Apr 4, 2016

SUPPLIER SELECTION


Upon receipt of a requisition, the purchase department checks if the item in question is already covered by a contract. If it is, an order can be placed against the contract without delay. If it is not covered by the contract the next stage is to select a supplier and negotiate the price and terms of payment and delivery period etc.

There is a strong preference for continuing to deal with regular suppliers, so as long as they continue to prove satisfactory. Nevertheless, it is advisable periodically to check the market to see what other suppliers have to offer.

It is good practice for purchasing staff to know their regular suppliers well, to be personally acquainted with the people who process and make decisions about their orders, to keep in touch with business plans, product developments and so forth. Suppliers are a major source without which, manufacturers could not operate. The management of supply market can be a very important matter which calls for advance planning, forethought and some strategic decisions.

When making a new purchase for which, there is no regular supplier, or when checking the market for regular purchases, the usual procedure is to send a request for quotation to a shortlist of possible sources (Floating of an enquiry).

The request for quotation or enquiry is simply the usual letter head with a standard pre-printed text asking the addressee to quote the price, terms etc. for supply of under-mentioned goods. A list of items of the purchase enquiry form is given below :

Ms.
Our ref.
Date.
Please quote before:
Dear Sirs,
Please send your lowest quotation for the following:
S.No.
Material description.
Quantity.
Note:
Please send catalog along with your quotation in duplicate.
Acceptance of material is subject to inspection at our end.
Quotation should be valid at one month.
Maker’s name should be invariably mentioned.
Payment after one month.

In most cases, the information s supplier given on his tender or quotation need to be supplemented by information in financial stability, quantity, capability performance record etc, which has to be obtained independently by purchasing staff. When considering regular purchases or established supplier, the track record is of particular importance although it should not be forgotten that past history is not a sure guide to future behavior, management does change, new development may occur, new products are launched, new customers found: nevertheless it would not be prudent to ignore the record of how a particular supplier has behaved in the past. Vendor rating is an attempt to systematize this information.

THE CONTRACT STAGE

A contract is a business agreement for the supply of goods and subject usually to a number of thousand conditions. When purchased order is placed and when order acceptance is sent by the supplier, it becomes a contract.

In normal cases, both order and contract are incorporated in single documents, the purchase order form. Normal practice is to make it a rule that all purchases subject to certain clearly defined exceptions, must be made by means of official purchase order.

It establishes clearly what the organization is committed to accept and pay for or by stipulating that the order number must be quoted on advice note and on invoices. Goods receiving personnel can then be given instructions not to accept which are not delivered without an official order number. The contract or agreement with the supplier may cover the supply of aggregated requirement over a considerable period of time.

All quotations received will be kept confidential and will not be divulged under any condition. The selection of perspective suppliers or contractors is indicative of the company’s confidence in their ability and progressiveness.

While placing the order first it has to be entered in the order placement Register. Original copy of the order is sent to the supplier, second the copy is kept in the Master Order File, the third copy is sent to the accounts department, the fourth is kept in the concerned file and the fifth is sent to the stores for information and verification of the goods received.




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