Finanl report purchase procedure mba finance


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Finanl report purchase procedure mba finance

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  6. 6. EXECUTIVE SUMMARY The Company being established as PATSONS METALLICS PVT.LTD. (PMPL) Incorporated in2011, PMPL is the flagship company of the PATSONS group. The company has a sizable presence inDomestics markets. Today PMPL is an acknowledged leader in the manufacturing of Metallic’sproduct CI and SGI Castings, Valves and Specials and Fittings for Water Works.. My Project is The Purchase Procedure of Manufacturing Company. The study was conducted atthe head office of Patson Metallic’s Pvt.Ltd. (PMPL), LATUR The project was of two months duration. During the project I interviewed the executives &staff to collect the data, & also made use of company records & annual reports. The data collected werethen compiled, tabulated and analyzed. Purchase Procedure is the very important part in themanufacturing company. Management due to Investments in current assets represents a substantialportion of Total investment.  Some the points to be studied under this topic are:-  How to purchase of raw material at a right time.  What should be the firm’s purchase policy?  How to & when to pay the creditors of the firm?  How much to invest in Raw materials? By studying about the company’s different areas I came to know certain things like Financial Analysis is more than one but it does not mean that Company has excessive control. 6
  7. 7.  Scope and Need of Study:- Purchase procedure is widely used in the entire organization. The scope of thisis limited to the study of purchase procedure and different types of Assets of Patsons Ltd. The studyof includes the comparisons of raw material requirements for the period of under review. The study was conducted at “PATSON LTD.LATUR”. The duration ofthe study was confined to about 60 days. In this duration of the study is based in the data collectedand the financial for last 2 years financial year and role of purchase manager when finished thematerial in the company. So some points are included. 1) It covers study of records maintained by the purchase department of the (PMPL). 2) It includes examination of forms reports used by the factory. 3) It covers study of various techniques of purchase procedure applied in the PMPL organization 7
  8. 8.  Objective of the project:-1) To identify the financial strengths & weakness of the company.2) Through the Purchase procedure and understand the profitability of the company.3) Evaluating company s performance relating to financial Analysis.4) To know the purchase procedure positions of the company with the help of purchase to the right material in the company.5) To find out the utility of financial position and observation to determining the financial capacity of the firm.6) To understand the concept of Purchase procedure of the Manufacturing company.7) The Study of Purchase Procedure manufacturing company and the Patsons metallic’s it is aanalyzing the nature of the market. The regulations and the governing factors of the Patsons group.8) The project is on Purchase Procedure of company and the project is undertaken to study of thepurchase procedure of manufacturing company. Adopted by Patsons Metallic’s Pvt.Ltd. (PMPL). 8
  9. 9. INTRODUCTION CONTENTS History of PATSONS Group History of Manufacturing Company 9
  10. 10. HISTORY OF PATSONS GROUP:-The Patsons Group commenced operations in the year 1980 at Latur in Marathwada region ofMaharashtra. The history is the story of human spirit and exceptional efforts to realize an appreciateddream of building a full- fledged industry starting from virtually nothing. The group was founded by ShriAnnasaheb Patankar, young, dynamic and talented technologist coming from upright middle classfamily of freedom fighters. Annasaheb after completing his technical education could have easily optedfor a prestigious government post, but instead, he decided to start a new business to help theeconomically backward farmers to get gainful and respectable employment opportunity. His dream wasto build a strong technology based industrial unit to serve the interests of poor farmers and landlesslaborers to make available gainful employment, in the industry sector. By complete hard work, total integrity, respect for the individual,keen business acumen, technical expertise, innovative approach and outstanding team building magic,there was no wonder that the sapling he planted, very soon became a striving industrial group. Later hisworthy bright sons Kamlesh and Mangesh joined him in 1995 and in the short period of less than 15years the father - sons team has made what Patsons Group is today. A grand shining successadmired by one and all. A benchmark of excellence and business leadership.  PATSONS METAL UDYOG:-Patsons Metal Udyog had its beginning in the form of a small C.I. foundry basically manufacturing CIcastings for sister company Patsons Valves & Engineering Industries. The foundry was shifted to MIDCarea Latur in the year 1985 and bigger size Cupola, Balancing Equipment and Comprehensive Testand Inspection Facility was added to make it a full size foundry unit for making CI Castings in the rangeof 1 Kg. to 1000 Kgs.In the year 2007 the Patsons Group decided to expand and modernize the foundry business and enterthe Automobile Casting area to meet the exacting and demanding need of the Automobile Castingsbusiness. This was done to meet the needs of fast expanding Automobile business in India.With this in view Patson Metallic’s Pvt. Ltd. easy formed. The unit is now operational since March 2011.Patsons Metallic’s Pvt. Ltd is a modern state of the art 10,000 Tons per annum capacity InductionFurnace based foundry unit, having automatic sand plant of 100 Tons per day capacity, molding line,semi automatic pouring line, 500 Kg. capacity dual track induction furnace, efficient and high productivefettling facility, pattern shop and integrated test and inspection facility.The plant is capable to produce C.I .and S.G.I. castings in the weight range of 1 Kg. to 1000 Kgs. Theentire facility is housed in the first class construction factory buildings with total area of 3000 squaremeters. The manufacturing team includes highly experienced foundry professionals with vastexperience in similar foundries. 10
  12. 12.  About usThe US $ 2 Million Patsons Group is one of the India’s fast growing business groups. The group hasbusiness interests in diverse areas including Preserved Vegetables. CI and SGI Castings, Valves andSpecials and Fittings for Water Works, Infrastructure Development and Higher Education.  Group companies includeFOOD PROCESSINGPATSON PRESERVED VEGETABLES PRIVATE LIMITEDPATSON AGRO EXPORT PRIVATE LIMITEDCASTINGSPATSONS METALLICS PRIVATE LIMITEDPATSONS METAL UDYOGVALVES & FITTINGSPATSONS VALVE & ENGINEERING INDUSTREISPATSONS VALVESPROJECT & INFRASTRUCTURENATIONAL COMMUNICATION NETWORKMARKETINGANKIT MARKETING SERVIC ESEDUCATIONALVISHWABHARATI ACADEMY’S COLLEGE OF ENGINEERINGAs a part of the major expansion and modernization program, the group has expanded the operationsin India and also developed a global foot print.Across the Patsons Group social responsibility sharing is a valued objective with keen and significantinvolvement in environment development and community enrichment activities.Ably led by managing director Mr. Kamlesh Patankar Group emerges as a focused organizationbuilding on its strengths to enhance value for the stake holders.  Chairman and Chief Executive Officer Kamlesh Patankar is CEO of Patsons Group Kamlesh began hiseducation at the prestigious Shri Bankatlal English School at Latur. Imbibed a liberal secular educationbased on the ideas of equality and freedom. After graduating in Metallurgical Engineering from PuneUniversity in 1992, he received valuable work experience at Cummins India, well known MultinationalCorporation based in Pune. He joined the business founded by his father Shri Annasaheb Patankarin the year 1995. He learnt the intricacies of business operations under the watchful and encouraging 12
