SOP - Purchase Dept
SOP - Purchase Dept
SOP - Purchase Dept
Prepared By P. Ramu
Approved By V. Dutta
CONTROL OF CONFIDENTIALITY
The information contained in this document is the property of HBL, No part of this
document may be reproduced in any form without the prior permission in writing of
HBL
• Legal
• Accountable and auditable
• Ethically, environmentally and socially responsible
• Economically effective
• Conducive to maintaining the organisation’s ability to exploit appropriate
technological, commercial and organisational developments as they arise
• Capable of identifying, minimising and managing risks that may threaten the
supply chain or the wider organisation
• Open to continuous improvement and development
• Fair & Transparent to all
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
1 Title page -
2 Table of contents/ index A
3 Control Sheet B
4 Distribution list C
5 Objective 1
6 Scope 2
7 Purchase Structure And Responsibilities 3
8 Procurement Process Cycle 4
9 Definitions 5
10 Processing of Purchase Requisitions 6
11 Selection of External Provider 7
12 Request for quote (RFQ) 8
13 Purchase Order Processing 9
14 Work Order Processing 10
15 Follow-up of Delivery Schedule 11
16 Inspection at External Provider’s premises 12
16 Transportation of Purchased Material 13
17 Goods Receipt 14
18 Acceptance & Rejection, Documentation 15
19 Corrective Action Request 16
20 Invoice Verification 17
21 Processing of Payments 18
22 Checks & Controls (MIS) 19
23 Annexure – I – Purchase Organisation
24 Annexure – II – Procurement Process Cycle
Annexure – III – External Provider Registration
25
Form
Annexure – IV – External Provider Evaluation Form-
25
Mfr
Annexure – V – External Provider Evaluation Form-
25
Dealer
Annexure – VI – External Provider Evaluation Form-
25
Service
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
Control Sheet
DISTRIBUTION LIST
1.0 Objective
The objective of the SOP is to describe the complete process for procuring
goods and services in the company, starting from the indenting stage to the
receipt of the material/service, till release of final payment.
2.0 Scope
In-charge Purchase is the process owner and responsible for all activities
of purchasing process. Purchase organization structure is defined in
Annexure – I.
5.0 Definitions:
Standard lead time and MOQ of the materials are to be maintained by Purchase
dept. and shall be circulated to PPC/ User Dept. for their planning of the material.
For new External Providers, purchase department sends registration form to the
External Providers for generates sufficient information about the capability of the
External Provider with regard to their technical capabilities, machinery available
etc.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
The External Provider Evaluation Team comprising Purchase & QA shall analyze
the information available against registration form and visit such sources, which
they consider suitable for the manufacture/supply of items in accordance with our
specification and requirements. Based on approval criteria the External Provider is
enlisted or rejected. Existing External Providers are revalidated based on their
quarterly performance rating and periodicity of re-evaluation is fixed based on the
score.
It is the list of approved External Providers. The External Provider is added in the
approved External Providers list after External Provider registration and approval by
evaluation team. A non performing External Provider is deleted from the list if their
performance is below the rating.
PR is the official indent for initiating any procurement. User releases online / Hard
copy PR through SAP system duly approved by authorized approvers and sends to
purchase for subsequent process.
Capital Items:
Items such as Plant and Machinery, test and measuring equipment, Office and
industrial furniture etc. would come under Capital items. All Purchase Requisitions
shall be raised against approved Acceptance of Necessity document (AON). The
PR (Purchase Requisition) shall be raised by the respective departments and
approved through SAP PR release strategy.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
Purchase shall float RFQ by E-mail to preferably minimum 3 External Providers with
required drawing /specifications. For RM/BOM items, the External Providers are to
be selected from HBL approved External Providers list.
Rolling Plan:
Minimum 3 months rolling plan is generally expected from PPC for critical raw
materials and long lead items for purchase to provide projection to External
Provider for their readiness.
