify the estimated price (optional).

2.    Supervisor will Verify

Supervisor or line Manager will examine the requirement of the user and shall verify the requisition of the user. Supervisor may also adjust the requirement in the requisition.

3.    Procurement Department

Procurement department will examine the requisition as per policy of the organization and, send the requisition to the management i.e. (Chief executive or Procurement Director, procurement committee) for procurement approval.

4.    Management Initial Approval

Management may approve the purchase and may ask to take formal quotations/proposal from the vendor, (if so required). Immaterial purchases may be procured from the approved vendors.

5.    Procurement officer Proposal

For small item (Like Lap top battery) procurement may be made from one of the approved vendor from the appearing in the approved vendor list. For heavy items (computer) a fresh formal quotation may be requested from vendors.

6.    Selection & Negotiation

A lower bidder will be selected offering the same items, and a further discount is requested from vendor, especially in case of procurement of high amount.

7.    Approval for Final Price

Procurement team will get approval for final price quoted by the vendor from the management, if final price substantially different from the early estimated price.

8.    Purchase order will be placed

Purchase order will be placed specifying the requirement of the items required (a reference to the quotation may also be given in the purchase order).

9.    Good received & inspected

Items received will be checked by the procurement officer, whether or not goods received are as per specification of purchases order. Procurement would also confirm the physical condition (new, not damaged, seal) etc. user of the item may also physical inspect the goods.

10.  Items is Recorded

Items are recorded in inventory system of organization before issue. It means goods are first transferred to warehouse and then issued to the user.

11. Item is issued to user

Inventory item is issued to user against receiving. Items may be directly issued to user against early issue or may be asked to send a fresh requisition for issue.

Objectives of Stock take

Objectives of Stock take

Stock take is technically term used for physical count of stock at some date. There are number of objective of stock take, which have been explained below;

1.    Missing or theft item identification

Stock take is an effective tool to identify the missing or theft item. Stock take is almost done by each stock carrying organization.

2.    Record Correction

Stock taking also identifies the mistakes in record keeping of inventory. Mistakes in Record may be found & corrected during the detailed investigation of identified variation in physical counting and record. (Stock Ledger)

3.    Damaged Inventory

Physical Stock take also helps in identifying the damaged stock lying in warehouse. Therefore it can be said that stock take helps in removing obsolete or damaged stock from warehouse.

4.    Expired Stock Identification

Stock take is an effective tool for identifying the expiry stock. In some businesses like business of medicines, expiry items must be identified & disposed off in time; otherwise it can prove too costly for organization.

5.    Reporting

Auditor perform stock take to ensure that actual inventory is reported in the financial statement. Inventory is one of the important elements of financial statement and has direct impact on the profitability of the organization.

Periodical Stocktaking Procedure

Periodical Stocktaking Procedure

Periodical stocktaking is an effective controlling tool for identification of missing or theft inventory. Stock take can be performed monthly, quarterly or annually. Stock take procedure has been elaborated below

1.    Non Store Staff

It is better to involve non store staff for the physical count. This is necessary to achieve one of the main objective of stock take i.e. identification of mission or theft stock.

2.    Well Planned

Stock taking activity should be well planed, and staff should be given written instruction, special counting sheet before the stock take for study & understanding. All relevant people should be informed before stock take.

3.    Supervised

Stocktaking should be supervised by a senior management member, who has detailed knowledge and experience of stock take. It is to be noted that stock take is a technically and complex process and requires effective supervision.

4.    No stock Movement

The movement of stock should be completely stopped during the stock take; otherwise it would not be possible to count the stock accurately.

5.    Stock take at once

To avoid stock take should be done at once (one day). The stock take work should be divided carefully and stock must not be double counted.

6.    Stock properly recorded

Stock count should be properly recorded on pre numbered and special sheet, which has been designed for stock take.

7.    Stock count sheet Comparison

Stock count sheet must be compared with stock record. Any variation should be investigated. There may be mistakes in recording of stock or chances of theft.

8.    Reporting to management

Unanswered variation must be reported to management. Immaterial variation should also be reported as control weakness.

Characteristics of Warehouse Management

Characteristics of Warehouse Management

Inventory is one of the primary aspects of every organization in the modern world. Therefore the must be a proper management system for inventory. Characteristics of a good warehouse or warehouse management system are given below;

1.    Speed Stock Issuance & Receipt

Warehouse must be managed in way that it ensures speed issuance and receipt of inventory.

2.    Location of all items known

Location of all items must be known to the store manager or other relevant persons. It means that every item should be physically verifiable anytime by the auditor or other authorized person.

3.    Suitable Environment is must

Inventory should be kept in suitable environment. Any careless approach in this regard can bring huge losses to the organization. Suitable environment includes required temperature etc.

4.    Secured Access & Environment

Inventory should be kept in a secured environment .it must be ensured that only authorized people should handle the inventory. Unauthorized person should not have access to the warehouse.

5.    Efficient use of Space

Efficient use of space is critical for almost every warehouse; otherwise a new storage facility would be required.

6.    Stock level alert System

Store manager must be alerted for shortages (reducing level of stock). Maintenance of appropriate level of stock is very critical for operations/production.

7.    Accurate Recording

System and control must be in place to ensure accurate recording of issuance and receipt. Accurate recording is an effective tool of inventory management.

8.    Stock Handling

Appropriate mechanism should be placed within warehouse for stock handling. Improper handling can not only damage the stock, but also raises the safety issues.

9.    Safety Mechanism

Safety mechanism is also essential requirement for a good warehouse management. Safety issue can bring high fines.