  13. 13. guidance of his father. Very soon, he mastered the working of the business and by the age of 41 today,steered the group to commanding heights of glory and growth. By virtue of his grand vision, insistence on quality, hard work, inspiringleadership and integrated approach, he led the group from success to success. Today, thanks to hiscontribution, Patsons Group has developed in to a multi product, multi division organization having asignificant foot print in the International market for Preserved Food Products and domestic areaPatsons Metallic’s pvt ltd. His enterprising spirit, innovative ideas, friendly nature, democraticprinciples and positive, proactive approach coupled with people centric management style has won hima place in the hearts of his customers, employees, friends and associates. He is a great team builderand believes that what the organization today is the work of his employees and acknowledges this factvery candidly at every opportunity. His greatest ability and strength lies in his relentless insistence oncontinuous improvement, facing any difficulty with total courage and rational problem solvingapproach and working with ease and warmth with people who are senior in age, experience andknowledge. He is a keen observer with a phenomenal photographic memory and computer like recall.Many times it is acknowledged by his associates and employees that even before a problem is fullyexplained to him; he comes out with a perfect wonderful solution. Definitely, legendary sixth sense isactive in his case.  Patsons Group Corporate Mission Statement:-To be responsible and ethical corporate citizen while offering best quality products and services to ourvalued Indian and Overseas customers. To develop growth oriented cooperative democratic workculture for vendors, employees and associates. To share our social responsibility to achieve healthygrowth coupled with stability and profitability  To achieve the above  To become one of the fast growing transnational business groups  To become a group that is recognized as the group that values quality, relations, performance, integrity and innovative spirit.  In our business we will  Continuously seek opportunities for growth, to be a leader in the domestic market  Establish a significant global presence.  Use technology as the tool for growth.  We will be recognized for our people centric ethos, excellent relations with business partners, and pleasant work culture.  We will be respected for being a good corporate citizen. 13
  15. 15.  Name of the organization : - Patsons Metallic’s Pvt.Ltd. Address of the factory :- B-10/2, Addl. MIDC, Harangul, District - Latur – 413531 Maharashtra, India Tel & Fax : - 00-91-02382-220885 & 220886 E-mail :- Web Site : - Type of Organisation : - Manufactures of casting (CI &SG IRON) Area of organization : - 7447 sq ft. Manpower :- 100 Turnover (sales) :- 3.24 cr (above) Share Capital : - 2000000 shares Banker : - Bank of Maharashtra ( latur branch) 15
  16. 16.  Patsons Metallic’s Pvt. Ltd:-  History:-  PATSONS METALLICS PVT.LTD.:-. The Patson Metallics Pvt. Ltd. it is a easy formed company. The unit is nowoperational since March 2011. Patsons Metallics Pvt. Ltd is a modern state of the art 10,000 Tons perannum capacity Induction Furnace based foundry unit, having automatic sand plant of 100 Tons perday capacity, molding line, semi automatic pouring line, 500 Kg. capacity dual track induction furnace,efficient and high productive fettling facility, pattern shop and integrated test and inspection facility. The plant is capable to produce C.I .and S.G.I. castings in the weightrange of 1 Kg. to 1000 Kgs. The entire facility is housed in the first class construction factory buildingswith total area of 3000 square meters. The manufacturing team includes highly experienced foundryprofessionals with vast experience in similar foundries. 16
  17. 17.  COMPANY PROFILE:-  INTRODUCTION:- The Patsons Metallics Pvt Ltd., promoted with advancement oftechnology, will be one of the India’s largest industrial groups, engaged primarily in manufacture ofvarious CI & SG Grade Castings to meet the domestic and international markets. Adding on newventures, expanding capacity and diversifying products, the unit total production of Castings will bearound 5000 metric tons per annum. Patsons Metallics Pvt Ltd. Are putting up a state of the Art Foundry to cater tothe need of OEM’s and replenish market. We also strive to conduct continuous up gradation in line withlatest technological development.  Location and Infrastructure:- The unit is situated at Latur Addl MIDC Area, Latur District Latur just 2 Kmsaway from Latur Airport. All vital modes of communication namely, Telephone, Facsimile, E-Mail,Intranet, Satellite Communication etc., are easily accessible from the city of Latur. Other facilities likeBanking, Transport etc.  Quality Assurance:- The Quality is synonymous to products. In fact, we cast quality andconfidence to its valued customers. The Quality Assurance Department with separate heads for eachsphere of activity such as Chemical Analysis, Physical Testing, Visual and Dimensional Inspection,Non-destructive testing, Packing and Dispatch.  Exports:- A wide range of items are likely to be exported regularly world-wide toUSA, UK, Germany, Italy, Denmark, South Africa, Japan, Singapore and Middle East Countries.  Marketing Network:- Marketing operations are to be carried out across the country, by a wide network ofmarketing offices, to cater the needs of domestic and upcountry market in major towns and cities ofIndia. 17
  18. 18.  Manufacturing and Design Unit: Patsons Metallics Pvt Ltd Is fully equipped manufacturing unit and design unit and has anappreciable production capacity. This unit is fully equipped with latest machines, equipments, and toolsto manufacture our product range. Different machines are installed in our production unit whichincludes: A) Medium Frequency Induction Melting Furnace. B) Sand Reclamation and preparation plant. C) Pneumatic Squeeze Jolting Pin Lift Moulding Machines. D) Pouring Ladles. E) Shot Blasting Machine. F) Compressor. G) EOT Crane. H) Workshop Machine. I) CNC Vertical Machining Center. J) Spectrometer. K) Physical Quality Testing Machines. L) Metallurgical Microscopes. This unit is fully supported by an in-house design unit. It develops the designs forcompany products based on market as well as company customer’s requirements. After the finalizationfrom our design unit, the product designs are used to produce the products. The Patsons Metallic’s Pvt Ltd. offers full-service capability in casting designassistance for new products from concept through prototype and final production phases and companyteam of experts in metallurgy, production, pattern design and quality control assures quality castings.Computerized customer service and production scheduling provide current order status and promptdeliveries and focused on responsiveness to your needs through short cycle times, on-time deliveriesand consistent quality.  500 KVA High Tension line installed with Express Feeder 18
  19. 19.  Quality Policy:- This unit is fully supported by an in-house design unit. It develops the designs for ourproducts based on market as well as our client’s requirements. We are committed to furnish only thequality products to our clients. We implement prescribed quality strategy in our organization. Thestrategy is fully in conformity with established cutting edge technology. It is implemented exhaustivelythrough every stage of our products, production and delivery.  It is ISO 9001-2008 Certified Unit for manufacture and supply of castings, automotive parts.  Laboratory and Testing facilities:  Spectrometer –State Of the Art 26 Element Germen make Spectrometer.  Traceability: The Quality Team supervises the Quality Assurance and Quality Control aspectsalong with the entire process system by identifying and associating with quality circles. We ensure100% tractability for the products.  Occupational Health and Safety: The organization committed to Occupational Health and Safety of the workers and shopfloor staff ensure strict adherence to body protective wears and covers for moving parts. The workersare constantly educated upon the important of health and safety through displays and safety tips.  Environmental Protection: As an environmentally responsible company, we comply with the environmental regulationsadvocated by the Government. As a result we have been provided with necessary Pollution ClearanceCertificate. 19
  20. 20.  FINANCIAL GROWTH PATSONS METALLICS PVT.LTD.COMPANY SALES, WHEN COMPANY STARTED:-MONTHS APRIL MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEBRS IN LAKHS 45 48 50 52 60 65 50 65 80 85 88 Sales( in lakhs) 90 80 70 60 50 RS 40 30 20 10 0 April May June July Aug Sep Oct Nov Dec Jan Feb MONTHS 20
  21. 21. Manpower distribution in the company:- production finance marketing Die M/C logistics maint Maint 30% 20% 5% 15% 10% 20% Manpower distrubution production finance marketing die maint M/C Maint logistics 20% 30% 10% 15% 20% 5% 21
  22. 22.  Company ISO Certification:- 22