For express /emergency purchases shall have the approval of the Unit Head. The
item(s) may be procured without following the usual procedure of collecting multi
quotes and comparison. However the PR (Purchase Requisition) has to have duly
justifiable reasons in writing for making such an express / emergency purchase
Comparison of Quotations:
Based on the quotes received, a detailed comparative statement is made for the
landed cost of the material along with the details of payment terms, delivery, freight
etc. Price break-up shall be considered as the basis for further negotiation.
Based on the approved PR, PO is the official agreement which is released on the
External Provider for the supply of ordered items as per the terms & conditions
indicated there in.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
Based on comparative statement and subsequent negotiations, the price and terms
& Conditions are mutually agreed upon for the processing of PO. PO is
subsequently released after approval through release strategy and as per the
following delegation of authority. The approved PO is forwarded to the External
Provider through mail or a hard copy. General Terms & Conditions are made
available in the HBL website.
Negotiation Strategies:
For standard BOM items, RFQ is floated to the External Providers and preferably 3
quotes are collected and comparative statement is made, price is negotiated and
PO Check list is prepared for the release of the order and approval.
ARC/AMC:
For standard items like general consumables & maintenance items potential
External Providers like dealers/distributers/traders are identified, RFQ is floated,
quotes are compared, price is finalized in purchase committee and ARC/AMC are
released. Individual POs are released with reference to the ARC/AMC finalized,
based on plant requirement.
E- Procurement:
For most of the Raw materials, BOM items , Standard Items like Crane, Pump,
Motor etc. & Capital items the price is finalized through e-procurement platform.
Few off line Quotes are collected to estimate the start price for conducting the e-
bidding process.
For any non –standard item / Item having no previous purchase history and valued
generally more than 2 L - rates are reviewed and finalized by a committee
comprising of members from Purchase, User department, Maintenance department
and Finance, which is referred to as Purchase Committee. Generally items covered
under the scope of purchase committee are - Project items, R&D items, First time
procurement items, Job Work items of high value, Scarp items etc.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
For these items purchase obtains quotes from preferably from minimum 3 External
Providers and comparative statement is made, the price is finalized through
negotiation in the presence of Purchase Committee.
Note:
PO Check List to be filled up with every PO approval process. (Sample Check List
is Annexed)
Material Follow-up:
Where ever a External Provider does not deliver directly to our plant, the material
shall be collected from the premises of External Providers either by our contract van
or any other private vehicles.
In accordance with Purchase Order terms the material is transported through bank
approved or our logistics empaneled transporters.
Approved Custom House Agents (CHA) & Freight Forwarders are engaged for
clearing at customs and pickup of imported consignments. After receipt of shipping
documents, Imports Purchase dept. forwards details to Imports Logistics group
under EXIM for further clearing process and delivery to respective plant.
Incoterms:
Waybill:
Waybill is the mandatory document to be accompanied with the material from the
External Provider during road transport within India. An online Way Bill will be
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
issued by HBL against scanned Invoice copy/LR provided by the External Provider.
The transporter has to carry the same with the material.
Materials should be received with External Provider’s test report along with other
statutory documents. Inward Quality control team inspects the material at the
inward stage in accordance with the inspection plan. Depending on the item, some
of the items are inspected at the External Provider’s works as well. However, the
final acceptance/rejection is done at our works. Based on the quality inspection
report, stores will generate the GRN (Goods Receipt Note).
Accepted Material:
Material once accepted and cleared by the Quality control department shall be
taken into the stock at stores and issued for production according to production
plan.
Rejected Material:
If the material is rejected at inward stage, a rejection report with reasons for
rejection will be forwarded to purchase department for onward communication to
External Provider. The rejected material shall be stored separately in stores till
further disposal.
Rejection Return:
Purchase department depending on the nature of defect, call the External Provider
for rectification/re-work or send back the material for replacement.
