purchasing policy and guideline_final_oct2012v1

7/27/2019 Purchasing Policy and Guideline_final_oct2012v1

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Registered Copy : 01

Issued By : Managing Director

Date Issued : 01-01-2013

PURCHASE POLICY


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Table of Contents

Policy

Authorized Department For Purchase

Selection Of Supplier

Basis Of Purchase

Forms

Minor Purchases

Verbal Quotations

Written Quotations

Exceptions

Responsibilities Of Various Departments Involved In Procurement Procedure

User Department

Budget Department

Purchase Department

Finance Department

Guideline And Procedures For Making A Purchase

Purchase Requisition

Purchase Order

Acceptance Of Goods & Services

Policy For Specific Areas Of Procurement

IT Procurement

Travel

International Travel

Local Travel

Stationery

Consultancy Service Procurement

Administrative Purchases (Car Maintenance)

C&F Agent

Media Buying And Agency Fixation

Packaging Materials

Appendices

PURCHASING POLICY AND GUIDELINE

POLICY

Authorized Department for Purchase:

Procurement of Goods and Services (Excluding Raw Materials for Milk Powder) for the Company will be conducted

through the Procurement Department. Such Procurement shall be made in conjunction with the Department

requesting the Goods or Service (User Department), Procurement Department and if required, any other person

Technically Competent for the purchase of the required item.

Selection of Supplier:

Wherever possible, Companys Policy is to purchase directly from manufacturers or officially accredited dealers / main

suppliers in order to ensure that the goods purchased are of the desired quality at a competitive price and where

appropriate, the after sales service meets the company standards.

Basis of Purchase:


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The Procurement Department shall proceed with the procurement process only once they receive a Completed and

Approved Purchase Requisition Form in a prescribed format.

Authority to approve the Purchase Requisitions to process for Purchase Order is attached in Appendix A, which may

be subject to periodic review and change by the Managing Director.

There are some circumstances where the raising of a Purchase Requisition is irrelevant or impractical. These items

are detailed in Appendix D of this document, which may be also subject to periodic review and change by the

Managing Director.

Forms:

For any purchase / services, the types of forms are as follows:

a. Purchase Requisition Form.

b. Comparative Statement Form.

c. Purchase Order Form.

d. Car Maintenance Requisition Form.

e. Travel Authority Form.

f. Capital Item Requisit ion Form.

Minor Purchases:

To ensure smooth operation of business, when time is crucial than money, in this cases the following mentioned

departments are allowed to purchases in cash without having to go through the formal Purchasing Procedure (Pre-

Approval of PR) and Procurement Department.

But Post Approval through raising PR should be made in this connection to the Minor Purchase (within 15 days of the

purchase).

The authorized departments and authority limit are as follows:

1. Head of Finance - BDT 50,000.00

2. Head of Production - BDT 25,000.00

3. Head of Procurement - BDT 25,000.00

4. Head of Marketing - BDT 10,000.00

5. Head of Sales - BDT 10,000.00

6. Head of Administration - BDT 10,000.00

7. Head of Product Planning - BDT 10,000.00

Verbal Quotations:

Purchases with a total value up to BDT 50,000.00 (BDT Fifty thousand only) may be processed through obtaining

verbal quotation from three reputable and reliable suppliers, evidenced in writing by the Procurement Department.

Such offers must be evaluated by the Head of Procurement on the basis of price, quality, specification and other

criteria before selection of the final supplier.

Written Quotations:

a. All purchases with a total value in between BDT 50,000.00 to BDT 150,000.00 (BDT One Hundred Fifty

Thousand only) must be processed through the Procurement Department by obtaining at least one written

quotation from reputable & reliable suppliers.

All purchases with a total value in excess of BDT 150,000.00 (BDT One hundred fifty thousand only) must be

processed through the Procurement Department by obtaining at least three written quotations from reputable &reliable suppliers. Such offers must be evaluated on the basis of price, quality, specification and other criteria

before a final supplier selection.