  23. 23. Organizational chart. (Role and Responsibilities):- M.D. (Mr.Kamlesh Patankar) Director (Mr.Anil Kulkarni)Manufactured Head Quality Sales Purchase Finance HR Development (D.J.Bhagat) (R.K.Kulkarni) (shrikant) (Deodhar) (Gujar) (Lakade) (Kulkarni)Produ.Incharge Maintenance ( store) (R.K.Kulkarni) (D.R.Kulkarni) Quality sys. (Melshetti) (Khatade) (Chavan) (Gujar)Mould+ Melt Core FetlingSand plant + (Randive) (Waghmare)(Deshpande) Dispatch (Navgire) 23
  24. 24.  COMPANY PRODUCT:-  Bajaj Break Drum:- The bajaj break drum it is manufacture product and this product manufactured patsons metallics, and this product used to bajaj motor cycle.  50 – Gate:- 50- gate it is a motor product means use to agriculture unit. Standard: 1. Design and Manufacture: DIN, ANSI, BS, JIS etc. 2. Face to Face: DIN, ANSI, BS, JIS etc. 3. End Flange Dimensions: DIN, ANSI, BS, JIS etc. 4. Nominal Pressure: Class 125lb, 250lb, 1.0Mpa, 1.6Mpa 5. Pressure test : API 598 ISO5208 24
  25. 25.  150 – Gate:- A) Comprehensive Service B) Model Number: Class 150 200 – Gate:- Features: * Rust resistant * High performance * Rugged construction 25
  26. 26.  280 Motor Frame:- Motor frame it is a mention that motor structure this motor structure used to all manufacturing company and this product make to this company. The process about this material firstly used to casting and infection about the material.Standard Features 1. Output: 11 up to 280kW 2. Multivoltage – (220-240/380-415//440-460V or 380-415/660-690//440-460V) 3. Open Drip Proof (ODP) 4. EFF2 Improved Efficiency 5. Cast iron frames (160M up to 280S/M) 6. Mounting: B3R 7. Degree of Protection: IP23 8. Squirrel cage rotor/Aluminum die cast 9. Stainless steel nameplate AISI 316 10. Class F insulation 11. Continuous duty - S1 12. Ambient temperature: 40°C, 1000 m.a.s.l. 13. Regreasing system from frame 225 and above 14. Thermistors (1 per phase) 15. Metric thread cable entries in terminal box 16. Suitable for Inverter Duty applications* 17. Paint color: RAL 7022 26
  27. 27.  COMPANY VALUED CUSTOMERS:- Company supply castings to the valued customers in the automobile, machinery, machine tools, general engineering, and valves industry throughout the country.  Some of the company Major customers are• Mayur Valves• Indian Valves Company• Alfa Hydrotech 27
  28. 28.  The Company Business relations for the following customers are under process:-Mahindra Ashok LeylandEicher Premium TransmissionTACO Boston GearThermax LHPRieter CumminsAtlas Copco Piaggio 28
  29. 29.  HISTORY OF MANUFACTURING COMPANY:- In its earliest form, manufacturing was usually carried out by a single skilled artisan with assistants. Training was by apprenticeship. In much of the pre-industrial world the guild system protected the privileges and trade secrets of urban artisans. Before the Industrial Revolution, most manufacturing occurred in rural areas, where household-based manufacturing served as a supplemental subsistence strategy to agriculture (and continues to do so in places). Entrepreneurs organized a number of manufacturing households into a single enterprise through the putting-out system. Toll manufacturing is an arrangement whereby a first firm withspecialized equipment processes raw materials or semi-finished goods for a second firm.Manufacturing started during 5000 – 4000 BC. Wood work, ceramics, stone and metal work. The SteelProduction 600-800 AD. The Industrial Revolution 1750 AD: Machine tools run by invention of steamengine and the Mass Production and Interchangeable Parts in the system of computer controlledmachines 1965. 29
  30. 30.  INTRODUCTION OF MANUFACTURING:-Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term mayrefer to a range of human activity, from handicraft to high tech, but is most commonly appliedto industrial production, in which raw materials are transformed into finished goods on a large scale.Such finished goods may be used for manufacturing other, more complex products, suchas aircraft, household appliances or automobiles, or sold to wholesalers, who in turn sell themto retailers, who then sell them to end users – the "consumers".Manufacturing takes turns under all types of economic systems. In a free market economy,manufacturing is usually directed toward the mass production of products for sale to consumers at aprofit. In a collectivist economy, manufacturing is more frequently directed by the state to supply acentrally planned economy. In mixed market economies, manufacturing occurs under some degree ofgovernment regulation.Modern manufacturing includes all intermediate processes required for the production and integration ofa products components. Some industries, such as semiconductor and steel manufacturers use theterm fabrication instead.The manufacturing sector is closely connected with engineering and industrial design. Examples ofmajor manufacturers in North America include Corporation, General, and Pfizer. Examples in Europeinclude Volkswagen Group, Siemens, and Michelin. Examples in Asia include Toyota, Samsung,and Bridgestone. 30
  31. 31. RESEARCH METHODOLOGY  Data Sources  Research Instruments  Data Analysis 31
  32. 32. RESEARCH & METHODOLOGY Research as a process involves evaluating data, deriving inference and conclusions aftercareful testing; a good research design is flexible, relevant, efficient, economical and focused. TheResearch and Methodology consists of following methods: 1 Data Sources 2 Research Instruments 3 Data Analysis1. Data Sources: Almost to be taken during collecting data. The results obtained from the analysis wouldthen be properly interpreted and policy decisions were to be taken. Hence if data was in accurate andinadequate, the whole analysis could be faulty and the decisions taken would be misleading. Hence toavoid this data must be collected accurately. The data can be collected from primary as well assecondary sources. Primary sources in simple term can be stated as, the one that itself collects thedata. While Secondary sources is one that makes data available through some other agencies.  Primary Data :- The Different methods of collecting Primary data are  Direct Personal Interview  Information from correspondents related to Company  Discussion with the concerned persons related to objective of company  By referring the books in support to theory  Secondary Data:-  Secondary Data was useful for Findings and Analysis of the Project Collected from the Annual Report.  I also had to refer various magazines and newspapers related to Purchase Procedure of Manufacturing Company. 32
  33. 33. 2. Research Instrument:-  The research instruments were the annual reports of the company of various years.  The analysis was done by comparing the figures of expenditures of the year in consideration.  The previous year so as to observe purchase procedure of the company.3. Data Analysis:- Having gathered all the data or information from all sources both primary and secondary,we analyze this data carefully proceed to draw conclusion from all this we need to correctly. Whileanalyzing the data we may need to use certain statistical tool. 33
  34. 34. Purchase Procedure and Related Topics  Introduction  Purchase of Materials  Purchase Requisition  Selection of Suppliers  Preparation & Execution of Purchase Order  Receipt & Inspection of Material 34
  35. 35.  Purchase Procedure and reelected topics:-  Introduction:- Purchasing refers to a business or organization attempting for acquiringgoods or services to accomplish the goals of the enterprise. Though there are several organizationsthat attempt to set standards in the purchasing process, processes can vary greatly betweenorganizations. Typically the word “purchasing” is not used interchangeably with the word “procurement”,since procurement typically includes Expediting, Supplier Quality, and Traffic and Logistics (T&L) inaddition to Purchasing. If a concern can afford it, there should be a separate Purchase Department for allpurchases to be made on behalf of all other departments. Purchasing should be centralized i.e. Allpurchases should be done by the purchasing department except for small purchases which may bedone by users departments. However, there is no advantage in centralized purchasing. If materials and stores requiredby different plants.  Materials Purchase Department in a business house is confronted with the following issues :- a) What to Purchase? b) When to Purchase? c) How much to purchase? d) From where to purchase? e) At what price to Purchase? 35
