Procurement Policy for Automotive industry's

1. Procurement & Purchasing Policy
This policy serves as a comprehensive guide outlining the procedures for acquiring goods and services essential for the seamless operation of our car servicing
business. It is designed to uphold principles of efficiency, transparency, and cost-effectiveness, ensuring optimal resource utilization and customer
satisfaction.
Departments Involved:
1. Sales & Operations Department
2. Warehouse Department
3. Procurement Department
4. Finance & Accounts Department
5. IT Department
1-Sales & Operations Department:
Responsibilities and Scope of Work:
Identifying Needs:
1. Identify service needs based on internal schedules and customer requests:
2. Regularly assess service schedules to anticipate upcoming requirements.
3. Engage with customers to understand their specific service needs and preferences.
4. Utilize customer feedback and historical data to forecast future demands accurately.
5. Collaborate with the warehouse department to establish minimum stock levels for critical parts:
6. Work closely with the warehouse team to determine minimum stock thresholds for essential parts.
7. Make sure the utilizing the correct product in sales invoice / Work orders.
Purchase Request Submission:
1. Designated Person to Submit formal purchase requests to the procurement department.
2. Prepare detailed purchase requests outlining part descriptions, quantities required, and justifications.
3. Ensure timely submission of purchase requests to the procurement department to facilitate proactive procurement planning.
4. Collaborate with procurement to provide accurate information and clarify any ambiguities in purchase requests.

2. Organizational Chart for Procurement & Warehouse Department
Director General
Procurement
Officer
Procurement
Coordinator
Data Entry
Operator
Warehouse
Supervisor
Store Keepers &
Clerks
Procurement
Manager

3. 2-Warehouse Department:
Responsibilities and Scope of Work:
Warehouse Management:
Ensure organized storage and retrieval of parts.
1. Ensure efficient organization of parts within the warehouse to facilitate easy identification and retrieval.
2. Implement systematic storage methods such as shelving, bin locations, or labeling systems to optimize warehouse space utilization.
First-In, First-Out (FIFO) Inventory System:
1. Implement and enforce a FIFO inventory system to ensure that parts are used in the order they are received.
2. Conduct regular audits and inspections to verify compliance with FIFO principles and identify any deviations or discrepancies.
Verification of Received Parts:
1. Receive incoming shipments of parts and verify their accuracy and condition against corresponding purchase orders or packing slips.
2. Report any discrepancies or damages to the procurement department for resolution with the vendor.
Analysis of Historical Usage Data:
1. Utilize historical usage data and analysis tools to forecast demand and determine optimal stock levels for various parts.
2. Consider seasonal fluctuations, trends, and patterns in demand to maintain adequate inventory levels without excessive overstocking.
Communication and Collaboration:
1. Foster ongoing communication and collaboration between the sales, operations, and warehouse teams to ensure alignment of inventory
management processes with business objectives.
2. Coordinate with sales and operations departments to prioritize and fulfill customer orders in a timely manner while maintaining optimal inventory
levels.
Issuance of Stock:
1. Fulfill internal requests for parts and materials from other departments, ensuring accurate picking, packing, and issuance of stock.
2. Maintain records of stock issuance and internal transfers for accountability and inventory management purposes.

4. Stock Internal Transfers:
1. Facilitate internal transfers of stock between different warehouse locations or departments as needed to optimize inventory distribution and usage.
2. Ensure proper documentation and tracking of stock transfers to maintain accurate inventory records and minimize errors.
Documentation:
1. Maintain accurate documentation of all incoming and outgoing shipments, including purchase orders, packing slips, and delivery receipts.
2. Ensure proper labeling and identification of parts to facilitate easy tracking and retrieval within the warehouse.
3. Document any discrepancies or damages observed during the receipt of shipments and promptly report them to the procurement department for
resolution.
Receipt & Reconciliation:
1. Conduct thorough inspections of received parts to verify their quantity, quality, and conformity to specifications outlined in purchase orders.
2. Reconcile received shipments with corresponding purchase orders and packing slips to ensure accuracy and completeness of deliveries.
3. Address any discrepancies or discrepancies identified during the reconciliation process promptly, either by coordinating with the procurement
department for resolution with the vendor or by initiating returns or replacements as necessary.
Record Keeping:
1. Maintain detailed records of all warehouse activities, including stock receipts, issuances, transfers, adjustments, and inventory counts.
2. Utilize electronic inventory management systems or manual logs to record relevant information such as part descriptions, quantities, dates, and
transaction details.
3. Regularly update and reconcile inventory records to ensure alignment with physical stock levels and to identify any discrepancies or variances
requiring investigation and correction.
4. Retain records of stock transactions, audits, and inspections for compliance purposes, internal audits, and future reference.
Delivery Policy:
1. Coordinate delivery with vendors.
2. Verify delivery against purchase orders and packing slips.
3. Submit Verified Delivery Notes & Relevant Vouchers to Procurement.
4. Send Confirmation to Procurement Department for Material Receiving via Email or Receipt.

