Order placing for materials

The legal order is placed with the supplier on a form known as a purchase order. Most companies insist that, every purchase be placed in this manner. When an order is placed by telephone or telegraph, it is practice to confirm the order by sending the supplier a regular purchase order. Such an order should be clearly marked ‘confirming’, to void the possibility of the supplier taking it as a second order.

Order Acknowledgement

Some companies insist on order acknowledgement from the supplier, acknowledging the receipt of purchase orders and agreeing to supply the items stated in the order.

Acknowledgement is to get a definite commitment from the supplier about the supply of items on time.

Follow Up and Expediting

Follow up is done to ensure that, the items ordered are delivered by the supplier on time. Theoretically, no special expediting procedure should be needed. If good production planning is made by the buyer, if engineering changes are rare and kept to a minimum, if an adequate system of inventory control is operative, if the purchase order properly prepared, if a reliable supplier has been selected, and if reasonable tolerance and mutual help exists on the part of both, then no particular follow-up device would have to be resorted to. These conditions have too many ‘ifs’ and to assume that all these ‘ifs’ will become ‘yes’ is to take things for granted.

It is necessary therefore, that follow-up should be done. Though a general policy should be established for the entire purchasing department, the immediate responsibility for expediting is likely to rest on the buyer who placed the order.

Extension of Delivery period

If the supplies are not affected within two weeks after the delivery date or if the suppliers ask for extension of time, the attention of

the authority who signed the order shall be drawn. If financial implications are involved, approval of the next higher authority shall be taken. While granting extension of delivery time, financial implications shall be examined and financial concurrence obtained, where it involves financial implications.

Cancellation of orders and Penalty

For cancellation of the order, the approval of the next higher authority shall be obtained. Before imposing any penalty less than what has been laid down in the terms and conditions of the supply, the approval of the designated authority shall be obtained.

The actual methods differ, of course, varying from writing series of letters, telephone calls, personal visits, to the use of resident expeditors whose work it is to see that shipments are made at the time specified in the order

Checking the Invoice and Approval

The last step in the purchasing cycle is to check the invoice and approve it for payment. Since the bill constitutes a definite claim the buyer, it needs to be handled with great care.

The bill sent by the supplier is compared with the Order and the Good Received Note that is made when the material is received. If the bill is correct in all respects, it is approved and given to the accounting department for payment.

Blanket Orders

Blanket order is a method wherein the buyer issues an order covering the requirement of a small item for one year. The order is relevant for one year. Whenever the stock of the item reaches low, the buyer simply telephones the supplier and requests him to supply the items against the outstanding blanket order. Blanket orders are useful in more than one way

1. paper work is reduced

2. time of buyers is saved ,

3. facilitates price negotiation because, one order covering year’s requirement is placed once, and

4. Facilitate purchase contracts of small items.