  36. 36.  MATERIALS: - Materials are the real resources and basic inputs used for manufacturing a product.Usually the term ‘Materials’ means and includes all raw materials, fabricated parts and subassemblies.Raw materials are materials that are in their original, crude unprocessed and raw form.Material control relates to both direct and indirect materials.  Direct materials are these, which enter into and form part of the product & include:- A) All materials specially purchased for a job order or a process. B) All materials issued from the stores against a particular job order, number or process. C) All components or assembly parts purchased for use in the jobs and process directly D) All materials or processed materials transferred from one process or operation to the other. E) All primary packing materials such as Poly Bag, Gunny Bag, Cardboard Box etc.  Indirect materials are those, which cannot be traced as a part of the product, such as : - A) Consumable store used in the operation. B) Lubricating Oil, Grease, and Fuel Oil etc. C) Tools, Jigs & Fixtures etc. D) Sundry Stores of small value like cotton waste. Broom Stick etc. 36
  37. 37.  Purchase of Materials :- Materials constitute a very significant proportion of total cost of finished product in most of themanufacturing industries so, there should be proper separable department i.e. purchase department forpurchase of materials in proper manner.Purchase of Material Include:-a) Purchase of Material at right quantity.b) Purchase of Material at right quality.c) Purchase of Material from right source.d) Purchase of Material at right time. Purchase Department follows purchase procedure in proper manner and kept cost of purchaseto minimum.Purchase Department should take into consideration following points regarding control ofmaterials cost and total cost:-a) The exact quality of specification of materials required should be determined according to the required quality of the finished product. If too superior quality of material were purchased, it would mean higher cost due to high prices, if the quality of materials is too low; the product will be inferior quality.b) The price paid should be the minimum possible otherwise the higher cost of the finished products would make the product uncompetitive in the market.c) There should be no interruption in the production process for want of materials and stores including small in expensive items like lubricating oil for a machine. Sometimes there out of stock situation may lead to stoppage of machine.d) There should be no over stocking of materials because that would result in lost of interest charges, higher godown charges, deterioration in quality and losses due to Obsolescence.e) Purchase department & stores department should properly coordinate. Wastage & losses while materials are in store should be avoided as for as possible. 37
  38. 38.  Objectives of System of Material Control :-a) Ensuring that no, particularly production, suffer from interruption for want of materials and stores. It should be noted that this requires constant availability of every item that may be needed however small its cost may be.b) Seeing to it that all the materials and stores are acquired at the lowest possible price considering the quality that is required & considering other relevant factors like reliability in respect of delivery etc.c) Minimization of the total cost involved both for acquiring stock and for holding them.d) Avoidance of unnecessary losses & wastages that may arise from deterioration in quality due to defective or long storage or from Obsolescence.e) Maintenance of proper records to ensure that reliable information is available for all items of materials & stores that not only helps in detecting losses and pilferages but also facilitates proper production planning.  Purchase Department & Requirements of Material Control:- a) Proper Co-ordination of all Departments involved Viz Purchase, Finance, Receiving Inspection, Storage, Accounting and Payment. b) Determining purchase procedures to see that purchase are made after making suitable enquiries, at the most favorable terms to the firms. c) Use of standard form for placing the order, noting receipt of goods, authorizing issue of material etc. d) Preparation of budgets concerning materials supplies and equipment to ensure economy in purchasing and use of materials. e) Operation of a system of internal check so that all transaction involving materials, supplies and equipment purchases are properly approved & automatically checked. f) Storage of all materials & supplies in a well designate location with proper safeguards. g) System of perpetual Inventory & stock taking in proper manner. h) Maintenance of all required records books, accounts in proper manner. i) Regular reports of materials purchased issued from stock, inventory balances, absolute stock, goods returned to vendors, defective units. 38
  39. 39.  To overcome above listed issues, the purchase department follows the procedure involving following steps:- a) Receiving Purchase Requisition b) Exploring the sources of materials supply and selecting suitable material suppliers. c) Preparation & execution of Purchase Order. d) Acquisition Process. e) Receipt & Inspection of Materials.a) Receiving Purchase Requisition :- Since the materials and stores purchased will be used by the production departments. There should be constant Co-ordination between the purchase and production department. Purchase Requisition is a form used for making a formal request to the purchase department to the purchase material. This form is usually filled up the storekeeper for regular materials and by the departmental head for special materials (not stocked as regular items). The requisition form is duly signed by either works manager or plant superintendent, in addition to the one originating it. It should be gone through periodically so that necessary deletion and addition may be made. If there is any change in the rate of consumption per week, the purchase department should be informed about the new figures. Once a item has been include in the standard list, it becomes the duty of purchase department to arrange for fresh supplies before existing stock are exhausted. But if the production department requires some new material, it should make out an indent well in time and send it to the purchase department for necessary action. Control over buying - for control over buying of regular store material it is necessary to determine their maximum, minimum, reorder level and economic order quantities and various levels constitutes an adequate safeguard against improper indenting of regular materials. In respect of special materials, required for a special order or purpose, it is desirable that the technical department concerned should prepare material specifications list specifying the quantity, size and order specifications of materials to be drawn from the store and those to be specially procured. 39
  40. 40. b) Exploring the sources of materials supply and selecting suitable material suppliers:- A source for the supply of each material may be selected after the receipt of the Purchase Requisition. Purchase department in each business house usually maintains a list of suppliers for each group of materials, required by tier concern. At least three quotations are involved from such suppliers. On the receipt of these quotations a competitive quotations are prepared. For selecting material suppliers the factors which the purchase Department keeps in its mind are Price, Quantity, Quality, Offered, Time of Delivery, Mode of Transportations, Terms of Payment, & Reputation of suppliers etc. In addition to the above listed factors purchase manager obtains the necessary information from the statement of Quotations, past records, buyer guides etc. for finally selecting suppliers. c) Preparation and Execution of Purchase Order:- Having decided on the best quotations that should be accepted, the purchase manager or concerned officer proceeds to issue the formal purchase order. It is a written a request to the supplier to supply certain specified materials at specified rates and written a specified period. Copies of purchase are sent to:- 1) Supplier 2) Store or the order indenting Department 3) Receiving Department and 4) Accounting Department A copy of purchase order, along with relevant purchase requisitions, is held in the file of thedepartment to facilitate the follow-up, of the delivery and also for approving the invoice for payment. Purchase order includes its number, date, party name, description of material, quantity, rate,amount, terms of payment, mode of delivery, terms of insurance and tax authorized signature etc. 40