For customized jobs, sub contract order shall be released from approved External
Providers list or ancillary. The selection of the External Provider shall be done
based on comparative quotations as well as evaluating the work content. The
evaluation of work content and rate finalization shall be done by Purchase
Department in consultation with HOD of user dept. The sub contract order apart
from the rate shall contain the norms for conversion & the wastage allowed
(Retrievable & Non-Retrievable) wherever applicable.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
Outsourcing
Cost savings
37B
Improve quality
39B
Operational expertise
40B
Product Realization
For the items decided to be out sourced, in the process of selecting the
sources for the purpose, purchase shall carry out feasibility study through
External Provider registration format & External Provider evaluation.
For Advance payments, “Down Payment” option is tagged in SAP system for
finance to prepare cheque. For others/balance payments, hard copy cheque indent
is filled up and sent to the finance for the processes of payment. (Sample Cheque
Indent is Annexed)
C-Form:
Debit Note:
It is the responsibility of purchase department to monitor the debit balances with the
External Providers and update finance on time to time basis against the debit note
generated by the finance.
Purchase department shall collect statements of book of accounts from all the
External Providers and submit the same to finance for ledger reconciliation.
Purchase shall carry out requisition review for the adequacy of the user
requirements prior to sending enquiry to External Providers.
All requisitions shall be based on approved budget for capital items. AON –
Acceptance On Necessity Document is generally approved by
CMD/Director/COO. The requisitions shall be raised by respective
departments approved by Plant Head.
The External Provider selection for evaluation shall be done based on the
contents of the External Provider registration form collected.
On closure of all SCAR (open issues if any - except mutually agreed for/
extended issues with clear action plan to close them) HBL External Provider
Evaluation Team shall recommend the External Provider for enlistment in the
approved External Provider List (Refer Serial Nos 2 & 3 of above criteria).
Master Data Team is requested through HOD purchase by mail for addition of a
new External Provider in SAP. Other changes like External Provider Name,
Address, Commercial details, deletion or blocking of a External Provider in SAP
etc. are also informed to Master data team through mails. Subsequently External
Provider code and “External Provider Master” in SAP is created / changed /
deleted / blocked.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
After receiving the initial samples from the External Provider, it is verified by QC
department as per drawing or specification. A report, which is called as First
Article Inspection (FAI) is made on basis of Dimensional inspection, Physical
appearance, and Chemical analysis etc.
FAI reports are sent to the External Provider for their reference and compliance.
(f) The above bought out items could be supplied by any of the following
types of External Providers:
(a) Manufacturer
(b) Authorized Dealer
(c) Trader
(d) ERP/Business process service providers (e.g. SAP)
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
The organization shall determine and apply criteria for the evaluation, selection,
monitoring of performance, and re-evaluation of external providers, based on
their ability to provide processes or products and services in accordance with
requirements. The organization shall retain documented information of these
activities and any necessary actions arising from the evaluations. Type and
extent of control on external service providers shall be decided by the
organization and to be monitored by a dedicated team members representing all
functions.
Services
Note:
1) For Grade - A&B - External Provider’s evaluation is need based.
2) Disqualified Vendors may be reassessed on confirmation from them on
improvement.
External Provider Evaluation Plan for Enlisted External Providers:
Urgent Supplies
Items or services required for areas other than those related to product i.e.
maintenance, administration, welfare, stationary, house keeping etc, the
purchases shall be made from External Providers on case to case basis
depending on the type of item and urgency and these need not form a part
of Approved External Providers List.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
In case of persistent failures in terms of quality and delivery and also based
on the performance rating criteria, the External Provider can be disqualified
and removed from approved External Providers List. However on case to
case basis External Provider can be granted three more chances for
improvement, beyond which HOD Purchase is authorized to disqualify such
External Providers.
-The External Providers shall also be black listed under following additional
circumstances
Bankrupt , insolvent , closure of business or dissolved
Sending RFQ
Against Purchase requisitions, request for quotations (RFQ) for supply of goods
and services are generated from SAP and are sent to the approved External
Providers through post /e-mail.