5. Inventory Management Reports:
1. Provide input and insights for inventory valuation reports, stock movement analysis, and warehouse utilization reports.
2. Collaborate with other departments to identify trends, opportunities for improvement, and areas of optimization in inventory management
processes.
3. Inventory Valuation Report
4. Stock Movement Report
5. Warehouse Utilization Report

6. 3-Procurement Department:
Responsibilities and Scope of Work: Review and Approval:
Efficient Channel Establishment:
1. Develop streamlined channels for receiving purchase requests from various departments, ensuring accessibility and prompt handling.
2. Utilize digital platforms or standardized forms to facilitate request submission and tracking.
3. Designate a central point of contact within the Procurement Department to oversee request intake and processing.
Scrutiny of Purchase Requests:
1. Thoroughly review each purchase request to ensure completeness and accuracy of information provided.
2. Verify that all necessary details are included, such as part descriptions, quantities, justifications, and allocated budgets.
3. Flag any discrepancies or missing information for clarification and resolution with the requesting departments.
Collaboration and Clarification:
1. Foster collaboration between the Procurement Department and requesting departments to address ambiguities or discrepancies in purchase
requests.
2. Engage in proactive communication to obtain additional information or clarification when needed.
3. Work collaboratively to refine and finalize purchase requests to meet organizational needs and objectives.
Scope of Work:
1. Receive and assess purchase requests from various departments.
2. Prioritize requests based on defined criteria and assign appropriate priority levels.
3. Conduct thorough reviews of purchase requests to ensure accuracy and completeness of information.
4. Collaborate with requesting departments to clarify any uncertainties or discrepancies in purchase requests.
5. Communicate effectively with stakeholders to facilitate the resolution of issues and finalize purchase requests.
6. Maintain detailed records and documentation of all purchase requests and related communications.
7. Continuously evaluate and refine the prioritization process to enhance efficiency and effectiveness.
8. Provide timely updates and feedback to requesting departments on the status of their purchase requests.
9. Coordinate with internal teams and external vendors to expedite urgent requests and resolve any procurement-related issues.
Systematic Prioritization Approach:
1. Implement a structured framework to prioritize and manage incoming purchase requests based on predetermined criteria.
2. Assign priority levels (P1, P2, P3, P4) to requests according to their urgency, budget availability, and strategic significance.

7. Define corresponding timelines for each priority level:
1. P1: High Priority - to be processed within 1-3 working days.
2. P2: Medium Priority - to be processed within 3-7 working days.
3. P3: Low Priority - to be processed within 7-15 working days.
4. P4: Lowest Priority - to be processed within 15-30 working days.
Notification and Escalation Mechanism:
1. Establish a notification system to inform requesting departments of the assigned priority level and expected processing timeline for their requests.
2. Implement escalation procedures for urgent requests that require expedited processing, ensuring prompt attention and resolution.
3. Communicate any delays or challenges in processing purchase requests to relevant stakeholders and propose alternative solutions where necessary.
Devolution of Power (DOP):
1. Establish clear guidelines and authorization thresholds for different types of purchases, ensuring adherence to organizational policies and financial
controls.
2. Exercise discretion and judgment to determine the appropriate procurement methods based on the nature, complexity, and value of purchases.
Obtaining Quotations (RFQ):
1. Conduct market research and supplier assessments to identify reputable vendors capable of meeting the organization's procurement needs.
2. Establish and maintain a database of approved vendors, categorizing them based on performance, reliability, and suitability for specific procurement
requirements.
3. Leverage market knowledge and bargaining skills to negotiate competitive pricing, favorable payment terms, and quality assurances with vendors.
4. Draft and review procurement contracts and agreements to ensure alignment with organizational objectives, legal requirements, and industry
standards.
5. Stay updated on relevant laws, regulations, and industry standards governing procurement activities, ensuring full compliance and adherence to
ethical practices.
6. Identify and mitigate procurement-related risks, including supply chain disruptions, vendor insolvency, and contractual breaches, through proactive
risk management strategies.