  41. 41. D) Acquisition Process:-The revised acquisition process for major systems in industry and defense is shown in the next figure.Then the purchase has to clear all the materials. The process is defined by a series of phases duringwhich technology is defined and matured into viable concepts, which are subsequently developed andreadied for production, after which the systems produced are supported in the field.The process allows for a given system to enter the process at any of the development phases. Forexample, a system using unproven technology would enter at the beginning stages of the process andwould proceed through a lengthy period of technology maturation, while a system based on mature andproven technologies might enter directly into engineering development or, conceivably, evenproduction. The process itself includes four phases of development.e) Receipt and Inspection of Materials:- Under every system of stores organization a distinction of made between the function of receiving and storing, so that each acts as a check on the order. The receiving department or section is responsible for taking charge of the incoming materials, checking and verifying their quantities, inspecting them as regards their grade, quantity or other technical specifications and if found acceptable, passing them on to the stores. In large organization a special inspection wing is often attached to the receiving 41
  42. 42. department and where it is not so technical appraisal of the incoming supplies is carried out by the general inspecting staff. In case the quality is not the same as ordered, the goods are not accepted. If everything is in order and the supply is considered suitable for acceptance, the receiving departments prepare a receiving reports and materials inward note or goods received note. It is prepare in quadruplicate, the copies being distributed as under: a) First copy is sent to purchase Department for varying supplier bill for payment. b) Second copy is sent to the Stores Department or the department indents the material. c) Third copy is sent to the Stores Ledger Clerk in the cost department. d) Fourth and last copy is retained for use by the receiving department. A good plan would be that the receiving clerk sends all the three copies (meant for others) along withthe materials to the materials to the Stores or Department that placed the order. The materials arephysically inspected and the particulars therefore as recorded in the receiving reports are verified. If thequantity and the Quality are in order, the delivery of same is accepted and copies of the reports aresigned, two copies of reports are forwarded to the purchase department and the third is kept on the fileas documentary evidence of the quantities of received for storage or use, as the case may be. ThePurchase Department in turn, enters the purchase price and forwards one copy to the AccountDepartment and the second to the Cost Department. Goods received include its Number, Date, Party Name, Order No., Quantity, Code, Description, Amount, and Charges if any, Authorized Signature of Inspector, Receiver & Store Keeper etc.  Material Outward Return Note :- Sometimes materials have to be returned to supplier after these have been received in thefactory. Such returns may occur before or after the preparation of the receiving reports. If the returntakes place before the preparation of receiving report, such materials obviously would not be includedin the account books would be necessary. But if the material is return after is entry in the receivingreport, a suitable document must be drawn up in the support of the credit entry so as to exclude fromthe stores of the material amount the value of the materials returned back. This document usually takesthe form of a material outward return note. The Material Outward Return Note is drawn up by the stores or the dispatchdepartment. Five copies of it are usually prepared, two copies for the supplier (one of which is to besent back by the supplier after he has signed the same). One for Store, one for Cost (Store) Ledger &one copy to be retained in the Material Outward Return Book. Material Outward Return contains its number, date, item description, quantity, reason for return ofmaterial etc. 42
  43. 43. Sometimes material it is transferred from one department to another, the surplus material arising on ajob or other units of production may sometimes may be unsuitable for transferable to stores because ofits bulk, heavy weight , brittleness or some such reason. It may however be possible to find somealternative for some other job instead of returning it to the storeroom. It must be stressed that generally transfer of material from one job to another is irregular, if notimproper; in so far it is not conductive to correct allocation and control of material cost of jobs or otherunits a production it is only in the circumstances envisaged above that such direct transfer should bemade, at the time of materials transfer a material transfer should be made, at the time of materialtransfer. A material transfer note should be made in duplicate, in the position of the copies of this notebeing are follows:-One copy for the cost department & one copy for the department making the transfer.No copy is required for the store as no entry in the store records would be call for the Cost Departmentwould use its copy for the purpose for making necessary entries in the Cost Ledger Account for the jobseffectively.Material Transfer Note contains its number, date, transfer department, transferee department, itemnumber, particulars, rates, authorized signature etc 43
  44. 44. FINANCIAL ANALYSIS Theoretical Background Practical Background 44
  45. 45.  As per International Accounting System (IAS)1, a complete set of financial statement includes the following components:- a) A Balance – Sheet which is prepared on a particular day, shows the financial position on that date. b) An Income statement or Profit and Loss Account, which shows the amount of profit or loss for a particular accounting period. c) A statement showing either, (a) all changes in equity or,(b) changes in equity other than those arising from capital transactions with owners and distributions to owners. Equity represents the amount contributed by owners. d) A cash flow statement and e) Accounting policies and explanatory notes. Explanatory notes provide clarification and additional information whichfacilitates analysis of the financial statements In India, financial statements do not include a separatestatement showing changes in equity.The following concepts of conventions are followed in the preparation of financial statement  Concepts  Separate Entity concept  Double Entry  Going concern  Monetary value concept  Matching concepts  Accounting period concept  Conventions:  Conservation  Consistency  Disclosure 45
  46. 46.  FINANCIAL ANALYSIS:-Financial analysis (also referred to as financial statement analysis or accounting analysis or Analysis offinance) refers to an assessment of the viability, stability and profitability of business, sub-business orprojectIt is performed by professionals who prepare reports using ratios that make use of information takenfrom financial statement and other reports. These reports are usually presented to top management asone of their bases in making business decisions.  Continue or discontinue its main operation or part of its business;  Make or purchase certain materials in the manufacture of its product;  Acquire or rent/lease certain machineries and equipment in the production of its goods;  Issue stocks or negotiate for a bank loan to increase its working capital;  Make decisions regarding investing or lending capital;  Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business. 46
  47. 47.  FINAL ACCOUNT:- a) TRADING ACCOUNT b) PROFIT & LOSS c) BALANCE SHEET a) TRADING ACCOUNT:- Trading Account is prepared to find out the gross profit and in turn the percentage of grossprofit is the excess of sales price over cost or purchase price of goods. Here cost/purchase price doesnot mean the price paid for goods to the supplier of goods but it also considers all incidental expensesincurred till the goods are received and made saleable, such as carriage/freight on purchases, wagespaid to workers, customs duty, and octroi, packing and forwarding charges. However, expensesincurred on sale are not taken in the Trading A/c.It is already seen that the goods account is split upinto four separate accounts. 1) Purchases account to record both cash and credit purchases of goods. 2) Sales account to record cash as well as credit sales of goods. 3) Purchases returns or returns outwards account to record the goods returned out of the goods purchases. 4) Sales returns or returns inwards account to record the goods returned by the customers out of the goods sold to them. Similarly for the goods remained unsold i.e. the goods on hand at the end of the trading year a separate ‘stock account’ is opened. The Stock at the end of the year is termed as ‘closing stock’. As this stock is on hand at the beginning of the next year it becomes the ‘Opening Stock’ it means closing stock of the last year forms the opening stock of the current year. A trader prepares a trading account to ascertain the result of buying and selling of goods i.e. Gross Profit or Gross Loss. gross profit Is the excess of selling price over the cost price of the goods sold i.e. b) PROFIT& LOSS ACCOUNT:- Trading a/c shows only Gross Profit. It does not take intoconsideration expenses incurred to conduct the business, such as administrative or managementexpenses, ( like staff salaries, office expenses, rent, rates, taxes, insurance, telephone, lighting, repairsof building, furniture, machinery etc, depreciation) selling and Distributions expenses ( like carriageoutwards, salesman’s salaries, advertisement, discount allowed, bad debts, delivery van expensesetc.) and financial expenses ( like interest paid, legal charges etc.) Net Profit: All incomes and gains, such as interest, commission, discount etc. received, profit on saleof asset etc. are added to the Gross Profit: from this total income, all administrative 47