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b. Where the products is available only from a monopoly/sole supplier. In this circumstance, it is incumbent upon

the Procurement Department to make all out effort to find an alternative source of supply to reduce the

companys reliance on one supplier.

c. For procurement of certain goods and services, special arrangements will be put in place as detailed later in this

document. These are detailed form section 5 to 11 of this document under the head Policy for Specific areas ofProcurement. This listing may be subject to periodic review by the Managing Director & Procurement Team.

d. In certain circumstances, it may be necessary to issue a Letter of Intent in order to provide an element of

conform whilst details are being finalized prior to the issue of Purchase Order. A Letter of Intent may only be

approved by the Managing Director, or his authorized person in his absence.

e. In the event of an emergency situation, i.e where time is more critical than cost, mainly related to factory safety

or loss of production, or to ensure timely distribution, the procedure of obtaining quotes might be waived only

with the approval of the Assistant Financial Controller or Managing Director or his nominated person at his

absence.

f. For RSOs any purchase exceeding BDT 5,000.00, (BDT Five thousand only) which is extremely critical and

where it is not economically fruitful to purchase from HO, could be procured through RSOs with written/ e-mail

approval from Head of Finance & Head of Sales in other cases where the value is higher than BDT 5,000.00

(BDT Five thousand only) by the Managing Director.


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Responsibilities of Various Departments Involved in Procurement Procedure:

For ensuring systematic purchase the related departments have to fulfill some duties which are detailed below:

User Department:

User department will raise the PR Form and will be liable for the followings:

a. Fill up Purchase Requisition Form as per Company Procedure.

- Put full description / specification of item, if available, provide sample of the product to

Procurement Department along with the PR Form.

- Write full justification for purchase including current stock levels, annual usage etc (if

required)

- Provide name of recommended suppliers (if any)

- Put estimated value of the product in PR Form.

- Put latest acceptable delivery date in PR Form.

- Put Budget Code, Cost Centre in PR Form.

b. Acceptance of Goods or Services after delivery / completion.

c. Checking and Approving bills.

(For service oriented procurements)

Budget Department

Budget Department will be liable for the following:-

a. Checking Purchase Requisition form against Budget & Budget code, Items, Justification for Purchase,

Estimated Value of the Product and match against Companys annual budget / specific program budget.

b. Take Approval from authorized persons (Appendix - A) and forward to purchase department.

Purchase Department:

Purchase Department is responsible for commercial aspects of the purchase. i.e:-

a. Identifying suitable suppliers for the required item.

b. Obtaining quotations and agreeing final supplier selection in conjunction with the Requisitioning

Department.

c. Agreeing delivery terms & date with the suppliers.

d. Agreeing Payment Terms & date with the suppliers.

e. Raise PO with compliance with the Purchase Policy.

f. Receiving Goods from Suppliers and handover to warehouse / user. (Except Factory Items & Services)

g. Receive bills from suppliers and after initial checking process the bill in accordance with Companys

Purchase Policy and submit to Finance.

h. Should maintain & update a suppliers database with all details like name, address, correspondence

number, products available etc.

Finance Department

Finance Department will be liable for the following:-

a. Check whether the PO value is within 15% variance of the PRs approved value. (To be checked against individual

items)b. Checking the accuracy of all documentation and matching of the invoice to the Purchase Requisition, Purchase Order

and Material Received note, suppliers quotation etc.

c. Ensuring the documents are appropriately authorized prior to presentation to Cheque signatories for payment.


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Level of Authority:

Authority to process the various forms of Related to Procurement are defined hereunder:

Authorization to process Purchase Requisition:

Purchase Requisitions are approved Preliminary by the Departments Heads afterwards if the expenditure requested is

a budgeted revenue expenditure, than Budget Department will forward the PR Form either to AFC or to Managing

Director depending upon the total amount of the PR Form. A detailed flowchart is appended in Appexdix - A

Authorization to process Comparative Statement:

Comparative Statement is mandatory for any purchase over BDT 50,000.00, even if 3 quotations are not received.