Comparison of Quotations
Quotes received are manually entered into SAP for the generation of
comparative statement. However manual comparative statements is
prepared for comparison on the basis landed cost and other influencing
parameters like lead time, payment terms and after sales services etc.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
The Approved PO is then sent to External Provider with the latest print of
drawing / specifications by e-mail or post. The superseded drawing /
specification shall be withdrawn from External Provider to make sure that
the External Provider does not produce / supply as per old drawing /
specification. Any special requirement e.g. Vendor’s compliance on quality,
safety requirements (EMS/OHSAS), joint Inspection at External Provider’s
premises or any other controls shall be specifically mentioned in the PO in
line with requirement. External Provider shall send Order Acceptance (OA)
after receipt of order from HBL and send Certificate of Conformity (CoC)
wherever applicable. PO Check List vide Annexure V.
Every PO has a validity (Time specific) which is mentioned in the PO terms.
When there is no change in the price and other terms, the old PO reference may
be considered for approval and release of repeat purchase order.
The purchase order once issued can be amended for price/qty./ payment
terms / change of address, change in commercial tax or on any other terms
depending on mutual acceptability.
Purchase Order amendment are approved as per PO approval strategy.
Cash Purchases
Production Items
Maintenance Items
Upon receipt of material along with bill / Delivery Challan / Cash memo,
inbound entry at gate is generated in SAP and on further quantity
verification, documentation GRN is created in SAP.
Acceptance
Rejection
If the material is rejected at inward stage, a rejection report with reasons for
46B
Documentation
Where the entire lot/ frequent rejections are observed, a Corrective Action
Request form will be raised and sent to External Provider through
purchase.
External Provider shall fill-up the CAR/SACR form and sent to purchase
indicating corrective actions taken by them.
Once the Invoice verification is done and posted by Finance, the payments
to the External Providers/Service Providers are processed as per the
payment terms indicated in the PO.
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
Following are SAP transaction codes are used for various Checks & Controls
a. ZPOHISTORY – PO to MIRO
b. ZPURDELIVERY – Delivery Tracking
c. ZPRICE – PO price Tracking
d. ZPR2GR – PR to GR
Following are various monthly reviews for additional checks and controls.
a. Debit balance review
b. Credit balance review
c. Job works review
d. Open POs
e. Review of SCARS
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
Annexure - I
Purchase Organization:
The structure of the organization generally conforms to the following based on
product categorization.
1. Central Purchase Team (Domestic and Imports) sitting at Banja Hill Road No. 11
office deals generally with all A, B & selectively C class Items and all Project
/Capex Items.
2. Local Purchase Team sitting at respective Plants deals generally with all C class
Items, Maintenance/Emergency Items, Consumable Items, Cash Purchases and
Service Orders.
Annexure - II
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
HYDERABAD
EXTERNAL PROVIDER REGISTRATION FORM
3B
…………………………………………………………………………..
…………………………………………………………………………..
…………………………………………………………………………….
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ORGANIZATION CONSTITUTION
42B
1) PARTNERSHIP COMPANY
(Please provide necessary documentary
evidence) 2) PRIVATE LIMITED COMPANY
5) PROPRIETORSHIP
COMMUNICATION DETAILS
4B
ESTABLISHED CAPACITY
MIN. STOCK
SL.No. DESCRIPTION LEAD TIME
QUANTITY
Standard Operating System
Purchase-Battery Group SOP 01 Rev.3 A
DECLARATION
I / We hereby declare that all statements made in this application from for enlistment of Vendor are
true, complete and correct to the best of my / our knowledge. In the event of any information being
found false or incorrect , the enlistment and any Purchase Orders placed on our firm may be
cancelled. I understand that the information will be used in the evaluation process to assess my
organization’s suitability to be invited to supply goods or services to HBL’s requirement.
Note : 1. Any changes on the above information to be immediately conveyed to Purchase dept for further action.
0 1 2 3 NA Comments
A QUALITY SYSTEM
9B
1 Is there a established and documented system for maintaining quality management system
(Quality objectives, procedures, documentation control etc) ?