  48. 48. c) BALANCE SHEET:- All nominal accounts are closed by transferring theirbalances to the Trading and profit and loss account. But real accounts and personal accounts areclosed by carrying forward balance for next year. These balances are grouped in a separate statementcalled Balance Sheet. Thus, Balance Sheet is a statement of the Ledger balances remaining afterhaving the Nominal accounts closed by transferring them to the Trading and Profit and Loss Account. The balance sheet has also two sides; but they are not headedas ‘Dr’ and ‘Cr.’ Sides because the balance sheet is a statement and not an account. The Left-handside is headed as ‘Liabilities’ and the right-hand side is headed as asset. All real accounts and thepersonal accounts with debit balances are shown on the ‘ assets’ side, where as the personal accountshaving credit balances , including capital a/c, are shown on the ‘ Liabilities’ side. The balance sheet is,therefore, defined as a statement of assets and liabilities. Since the balance sheet is not an account,there is no ‘To’ or ‘By’ proceeding the names of the Accounts recorded in the Balance sheet. Real accounts and personal accounts are closed by carrying forwardbalances as shown below & these balances are shown in the balance sheet as stated above. 48
  49. 49.  PRACTICAL OBSERVATIONS:-  FINANCE DEPARTMENT:- Finance Department of (PATSONS METALLICS PVT.LTD). Is a compositedepartment catering of the following functions:- a) FINANCE: - Procurement, Management and Utilization of Finance. b) ACCOUNTS: - Accounting of Income, Expenditure and Assets and Liabilities of the company. c) COST BUDGETS-MIS: - Costing of products, purchase procedure and profitability Improvements. Finance Department of PATSONS METALLICS PVT.LTD Comprises of the following sectionsto distribute the total workload:-  BILL SECTIONS  ESTABLISHMENT SECTION  MISCELLANEOUS WORKS SECTION  PURCHASE SECTION  CASH SECTION  ASSET/ PROJECT ACCOUNT SECTION  FINANCE SECTION  MIS-BUDGET SECTION  STORES ACCOUNTING SECTIONS  BOOKING SECTIONS  AUDIT SECTION  COSTING SECTIONS 49
  50. 50. PATSONS METALLICS PVT.LID INCOME AND EXPENDITURE ACCOUNT For the year ended 31st march 2012 Particulars Rs. Ps. Rs. Ps. 31/03/2011 31/03/2012A) INCOME:Sales 83750.00 43540180.67Other income 0.00 37471.00Total 83750.00 43577651.67B) EXPENDITURE: Materials Consumed 79726.17 28938675.90 Expenditure on personnel 0.00 1580680.00 Operating & admin. Expenses 0.00 1906288.92 Finance expenses 0.00 6287974.94 Statutory expenses 0.00 85900.00 Depreciation 0.00 4193692.00Total 79726.17 42993211.76Net profit for the year 4023.83 584439.91Less: provision for Taxation – Deferred Tax 0.00 0.00Loss after Tax Carried to Balance sheet 4023.83 584439.91 50
  51. 51. PATSONS METALLICS PVT.LTD BALANCE SHEET As on 31st march 2012 Particulars Rs Ps Rs PsSchedule A – Share CapitalAuthorized:2000000 Equity Shares of Rs 10.00 each 20000000.00 30000000.00Issued subscribed and paid Up Capital2469793 Equity Shares of Rs 10.00 each 0.00 24697930.00Issued Application Money Received1499000 Equity shares of Rs.10.00 each 14990000.00 0.00 14990000.00 24697930.00Schedule B – Loans & Advancesa) Secured loans 35442967.00 47860430.10-from a bank-Term Loan-Bank of Maharashtra,Latur 27277504.00 31926601.65Cash credit- bank of Maharashtra, latur 8165463.00 15933828.45b) Unsecured loans 3451314.00 1430000.00- from Directors 2951314.00 0.00- from shareholders 500000.00 1430000.00Total 38894281.00 49290430.10 51
  52. 52. Particulars Rs Ps Rs PsSCHEDULE:- CURRENT ASSETS:Inventories 3580817.83 18444861.00(At Lower of Cost or Market Value)- Finished Goods 0.00 0.00- Raw Materials 3580817.83 18444861.00Deposits 367961.00 342961.00Vat Tax MVAT Deposit 25000.00 0.00Water Deposit MIDC 6750.00 6750.00MSEB Deposit 336211.00 336211.00Sundry Debtors (Unsecured Considered Good) 96996.00 9314484.71Due for under Six Months 96996.00 9314484.71Due for under Six Months 0.00 0.00Cash and Bank Balances:Balances with Nationalized Banks-- In Current Accounts- Canara Bank, Camp, pune 0.00 5000.00- Bank of Maharashtra, latur 54477.00 -28779.48Balances with Non –Scheduled Banks- In Current AccountsPoornwadi Nagrik Sah.Bank Ltd. 2377.00 - 11016.00Cash on Hand 116941.00 35872.00 173795.00 1076.52Total 4219569.83 28103383.23 52
  53. 53. Particulars Rs Ps Rs Ps 31/03/2011 31/03/2012SCHEDULE:E- LOANS AND ADVANCES: 4863928.00 3307515.00(Unsecured , Considered Good)Advances recoverable in cash-- or in kind for value to be received 4863928.00 3307515.00SCHEDULE:F – C.L &PROVISIONSCURRENT LIABILITIES 1518069.00 4144677.00Sundry Creditors –Capital Goods 1293274.00 218341.00Sundry Creditors- Raw Material 180578.00 3713577.00Sundry Creditors – Services 44217.00 212759.00PROVISIONSTDS Payable 155932.00 78213.00Excise Duty 0.00 93596.00Light Bill Payable 0.00 711310.00PF Payable 0.00 130640.00Water Bill Payable 0.00 3703.00Vat Payable 0.00 522126.15Total 1674001.00 5684265.39SCHEDULE:G – MISCELLANEUS ASSETSPreliminary Expenses 250000.00 200000.00During this period 250000.00 250000.00Less-Amortised in this year 0.00 0.00 53
  54. 54. Duties and Taxes 1938470.00 1938470.00Vat on Capital Goods 1100930.00 110930.00Vat on Raw Material 78070.00 78070.00Excise Duty on Capital Goods 615228.00 615228.00Excise Duty on Raw Material 144242.00 144242.00Total 2188470.00 2138470.00 SCHEDULE OF FIXED ASSETParticulars Cost Mar 11 Additions sale/ Cost mar 12 Acc Dep Opg net Deletion mar11 BlockLand 10113400.00 10000.00 0.00 10123400.00 0.00 10113400.00Building 13000000.00 0.00 0.00 13000000.00 0.00 13000000.00Plant &Machinery 20160148.00 6416990.00 0.00 26577138.00 0.00 20160148.00Computer Systems 0.00 20477.00 0.00 20477.00 0.00 0.00Electrical Fittings 974009.00 122608.00 0.00 1096617.00 0.00 974009.00Furniture & Fixture 42781.00 0.00 0.00 42781.00 0.00 42781.00Software 0.00 45000.00 0.00 45000.00 0.00 0.00Total 44290338.00 6615075.00 0.00 50905413.00 0.00 44290338.00 54
  55. 55. Interpretation: This table shows the Income and expenditure and balance sheet for the last 1 years i.e. for years 2011-2012.The income and expenditure show the expenses and income last one year. The company balance sheet show the reputation in the market and the fixed share devoted that income.  ANALYSIS OF THE BALANCE SHEET YEARLY GROWTH:- year year Particulars 2011 2012 sales 83750 43540180income 0.00 37471 79726 42993211expenditure 38894281 49290430fixed asset 1674001 5684265fixed liabilities 4023 584439net profit 55
  57. 57.  Data interpretation Mr. Devadar a purchase manager of (Patsons metallic’s hasgiven me following information relating to purchase procedure of the company.Companies have three important department, vendor development department, and quality AssuranceDepartment which are mainly responsible for purchase of material.Purchase Department is responsible for purchase of raw material, Consumable, capital goods. Vendor Development Department is responsible for material order by them on labour chargespayments i.e. raw material is provided by company to vendor for producing components .companymakes payments to vendor for labor charges given by Vendor Development Department. Quality Assurance Department is responsible for quality of material purchased. This department isresponsible for selection of supplier also.  Purchase Procedure:- 1. Purpose:- This procedure ensures that requirement of purchase of product affecting quality are clearly communicated to suppliers. 2. Scope:- This procedure applicable for all units of PATSONS METALLICS PVT.LTD. This procedure covers the generation of purchase indent/requirement from user department. Issuing of purchase order. 3. Responsibility:- The purchase responsibility control to the head of patsons metallic’s 4. Procedure:- 1) Purchase of General Items/ Machinery Spares. a) Raising of purchase indent. b) Required material shall be indented by user department through purchase indent duly authorized by concerned departmental head. c) The purchase indent shall be issued to purchase Department through Stores Department. 57