8. Vendor Selection:
Establish evaluation criteria aligned with organizational priorities, which may include:
1. Select the best vendor based on evaluation criteria.
2. Utilize a structured evaluation process to assess potential vendors objectively and select the most suitable supplier for each procurement
requirement.
3. Price Competitiveness: Evaluate vendors based on their pricing structures, ensuring competitiveness while maintaining quality standards.
4. Quality of Products or Services: Assess the quality of goods or services offered by vendors, considering factors such as durability, reliability, and
compliance with specifications.
5. Vendor Reputation and Past Performance: Review vendor track records, references, and feedback from previous clients to gauge reliability,
professionalism, and adherence to deadlines.
6. Delivery Lead Time: Consider vendors' ability to meet delivery schedules and timelines, minimizing disruptions to operations and project timelines.
7. Payment Terms: Evaluate proposed payment terms, including discounts for early payment, flexibility in payment methods, and adherence to
budgetary constraints.
8. Conduct a comparative analysis of shortlisted vendors against these criteria, assigning weightage to each criterion based on its importance to the
procurement requirement.
9. Engage in negotiations with shortlisted vendors to address any discrepancies, clarify expectations, and finalize terms and conditions conducive to a
mutually beneficial partnership.
10. Upon completion of the evaluation process, select the vendor that best meets the organization's procurement objectives, considering factors such
as value for money, reliability, and long-term strategic alignment.
Documentation:
Prepare Purchase Documentation:
1. Generate purchase orders, requisitions, or procurement requests based on approved purchase requests received from departments.
2. Ensure all relevant details, including vendor information, item descriptions, quantities, prices, and delivery terms, are accurately documented in
procurement records.
Receipt & Reconciliation:
Obtain Receipts for Purchases:
1. Collect official receipts or invoices from vendors upon completion of purchases.
2. Verify that the receipts match the details specified in the purchase documentation, including quantities, prices, and item descriptions.

9. Reconcile Purchases:
1. Match the received goods or services with the corresponding purchase orders or requisitions.
2. Reconcile any discrepancies between the ordered items and those delivered, and address any issues or discrepancies with the vendor as necessary.
Record Keeping:
Maintain Procurement Records:
1. Establish a comprehensive record-keeping system to track all procurement transactions, including purchase requests, orders, receipts, and invoices.
2. Ensure procurement records are accurately maintained and readily accessible for auditing, reporting, and reference purposes.
Ensure Compliance:
1. Monitor and ensure compliance with procurement policies, procedures, and regulatory requirements.
2. Maintain documentation of procurement activities to demonstrate adherence to internal controls and external regulations.
Issuance of Fixed Petty Cash for Minor Purchases and Cash Purchase Policy:
Purpose:
To facilitate minor purchasing activities and address immediate procurement needs without relying on the standard purchase order process. Additionally, to
establish guidelines for cash purchases when products are unavailable from reliable vendors or for one-time purchases of small quantities.
Responsibility and Scope of Work:
1. Assign a designated individual within the Procurement Department to oversee the management and disbursement of fixed petty cash and cash
purchases.
2. Ensure the assigned individual is trained in proper petty cash handling procedures and authorized to allocate funds for approved purchases.
Required Approval:
1. Seek approval from the Procurement Manager or designated authority for establishing and replenishing fixed petty cash funds.
2. Obtain authorization from the Procurement Department, in conjunction with relevant department heads or budget holders, for cash purchases.
Documentation and Record Keeping:
1. Maintain meticulous records of all petty cash disbursements and cash purchases, documenting the date, purpose, amount, recipient, and supporting
documentation (e.g., receipts, invoices).
2. Utilize standardized petty cash vouchers or forms to document each transaction and secure signatures from both the recipient and the responsible
individual dispensing the funds.
3. Retain copies of all vouchers, receipts, and associated documentation for reconciliation and auditing purposes.