The authority level are of Signatories are attached in Appendix A.

Authorization to process Purchase Orders:

a) Purchase Orders with a total value up to BDT 500,000.00 (BDT Fifty thousand only) equivalent will be approved

and signed by the Head of Procurement. Regarding factory purchase, if PO is required to be raised, the factory

manager has the sole authority to sign the PO upto BDT 25,000.00 (BDT Twenty five thousand) maintaining the

company norms & payment terms mentioned hereunder

Purchase Orders Exceeding limit BDT 500,000.00 (BDT Five lakhs) up to BDT 10,00,000.00 (BDT Ten lacs)

should be jointly signed by Assistant Financial Controller and any value over BDT 10,00,000.00 (Ten Lakhs)

should be approved by the Managing Director or his authorized person in his absence.

a) In absence of the Managing Director any purchase exceeding BDT 10,00,000.00 (BDT Two lacs) should be

countered signed by both the Head of Procurement & nominated person of the Managing Director.

b) In the rare case of absence Managing Director and any one of the procurement team alternative signatories

might be assigned for the duration of absence, in written circular or mail to the related persons by the Managing

Director.


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GUIDELINE AND PROCEDURES FOR MAKING A PURCHASE

1. Purchase Requisition:

Where there is a requirement to purchase goods or services, the user department shall complete the Purchase Requisition Form (Form

on Appendix B) and submit it to the budget holder for initial approval.

It should be noted that a full justification for the need to purchase should be given in the appropriate box. A list of budget holders is

provided in Appendix C.

After initial approval of the budget holder, the Purchase Requisition should be forwarded to the Budget Department for checking the

budgetary allocation & availability.

The Purchase Requisition for stock items such as packing foils for different SKUs, cartoon requirements & other packing materials

should be raised at least two months before requirement from the department involved in supply & demand projection. A detailed

procedure is elaborated in Section 12 of this manual.

In case of adequate / surplus budget in the appropriate head, the authorization of processing the Purchase Requisition will be issued by

the Budget Department by having signature as per the authority level detailed in Appendix A.

Once appropriate approvals have been obtained, as evidenced in Section 1 of the Purchase Requisition, it should be forwarded to the

Procurement Department for purchasing.

Based on the nature and value of the proposed purchase request, the Procurement Department shall determine the mode and therefore

the appropriate steps to be taken to proceed with the purchase as outlined in Section 1 of this document.

Minor Purchases: As stated in Section 1.5 of this document, certain items which are not available in the warehouse /

stores and the value of which does is up to BDT 10,000.00 (BDT Ten thousand) (User authorities are detailed in 1.5

above)may be purchased directly by the user department in cash. It should be noted that, if desired the purchase

might be made using Purchasing Department. For cash purchases, a purchase requisition form shall be completed by

the individual making the request and approved by the Budget Holder against whose budget the item will be charged.

Once approval is obtained the concerned official or purchasing department may buy from any shop/supplier obtaining

a receipt as evidence. Re-imbursement of the sums expended will be made through the submission of an expenses

statement, along with the approved Purchase Requisition form with initial from budget holder, to finance department.


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Procurement department should go for purchase if the initial PR value and the proposed PO value of the selected supplier is within

10% variance of the proposed PR value. Otherwise the PR should be turned back to the Budget department for reallocating the

budget with coordination with the user department.

The Priority Rating in the PR should be mentioned following the criterias hereunder:

1. High - From 3 - 7 working days2. Medium - From 8 15 working days

3. Low - From 16-45 working days

3 Purchase Order

3.1 Once Purchase Requisition Form and Comparative Statement Form has been completed and authorized, (with the

possible exception of Minor Purchases) Procurement Department will obtain quotations as dictated in paragraphs 1.6

and 1.7 of this document to fulfill the purchase.

3.2 Prices stated by the suppliers in their quotations must always be treated as the final price. Further negotiations should

be entertained, if Hoed of Purchase feels so after written quote has been received.