  58. 58. 2) Calling of quotations:- a) Purchase may call quotations from Vendors who are in the approved Vendor list. In case of material is not available with approved vendors. b) After receipt of quotation a for new material permission by taken shall be prepared by purchase department with chairman/M.D/Director, which shall contain following information as required.  Basic Price  Discount  Packing & Forwarding Details  Taxes, Duties & Freight Details  Delivery Schedule  Product Specification c) By referring comparison chart, Chairman/Managing Director/Director shall be deciding the vendors with whom the order shall be placed. d) Purchase section shall prepare the purchase order by referring approved comparison chart and purchase indent & purchase head review the same and forward to chairman/M.D for his approval. e) In case of single source suppliers urgent purchases or purchases having any specific requirement regarding quality, make etc. purchase Head shall obtain approval of M.D./Director for purchasing without comparison chartB) RAW MATERIAL PURCHASE:- a) Purchase head shall receive the monthly requirement for raw material from PPC (ProductionPlanning & control) department in the form of Raw Material Requirement Report. b) The raw material required for developments items; MDT Leader (Multi Disciplinary Team)shall raise the requirement through inter Office Memo with detail specification (e.g. grade, size, Qty etc)through Production Planning & control Department. c) PPC Department shall submit he requirement to purchase department for further processing. 58
  59. 59. d) By referring the stock in hand, pending purchase order etc. Purchase Head shall decide thequantity of raw material to be ordered. Refer work out statement form and based on that the schedulingShall be decided & communicated to Vendors/Suppliers. The same shall be monitored by PurchaseHead for 100% on time delivery. e) Change in Schedule:- In case of change in schedule the purchase Head shall intimated well in advance thesame to the supplier via correspondence.C) PLACING OF ORDER FOR RAW MATERIAL:- a) The rates are negotiated by purchase Head and M.D. directly with raw material vendors fromtime and the negotiated rates comparison chart shall be approved by Chairman. b) Purchase Department shall refer approved comparison chart and prepare purchase order. c) The Purchase order shall be reviewed for its adequacy of information by Purchase Head. D) EMERGENCY PURCHASES:- In case of urgent material requirement, Purchase Head shall purchase the required material from other suppliers on trial order basis by verbal communication with chairman. Purchase Head shall raise the Purchase Order as trial and same shall informed to quality assurance head before material receipt. In these cases also the material testing shall be done as per Raw Material Quality Plan. E) REPEAT ORDER:- In case the same material is required by the indenter then purchase Department refer the price list and validity of rates quoted and if it is valid, he shall place repeat order with that supplier. These cases take care of avoiding calling quotation again. 59
  60. 60. F) PURCHASE ORDER:- A) Purchase Order shall indicate the following as appropriate:-  Purchase order No./Date  Indent Number  Suppliers Name, Code No.etc.  Process to be carried out.  Part No./drawing No. with pertinent issue status  Requirement of Certificates for the Restricted and Toxic and hazardous Materials.  Quantity  Unit Price  Place of Delivery  Delivery schedule  Mode of transport  Quotation No.& date  Discount  Other instruction required for specific components.  Mode of Insurance  Payment terms  Description of Goods Packaging & forwarding  Excise / Sales Tax  Freight  Octroi  Inspection Requirements  Test Certificates (if required)  Quality Plan (if required) B) Scheduling of Vendor / Subcontractor shall consider the following parameters before placingpurchase order / schedule to the Vendor / subcontractor.  Vendor / Subcontractor capacity with the requirement  Cycle Time required to Produce  Transportation  Mode 60
  61. 61.  Availing of Material to be sent to vendors in stock at PATSONS METALLICS PVT.LTD. And at Vendors / Subcontractors end. Any other resources required, like tooling’s, Gauges, Advance payments as per Contract etc C) Purchase order shall be issued to the Vendors / Subcontractors by purchase Department andcopies of the same shall be distributed to Account Head and Stores Department Shall be via. PurchaseOrder Intimation in case of miscellaneous items.D) Inspection of Purchase Product:-  In case of raw material, the material shall be inspected by Incoming Inspection engineer as par Quality plan For Raw Material. In case of material Other than above the same a shall be inspected by the indenter and the remark regarding acceptance or rejection shall be put on the Goods Inward Note itself.  Corrective Action at Subcontractors end :- In case of any major problem / Nonconformity with respect to the raw material same shall becommunicated to the supplier. Purchase Head shall ask for corrective and preventive action fromsupplier. In case inferior quality material supplied by supplier, material is rejected by issuing goodsrejection note to the supplier and material is return to the supplier.  After extending control over Vendors / Subcontractors, the list of approved Vendors shall be updated immediately and the same shall be reviewed in a six month.  In case of non-availability of indented material, Purchase Head shall consult concerned departmental head for the alternative material before issue of purchase order to the Vendors. E) Confirmation of Order Conformance:-  Purchase head shall confirm the order conformance by keeping verbal or written communication with the vendors. F) Purchase Order Amendment:-  The indenter shall inform the purchase Head via interdepartmental note, the amendments or changes as regards the specifications or quality or any other parameters immediately so that corrective action shall be taken before material reaches to the works. 61
  62. 62. G) Open Purchase Order:- In case the quantity required is not fixed then Purchase Head shall issue open Purchase Order where the rate and validity remain unchanged only quantity required shall be informed to supplier via correspondence time to time. In case quantity required is fixed specific purchase order is issued by purchase head to the supplier.H) Proforma Invoice:-  In case of certain purchases if the Vendor Insists advances payment, the purchase head shall obtain proforma invoice Vendor.  Proforma invoice shall be reviewed by purchase Engineer Referring to the terms and conditions and modvat terms as mentioned in Purchase Order.  Proforma Invoice shall be sent to Account Head for arranging the payment to the Vendor.  Purchase Engineer shall insure that the Original Invoice is submitted by the Vendor after receipt of payments.  Accounts Head shall verify and compare the contents in purchase order with delivery challan concentrating especially on freight and weight/ quality and shall inform action taken in relevance with debit or credit to Purchase Department through Inter Office Note. 62
  63. 63. I) Records:- a) Purchase Indent b) Purchase Order c) Approved Subcontractors list d) Approved Vendor list e) Purchase Order Amendment f) Purchase Order Intimation g) Raw Material Work Out Statement h) Vendor Assessment Form Quality System Procedure (Purchasing):- 1.0 Purpose :- This procedure insures that the organizations suppliers shall have required capability and quality to supply material and services. 2.0 Scope:- This procedure is applicable for all units of PATSONS METALLICS PVT.LTD. This procedure covers the assessment of Vendors and suppliers & maintaining the Records. 3.0 Responsibility:-  Vendor Department  Quality Assurance Head  Purchase Head. 4.0 Procedures:-1) Categories of Incoming Material:- All Incoming material shall be categorized as:- A-1 Raw Material in Metal Form A-2 Hardware for Sub-assembly received from Vendors. A-3 Sub-assembly components received from Sub-contractors 63