10. Issuance Process:
1. When a minor procurement need arises within the approved petty cash parameters or for a cash purchase, the requester submits a request to the
designated individual in the Procurement Department.
2. The responsible individual reviews the request to ensure compliance with established guidelines and obtains necessary approvals.
3. Upon approval, the designated individual disburses the requested amount from the fixed petty cash fund or approves the cash purchase.
4. The requester utilizes the funds for the intended purchase and obtains a receipt or invoice as evidence of expenditure.
5. Subsequently, the requester submits the receipt or invoice, along with any remaining funds and a completed petty cash voucher or cash purchase
documentation, to the responsible individual for reconciliation and documentation.
Threshold Limit:
1. Establish a maximum total cost of 3000 Saudi Riyal per transaction for both petty cash disbursements and cash purchases.
2. Any purchases exceeding this limit must adhere to the standard procurement process and secure appropriate approvals.
Receipt and Reconciliation:
1. Obtain an official receipt from the vendor for cash purchases and reconcile it with the petty cash voucher or cash purchase documentation to ensure
accurate transaction recording.
Record Keeping:
2. Maintain comprehensive records of all petty cash disbursements and cash purchases, including vouchers, receipts, invoices, and supporting
documentation.
3. Periodically review and reconcile these records to ensure transparency and accountability in cash expenditure.
Leasing Management:
1. Identify leasing opportunities for acquiring specialized equipment or assets with a higher value threshold.
2. Conduct cost-benefit analyses to evaluate the feasibility of leasing versus purchasing fixed assets.
3. Obtain quotations and negotiate leasing terms with potential lessors to secure favorable agreements.
4. Coordinate with Finance & Accounts for budget approvals and ensure alignment with financial objectives.
5. Monitor lease agreements for compliance with terms and conditions, including payment schedules and maintenance responsibilities.
6. Facilitate lease renewals, terminations, or extensions as necessary, ensuring continuity of operational requirements.

11. Reports for Procurement Department:
Vendor Performance Report
Objective: Analyze vendor performance metrics to assess reliability, quality compliance, and price competitiveness.
Frequency: Monthly
Key Metrics:
1. On-time delivery performance.
2. Quality of delivered products or services.
3. Adherence to agreed specifications.
4. Competitive pricing compared to market standards.
5. Purpose: Identify reliable vendors, recognize areas for improvement in vendor relationships, and inform decision-making regarding future
procurement partnerships.
Purchase Order Analysis Report:
Objective: Analyze purchase order data to identify spending trends, commonly purchased items, and potential cost-saving opportunities.
Frequency: Quarterly
Key Metrics:
1. Total spending by category or vendor.
2. Frequency of purchase orders.
3. Variance in pricing for recurring purchases.
4. Identification of high-value or high-frequency items.
5. Purpose: Enhance procurement efficiency, optimize spending patterns, and inform strategic sourcing decisions.
Inventory Turnover Report:
Objective: Measure the efficiency of inventory management by tracking the rate at which inventory is used or replaced over a specific period.
Frequency: Monthly
1. Inventory turnover ratio (cost of goods sold divided by average inventory value).
2. Inventory aging analysis (identifying slow-moving or obsolete inventory).
3. Comparison of current turnover rates with historical data.
4. Purpose: Identify opportunities to optimize inventory levels, minimize carrying costs, and ensure adequate stock availability to meet operational
requirements.

12. Asset Management Report:
Frequency: Annually
1. Contents: Summary of fixed asset register, including asset details, maintenance histories, and depreciation schedules.
2. Purpose: Ensure accurate tracking of owned equipment, assess asset performance, and facilitate financial reporting.
Leasing Management Report:
Frequency: Semi-annually
1. Contents: Overview of leasing agreements, including terms, costs, and renewal dates.
2. Purpose: Monitor lease compliance, evaluate leasing effectiveness, and support decision-making regarding lease renewals or terminations.
Cash Purchase Reporting:
Frequency: Monthly
1. Cash purchases should be included in regular financial reports and budget reviews to track expenditure and ensure compliance with budgetary
allocations.