3.3 These quotes will be entered in the Comparative Statement Form and then approval will be obtained as per the

authority level detailed in Annexure G.

3.4 Every Purchase, with the exception of Minor Purchases as defined above, wil l be made through issue of a pre

numbered Purchase Order. The number registrar of the purchase order should be maintained by the Procurement

Department.

3.5 The Purchase Order is an important document and should be issued with the utmost care. The Purchase Order is a

legal document that, once signed by authorized official, constitutes a contract between the company and the Supplier

or Service Provider. It creates a liability for the company and an obligation to pay. For this reason, it is paramount that

the purchase order is clear and precise. It should detail exactly what is required by the by way, of description,

manufacturers parts numbers, technical specifications, quantity, goods or service delivery date and price as agreed in

the quotation. This list is not exhaustive. All relevant information, including technical drawings, where appropriate,

should be provided.

In addition, the full terms and conditions of supply should be stipulated on the purchase order.

3.6 Payment terms are restricted to:-

- Advance Payment (Limited Situations only) with approval from Managing Director.

-Payment upon delivery. (limited situations only)

- 15 days net. (small suppliers only)

- 30 days net or longer (preferred terms)

- Against Letter of Credit (overseas only)


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- Progress payments (Restricted to projects)

All the payments over BDT 10,000.00 (BDT Ten Thousand) are preferred to be made by Cheque with relaxation in few

occasions subject to approval of the Head of Finance / Managing Director. But under no circumstances, payment over

BDT 10,000.00 (BDT Ten thousand) will not be made in cash.

3.7 Once the purchase order has been approved in accordance with paragraph 1.10 of this document, 3 copies should be

distributes by purchasing department as follows:

- Original to the supplier / Service Provider.

- 1st Copy to the supplier / Service Provider for signature and acceptance and returned to the

Procurement Department.

- 2nd Copy to Finance Department.

- 3rd Copy to User Department.

- In case of involvement of the factory warehouse, a copy should be given to the warehouse.

3.8 Procurement Department / Department engaged that specific purchase should ensure that the duplicate copy of the

order is accepted and returned by the supplier without any changes.

3.9 In the event that the suppliers request any changes to the Purchase Order, such changes will be only and only valid

with the acceptance of the MD or authorized person in his absence.

A sample Purchase Order format is presented in Appendix F.

4 Acceptance of Goods & Services:

4.1 Where it is possible & practicable, purchases should be inspected by the person requisitioning the item or the

nominated person of the Budget Holder. Inspection by other departments may also be considered if appropriate.

4.2 In case of delivery of sub-standard, defective, or non specified items, the company has the right to refuse delivery or

return the goods, in whole or in part, at the suppliers expense. Considerations needed to be given whether purchase

order remains valid for replacement or not.

4.3 For work not done in accordance with specifications or sub-standard quality or poor workmanship, the same will not

be certified for acceptance and the supplier will be required to rectify the defects within a certain period failing which

the same will either be rectified by another supplier and costs deducted from the original suppliers invoice. If a

decision is taken to accept the work/ supply of goods in defective condition, a pro-rata amount will be deducted from

the suppliers invoice.

4.4 Where contracted work requires technical or engineering adjustment prior and/ or subsequent to installation, the

person in charge of the purchase or work should finalize the work prior to final payment.

4.5 Purchases must be accompanied by instructions, operating and maintenance manuals where applicable. Users

training & service contracts in appropriate cases should also be considered.

Policy for Specific Areas of Procurement:


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For various commercial and logistics reasons, purchase of certain goods and services that are best carried out by preferred

suppliers basis. These types of procurement are detailed below along with the procedures and guideline governing the

process of selection.

5. IT Procurement:In order to ensure compatibility of IT equipments and or softwares a preferred supplier might be assigned and in this type of

case relaxation for three quotations might be waived but with proper justification to Head of Finance & Head of Procurement.

6. Travel:

International Travel:

All international travel on company business must to be approved by the Managing Director.