2 Is there periodic top management reviews to verify the effectiveness of the quality system?
3 Are internal audits conducted and documented to verify the complianceof quality activities?
4 Does the External Provider’s procedure state that product / process / tooling / equipment /
material changes are communicated and agreed upon by the customer before implementation
of such change.
5 Is the responsibility and authority of personnel, who manage, perform and verify work
affecting quality, defined and documented?
B INCOMING MATERIAL CONTROL
6 Inspection procedure / plan is available for incoming stage inspection ?
7 Is sampling plan adopted ?
8 Are all material and test specifications available ?
9 Are the described tests and inspections actually performed as per specification ?
10 Is acceptance / rejection criteria defined ?
C PROCESS CONTROL
11 Is the workplace properly configured (adequate space, light, etc.) ?
12 Are drawings / specifications available for production ?
13 Is Process Flow diagram available ?
14 Is Control Plan been developed / available ?
15 Are Work Instructions available and displayed at work stations ?
Standard Operating System
Purchase-Battery Group SOP 01 Rev.1 A
HBL Assessment
S.No DETAILS
0 1 2 3 NA Comments
16 Does the Flow Diagram and Control Plan identify operations for receiving, storage, production,
labeling, packing and dispatch ?
Are appropriate statistical tools used and out of control points noted to take necessary corrective
17
action ?
18 Are all tools and gages available and properly identified ?
Is the operator expected to initiate line stoppage when defective material results during
19
production ?
20 Are forms available to record inspection results ?
21 Is there an acceptable lot traceability system ? Are records readily available ?
Does the External Provider have a procedure for immediate production line stoppage in the event
22
of producing non-conforming part / product ?
23 Does packaging and material handling protect parts from damage ?
24 Are unidentified or rejected materials / parts lying around in shop floor ?
25 Is separate area identified for non-conforming / rejected materials ?
26 Critical tooling (dies, molds, fixtures etc.)are verified prior to use and maintained appropriately ?
D IDENTIFICATION AND TRACEABILITY
27 Are procedures and facilities for storage, release and control of material adequate ?
28 How is the product identified throughout its manufacturing and delivery stages ?
E CALIBRATION (IMTE)
29 Is there a master list of Inspection, Measuring and Test Equipment (IMTE) ?
30 Is there a calibration plan for all IMTE ?
31 Are the gauges / instruments / standards traceable to national / international standard ?
32 When the laboratories are used for calibration services are they accredited ?
33 Are the calibrations records maintained ?
F INSPECTION AND TEST STATUS
34 Is first-piece inspection (setup approval) performed and documented to assure compliance to
specifications prior to production run?
35 Are sample sizes and frequencies of inspections performed and as per quality plan and
documented?
Standard Operating System
Purchase-Battery Group SOP 01 Rev.1 A
HBL Assessment
S.No DETAILS
0 1 2 3 NA Comments
G STATISTICAL METHODS
36 Are statistical techniques used to control KPCs / KCCs ?
37 Is the statistical data summarized and acted upon for improvements to eliminate the causes
of variation when stability and control is not demonstrated ?
H CONTROL OF NON-CONFORMING PRODUCT
38 Does the External Provider have any system / instructions to isolate, identify and control all
non-conforming material throughout the manufacturing process ?
39 Are all quality problems (customer concerns, formal corrective action requests, warranty
issues, etc.) tracked to determine where the system failed ?
I CORRECTIVE AND PREVENTIVE ACTION (CAPA)
40 Is there a documented corrective action for all the non-conformances detected either in their
facility or customer’s facility ?
41 Are the non-conformances handled effectively and resolved in a timely manner to prevent
recurrence ?
42 Are any problem solving techniques used ?
J TRAINING
43 Are the employees trained in the operational and functional aspects of their assignments ?
Are the records maintained ?
44 Is the effectiveness of the training program periodically evaluated to assure it is capable of
achieving stated objectives and requirements ?
45 Does the company have trade experts for special or critical processes ?
46 Is there any training plan for newly hired resource which is general and specific to the
position ?