13. 4-Finance & Accounts Department Policy for Procurement Department:
Responsibilities and Scope of Work:
Financial Approval:
1. Review purchase requests received from the Procurement Department and ensure that they align with the allocated budget.
2. Grant approval for purchases within budget constraints after thorough evaluation of the requested items and their associated costs.
Cash Purchase Approval:
1. Verify the availability of petty cash funds for cash purchases requested by the Procurement Department.
2. Approve petty cash disbursements for purchases that fall within the established guidelines and limits.
3. Maintain accurate records of all cash transactions, including the amount disbursed, purpose of the purchase, and supporting documentation.
Payment Policy for Vendors:
1. Manage vendor payments in accordance with standard payment terms and conditions agreed upon with vendors.
2. Ensure timely processing of vendor invoices and payments to maintain positive vendor relationships and avoid disruptions to the supply chain.
3. Offer discounts for early payments to incentivize prompt settlement of invoices.
4. Impose penalties for late payments to enforce adherence to payment terms and discourage delays in settling outstanding obligations.
Reports for Finance & Accounts Department:
1. Generate and analyze budget allocation reports to track expenditure against the allocated budget for procurement activities.
2. Prepare financial analysis reports to assess the financial impact of procurement decisions and identify opportunities for cost savings or
optimization.
3. Ensure accurate and timely reporting of financial data related to procurement activities to support strategic decision-making and financial planning
processes.
5-IT Policy for Supporting Procurement Workflow:

14. Workflow Automation:
1. Implement workflow automation tools or software to streamline the procurement process.
2. Design workflows that reflect the procurement procedures outlined in the procurement policy.
3. Configure the system to route purchase requests, obtain approvals, issue purchase orders, and track deliveries automatically.
Specific Forms:
1. Develop standardized electronic forms for submitting purchase requests, including fields for part descriptions, quantities, justifications, and allocated
budgets.
2. Create templates for purchase orders, petty cash vouchers, and other procurement-related documents to ensure consistency and accuracy.
3. Ensure that the forms capture all necessary information required for procurement transactions and compliance purposes.
Setting DOP Approvals:
1. Define clear authorization thresholds and approval levels based on the value, nature, and complexity of procurement requests.
2. Configure the workflow system to enforce DOP approvals for purchases exceeding specified thresholds.
3. Establish escalation procedures for requests that require higher-level approvals or exceptions to standard approval processes.
4. Integrate DOP approval mechanisms into the workflow automation system to ensure compliance with organizational policies and financial controls.
Integration with Accounting Systems:
1. Integrate the procurement workflow system with accounting software to facilitate seamless recording and tracking of procurement transactions.
2. Ensure that purchase orders, invoices, payments, and other financial data are synchronized between the procurement and accounting systems.
3. Implement data validation checks and reconciliation mechanisms to maintain data integrity and accuracy across systems.
Security and Access Controls:
1. Implement robust security measures to safeguard sensitive procurement data and prevent unauthorized access or tampering.
2. Define user roles and access levels within the procurement workflow system based on job responsibilities and authorization requirements.
3. Enforce multi-factor authentication, encryption, and other security protocols to protect data integrity and confidentiality.
Training and Support:
1. Provide comprehensive training to procurement staff and other stakeholders on how to use the workflow automation system effectively.
2. Offer ongoing technical support and troubleshooting assistance to address any issues or concerns related to the procurement workflow system.
3. Conduct regular audits and evaluations to assess the system's performance, identify areas for improvement, and ensure compliance with IT policies
and regulatory requirements.
Workflow Each Type

15. Purchase order
Purchase from Contractor.
Purchase
Reqeust via
Systme
Initial
Department
Approvl
RFQ
Evaluation
Vendor
Selection
PO/LPO/LOI
Delivery
Invoicing
Payment to
Vendor as per
Terms
Documents
Submit to
Rerecord Room

16. Issuance of Stock to Department available in Store Room
Purchase Request Via
System
• System
Initial Approval • System
Generate PO/LOI/LPO
With reference of
approved Quotation
• System
Submit to Vendor
Delivery
Invoicing
Payment to Vendor as
per Terms
Documents Submit to
Record Room

17. Stock issue Request
Manually or Systematic
Check The Signed Ticket
from Relevent
Authorities / Systematic
Request to be approved
by the Line Manager
Issue The Stock & Get
Signature from Receiver
Transfer Request in The
System
Submit To Record Room