A Purchase Requisition Form should be submitted to the Managing Director well advance of the expected travel date. The

PR should be raised mentioning all the expenditures of the journey and approved in the above mentioned process.

Once approval has been given a copy of the Purchase Requisition should be passed to the Corporate Office HR

Department for processing flight booking, visa processing and other related travel documents through the company

approved travel agent and also the Hotel Booking.

Local travel:

A travel authority form must be completed for all local travel prior to the journey commencing. The travel authority form must

be approved by the appropriate Functional Head before submitting to the HR Department. A Purchase Requisition should be

raised mentioning all the expenditures of the journey and approved in the above mentioned process.

8 Stationery

8.1 In order to provide a consistent and uniform high quality printed stationery, commensurate with the desired image the

company wished to portray, one supplier who meets the required standards will be selected on value for money basis.

8.2 An annual supply contract will be negotiated by the Procurement Department to provide the Companys total requirements

both for Corporate Office, Factory, and Regional Sales Office.

8.3 For non printed items, different number of suppliers might be utilized from time to time.

8.4 Procurement of all the stationeries should be requested by the Administrative Department to the Procurement Department.

9 Consultancy Service Procurement:

9.1 Consultancy service procurement should be made in presence of the procurement team. The budget holders are authorized

to give priority to any individual supplier/ consultant based on their quality of service and market reputation. But the

procurement will be done after approval of all the members of the procurement team. The final approval of procuring such

service is subject to approval of the Managing Director in the Consultancy Service Contract.

9.2 Procurement of service related to HR for head hunting or other consultancy related to HR should also be finalized with

approval of all the members of the procurement team. The final approval of procuring such service is subject to approval of

the Managing Director in the service contract.


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10. Car Maintenance:

Objective

To facilitate repair and maintenance of Company Vehicles in order to ensure proper transportation service.

Scope

This procedure applies to all vehicles registered under company name, either used by Individuals or Company Pool Car / Microand Delivery Vans.

Procedure

Functions of repair and maintenance of Company vehicles will be done in coordination with the Vehicle users, Administration

Department and Procurement Department. In case of Company Pool Car & Delivery Vans, Administration Department is

considered as the user of those vehicles.

The summarized roles of above three departments are mentioned hereunder:

Vehicle Users:

i. To fill Vehicle Maintenance Form (VMF) in case of regular maintenance and forward to Administration Department for

database up-gradation and judge the necessity of the repair work.

ii. To ensure proper service is availed from vendor.

Administration Department:

i . To receive VMF from var ious users and update the database.

ii. Justify the maintenance and take necessary actions. (if accepted, and then send to vendor. If rejected then send back

to user)

iii. To follow up with enlisted suppliers to ensure repairmen of car in due time.

iv. To ensure Quality Checking and provide report within 7 days from the date of receiving the service.

Procurement Department:

i. To select Appropriate Supplier / Vendor and appoint on a yearlong basis both for regular maintenance and also for

repairmen of vehicle.

ii. To procure parts required for repairing the car valued over BDT 5,000.00

iii. To negotiate price with suppliers.

iv. To raise Purchase Order (PO) in favour of appropriate suppliers.

v. To submit bills and invoices along with relevant documents to the Finance Department for Payment.


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11. C&F Agent, Transport Service Provider, Insurance:

Procurement for Service from C&F Agent, Transport Service Provider & Insurance will be done based on annual service

contracts.

However the rates of the service providers will be reviewed after every four months. The user of the C&F Agent, Transport

Service Provider will be the Product Planning and Sales Coordination Department and selection of the supplier from time to

time will be done jointly by Procurement Department & Product Planning and Sales Coordination Department.

11. Media buying and Agency Fixation:

Guideline of Procurement of Media and Other marketing agency will be circulated soon.


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12. Packaging Materials:

Objective

To facilitate forecasted production by ensuring availability of all required packaging materials in a timely and accurate manner.