  64. 64. 2) Basis of Approval of Raw Material Suppliers( Category A-1 Material):-  The criteria for the selection of suppliers are follows:-  Minimum third party registered to ISO 9001:2008 OR  Customer Approved / Recommended Suppliers OR  Traders who supplies steel of minimum ISO 9001:2008 certified casting manufactures.  Purchase Head and Quality Assurance Head shall visit to supplier and carry out the assessment to verify that supplier can meet our requirements.  The name of every newly introduced supplier shall be included in provisionally approved list, then shall be given trial order by putting “Trial Order” stamp on purchase order. The lot size may be preferably 10 tons and shall be supplied in minimum 3 consecutives lots viz Tons, 3 Tons and 5 Tons only. After satisfactory performance of two consecutive deliveries his name shall be included in Approved Vendor List.  List of provisionally and Approved Vendors Shall be Maintained and updated time to time by purchase Head and the copy of the same shall be issued to Quality Assurance Department.3) Basis of approval of category A-2 material Suppliers:-  The criteria for Selection of Suppliers:-  Minimum third party registered to ISO 9001:2008 OR  Customer approved / recommended supplier OR  Traders who supplies material of minimum ISO 9001:2008 certified manufactures OR  Traders who supplies material of renowned brand and has a good reputation for quality and delivery of PATSONS METALLICS PVT.LTD.  The assessment is carried out by the team, which shall include representative of Quality Assurance and purchase Head. The details of assessment shall be referred from Sub-contractors assessment form. 64
  65. 65. 4) Basis of approval of A-3 material suppliers:-  Minimum third party registered to ISO 9001-2008 OR  Customer approved / recommended supplier OR  Vendor Development head and quality Assurance Head shall visit to supply and carry out the assessment to verify that supplier can meet companies requirements.5) The name of every newly introduced sub-contractor shall be included in provisionally approved sub-contractors list, and then shall be given trial order by putting “Trial Order” stamp on purchase order. Through the quantity in small batches. After evaluating the performance of 2/3 consecutive lots, if found satisfactory the sub-contractor shall be informed to complete the remaining quantity. Then his name shall be transferred from provisionally approved list to approved sub-contractor list.6) List of provisionally & approved sub-contractor shall be maintained and updated time to time by vendor development head and the copy of the same shall be issued to Quality Assurance Head.7) Basis of approval of category (B) & (C) item Vendor:-  Vendors which are reputed in market shall be directly included in approval Vendors List without assessing them.  Every newly introduced Vendor other than reputed shall be given a Trial Order. After satisfactory performance of two consecutive supplies his name shall be included in Approved Vendor List till than his name shall be included in provisionally approved vendor list.  In case of the items which are purchased from dealers & shopkeeper from open market, these shall be no necessity of assessing them, but market alternative make of the items shall be indicated in purchase Order.  These shall be no necessity of vendor approval in case of one time procurement.  Selection for Metallurgical Test laboratories and Calibration Agencies shall based on ISO approved certification and the scope of certification. Their name shall be directly added in approved vendor list without assessing them. 5.0 Periodical Rating:- 5.1 Quality Rating:-  Monthly quality rating for approved sub-contractors like the category of A-1, A-2, A-3 and which are performing special process shall be calculated and issued to respective department for decision making by Quality Assurance Head. 65
  66. 66.  Monthly Quality Rating shall be calculated as mentioned below:- QR= Q1+0.5 Q2+0.3 Q3+O.5 Q4 Q × 100 Where. QR= Quality Rating Q1= No. of lots/Component fully accepted Q2= No. of lots/ Component accepted under deviation and/ or rejected. Q3= No. of lots/ Component rejected during production. Q4= No. of lots/Component returned from customer. Q5= Total No. of lots/Components received.5.2 Delivery Rating:-  Monthly delivery rating for the sub-contractors performing special process, category A-2 and A-3 shall be calculated by Vendor Development Head for each schedule once in a month.  Monthly delivery rating for the category A-1 shall be calculated by Purchase Head for each schedule once in a month.  Delivery rating shall be calculated as mentioned below:- D.R= No. of lots received within schedule No. of lots Scheduled ×1005.3 Overall Rating:- Overall Rating shall be calculated as mentioned below:-  For Raw Material Suppliers (By Purchase Department) O.R. % = [Q.R. × 0.6 + D.R. × 0.3 + Price Factor × 0.1] × 100 Where, O.R. = Overall Rating Q.R. = Quality Rating D.R. = Delivery Rating 66
  67. 67.  Purchase shall give Price Factor as 1.0 for lowest price supplier and reduced by 1.0 to higher & higher price supplier.Example of Calculating Price Factor:- Supplier A B C D Price (in Rs.) 3000 2900 2800 2700 Higher Lower Price Factor 0.7 0.8 0.9 1.0 SUPPLIR 3500 3000 2500 2000 PRICE 1500 1000 500 0 A B C D PRICE 3000 2900 2800 2700 PRICE FACTOR 0.7 0.8 0.9 1 67
  68. 68. 5.4 For A-3 Category Supplies ( By Vendor Development Department) O.R= (QR × 0.6 = D.R. × O.4) Where, O.R.= Overall Rating Q.R.= Quality Rating D.R.= Delivery Rating5.5 Grading Index for Overall Rating shall be as follows:- Grade Points Comments Points converted to Percent A 96 and above Excellent 22% B 91 to 95 Good 22% C 86 to 90 Must Improve 20% D 76 to 85 Poor 19% E Below 75 Very Poor (Delist) 17% Overall Rating 17% 22% Excellent 19% Good 22% Must Improve Poor 20% Very Poor 68
  69. 69. 5.6 Purchase Head / Vendor Development Head shall consolidate the Quality Rating, Delivery Rating & overall-rating for the suppliers of categories A-1 and A-3 respectively and this data can be submitted in management review meeting. Vendor Development Head and purchase Head Shall inform to concerned suppliers and utilized this data for pacing of Purchase Orders and schedule. Suppliers having overall rating below 75% shall be informed consecutively in 3 months to improve the quality and delivery by purchase head and vendor development head respectively even then if not improved, then shall be de listed.5.6 Supplier’s wise rating of all above categories shall be displayed as visual control after every revised- rating report preferably every month. 6.0 Assessment of Transporters:-6.1 In charge dispatch shall assess a transporter by referring form no. SLS/03, transport assessment form and update the list time to time and same shall be available within charge the dispatch.6.2 No need to assess the transporter if customer supplies it. But it shall be included in list of approved transporter and clearly mentioned as ‘Customer Supplied’6.3 Dispatch in charge shall keep periodic check by considering following point:-  Availability of vehicles whenever required  Protected roof for material  Precaution above damage  Accident and damage record etc 7.0 Periodic Re-assessment of suppliers:- Re-assessment of suppliers shall be carried out every month to update the information at PATSONS METALLICS PVT.LTD. 69
  70. 70. 8.0 Periodic Evaluation of Suppliers:- Vendor Development shall prepare the monthly plant for A-3 category suppliers audit an accordingly prepare the schedule for audit. Patsons Group of Industries trained auditors will take this audit and reports are maintained by Vendor Development Head. Periodic evaluation of major suppliers shall be carried out as:- a) For Special Process Suppliers: - After every three months. b) For brought out items Suppliers:- yearly If any non-conformance observed during this audit, auditor should ask for action plan to supplier and submit it to Vendor Development Head along with audit report for further follow up. 9.0 Suppliers QMS (Quality Management System) Development:- The suppliers who are manufacturing press parts for PATSONS METALLICS will be developed to implement QMS (QUALITY MANAGEMENT SYSYTEM) as per these technical specifications in following stages. Suppliers are expected to comply fully with these technical specifications within a period.10.1 Objective of Vendor Cluster:-  It is time bound activity for improvement of company suppliers.  All suppliers must have at least ISO 9001-2008 Certification.  Good Housekeeping and 5 score must be greater than 75%  Training and Implementation Techniques like Kaizan, Poka Yoke etc. for continues Improvement.  Delivery Rating must be 100%  Delivery Rating must be 75%  Space Utilization through continues 1S, 2S activities.  Proper Storage Material at each Stage.  Machine up Keeping through Timely Maintenance.  Availability and Calibration status of Instruments.  Properly Defined Inspection Methods at all Stages. 70