K PURCHASING
47 Does your purchasing documents clearly contain the product or service specifications of the materials
being ordered from your External Providers ?
48 Is there an assessment and selection process for External Providers ? Is there an approved External
Provider list ?
49 Are External Providers evaluated and selected based on their ability to meet quality system, quality
assurance and delivery requirements ?
50 Is there a system to monitor delivery performance ?
51 Are the quality records of your approved External Providers established and maintained ?
52 Are on-site External Provider evaluations and / or audits conducted when appropriate ?
53 Is there a corrective action process with your External Providers to determine root cause of non-
conformances ? Is the effectiveness of the corrective action verified ?
Standard Operating System
Purchase-Battery Group SOP 01 Rev.1 A
HBL Assessment
S.No DETAILS
0 1 2 3 NA Comments
L MAINTENANCE
54 Is there a plan for preventative maintenance on equipment ? Is it followed ?
55 Is there a contingency plan established to meet failures such equipment, utilities, transportation,
computer systems and procurement sources ?
56 Is the plant layout clean, organized and well lighted with demonstrated evidence of ‘good housekeeping’
10B
O OCCUPATIONAL CONDUCT
61 All the persons working in the organization must be above 18 yrs.
15B
62 Is the External Provider maintaining the statutory requirements like PF, ESI, OT etc.
16B
64 Are first aid boxes available at the site and are the persons aware of the basic knowledge about its use
18B
and location.
65 Are the normal working hours limited to 8 hrs.
19B
Note : External Provider Code of Conduct and Non-Disclosure Agreement - Signed / Not Signed
Audit Rating Scale : Good - 3, Satisfactory - 2, Poor - 1, Very Poor - 0, Not Applicable - NA (Rating score - 0 & 1 - Action to be taken)
S.No.
49B
Auditor's Comments
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ESTD.YEAR (Month & Year)
Enclose the evidence of financial reports. Sales tax assessment order / returns of last 3 yrs Available / Not Available
`
NAME OF MANUFACTURER WHOSE PRODUCTS
ARE SUPPLIED
( Enclose authorization letter of respective OEM )
Standard Operating System
Purchase-Battery Group SOP 01 Rev.1 A
16. Has the External Provider have a record retention system for atleast one year ?
Does the External Provider have adequate provision for storage, protection and packaging of
17. material being supplied to HBL ?
Standard Operating System
Purchase-Battery Group SOP 01 Rev.1 A
Is the External Provider capable of furnishing the documentation evidences for above mentioned
18. points / requirements ?
Is the physical shop / plant layout capable of handling / storing increased production volumes
19. without serious detriment to part quality ?
Is the External Provider’s plant clean, organized and well lighted with demonstrated evidence of
20. good housekeeping ?
21. All the persons working in the organization must be above 18 yrs.
23B
22. Is the External Provider maintaining the statutory requirements like PF, ESI, OT etc.
24B
24. Are first aid boxes available at the site and are the persons aware of the basic knowledge about
26B
Result : Approved / Not Approved --- Re-audit necessary. (Attach annexures / separate sheet, as applicable)
Note : External Provider Code of Conduct and Non-Disclosure Agreement - Signed / Not Signed
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ESTD.YEAR (Month & Year)
7 Does the External Provider undertake the inspection responsibility for the service provided by him ?
8 Does the service provider submit the test certificate for the work executed ?
Does the External Provider have adequate facilities for provision of service, (including temparature &
9 humidity control where required) storage and protection of material being supplied to HBL ?
Is the service workshop clean, organized and well lighted with demonstrated evidence of good housekeeping
10 ?
11 All the persons working in the organization must be above 18 yrs.
31B
12 Is the External Provider maintaining the statutory requirements like PF, ESI, OT etc.
32B
Are first aid boxes available at the site and are the persons aware of the basic knowledge about its use and
14
34B
location.
15 Are the normal working hours limited to 8 hrs.
35B
S.No
52B Auditor's Comments