Scope

This procedure applies to all local purchase of packaging materials Inners and Outer Cartons, foils, tape, glue and other misc

items required for production process.

Procedure

Functions of procurement of packaging materials are to be performed in coordination with Product Planning, Procurement and

Manufacturing Department.

The summarized roles of above three departments are mentioned hereunder:

Product Planning Department:

iii. To prepare 3 months rolling forecast mentioning monthly consumption of each item of packaging materials with the view

to obtain approval from the Managing Director and to raise Purchase Requisition as per forecasts.

iv. To ascertain Minimum Order Quantity (MOQ) Level and re-order level of each item of packaging materials in

consultation with Manufacturing Department.

v. To provide with delivery schedule of each item of packaging materials at Factory end, either on monthly or quarterlybasis, in consultation with Manufacturing and Procurement Department, considering MOQ and re-order level.

vi. To follow up with Suppliers for any emergency situations.


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vii. To notify Procurement and Manufacturing Department any special issue / special circumstance, which needs to be

brought to their notice, immediately.

Procurement Department:vi. To select Appropriate Supplier in compliance with Companys Procurement Policy.

vii. To negotiate price with suppl iers.

viii. To raise Purchase Order (PO) in favour appropriate suppliers.

ix. To follow up with suppliers to ensure supply of packaging materials in a timely manner to fulfil the requirements of

Product Planning Department.

x. To notify Product Planning and Manufacturing Department any special issue / special circumstance, which needs to

be brought to their notice, immediately.

xi. To submit bills and invoices along with relevant documents to the Finance Department for Payment after completion

of required formalities.

Manufacturing Department:

v. To receive packaging materials and store in appropriate place.

vi. To ensure Quality Checking and provide report within 7 days from the date of receiving goods.

vii. To provide daily stock and consumption report to concerned personnel of Product Planning and Procurement

Department.

viii. To monitor the Minimum Order Quantity (MOQ) Level and re-order level of each item of packaging materials on

continuous basis and update Product Planning Department for its appropriate planning.

ix. To bring to the notice of Product Planning and Procurement Department any other important issue which needs to be

brought to their notice.

x. To carry out test of packaging materials, in case of new or existing design and report back to purchase department.

Appendix - A

Approval Authority of Purchase Requisitions

Financial Authority for Approval of Revenue Expenditure Budgeted

Position Amount

1. Budget Holder As mentioned in Sec 1.5.

2. Head of Finance Upto BDT 100,000.00

3. Managing Director Any Value

Financial Authority for Approval of Revenue Expenditure Unbudgeted

Position Amount

1. Budget Holder Less than BDT 10,000.00

2. Managing Director Any Value

Financial Authority for Approval Capital Expenditure Budgeted & Unbudgeted

Position Amount

1. Managing Director Any amount.

Approval Authority of Comparative Statement

Financial Authority for Approval of Revenue Expenditure Budgeted

Position Amount

1. Head of Procurement Up to BDT 150,000.00

2. Head of Finance & Head of Procurement Up to BDT 500,000.00

2. Managing Director & Head of Procurement / Head of Finance Any Value


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Approval Authority for Purchase Orders

Financial Authority for Approval of Purchase Order

Position Amount

1. Head of Procurement Up to BDT 500,000.00

2. Head of Finance & Head of Procurement Up to BDT 10,00,000.00

3.Managing Director & Head of Procurement / Head of Finance Any Value

Appendix - B


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Appendix - C

Appendix - D

Goods & Services not requiring a Purchase Requisition

1. Raw Materials Import.

2. Utilities Bill

3. Port Clearance Charge.

4. Customs Duty.

5. Insurance.

6. Post & Courier Services.

7. Property rental charges

8. Audit & rental fees.9. Salary related Costs

10. Personal Expenses.

11. Taxation Payments.


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Appendix - E

Procurement Team


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Appendix F


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Abbreviation:

Company : New Zealand Dairy Products Bangladesh Ltd

PR : Purchase RequisitionPO : Purchase Order

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