12. Details of Process
Inventory Transaction process can be broken into various modules. The modules into which it can be broken into are as below
1. Purchase Requisition
2. Purchase Module
3. Receipt Module
4. Issue Module
5. Vendor Bill Matching (Consolidated GRN)
13. Purchase Requisition
13.1 Overview
Whenever there is a shortage of a part or the Part has gone below the ROL, it has to be procured to replenish the stock. For purchasing a part, the user would raise a Purchase Requisition to the purchase department
The process flow of Purchase Requisition module is as given below
(To be pasted from Excel)
13.2 Creation of Purchase Requisition
While preparing the Purchase Requisition the following fields have to be entered by the Users
• Department
• Cost Centre
• Part Code
• UOM
• Qty
• Any Drawing/Quotation or any other documents info
13.2.1 Enhancements planned
• Attaching the soft copy of Drawings, Quotations and any other documents to the Purchase Requisition
• Link to the Document Management System being implemented in Mettube Sdn Bhd
• Summarised Alerts of the PRs to be sent to respective superiors
13.2.2 Business rules
• The user should be prompted if the PR Qty + Stock in Hand + PO Qty exceeds the Maximum Qty
• PR date is the current date and no one will be permitted to change it.
• PR details can be changed before second level approval.
• Once finance director approves PR, no one will be permitted to amend the Purchase Request.
• PR can be cancelled before the 2nd level approval.
• The PR Description is not editable
• One PR will have only 1 Cost Centre, multiple Cost Centre’s cannot be mixed.
13.3 First level Authorisation of PR
The First level of authorisation is done by the relevant heads of the department.
While authorising PRs they will be provided with the following information to enable them to authorise PR’s.
• Part Code
• Relevant Drawings and other documents if they were attached
• Past 6 months consumption
• Past 6 months purchase pattern
• ROL
• Maximum Stock Qty
• Minimum Stock Qty
• Equivalent Part’s stock
Option to cancel the PR in this screen will be provided.
An alert will be sent to the PR Creator once the First level approval/rejection occurs
13.3.1 Business rules
• If the Purchase Requisition is edited after the first level of authorisation, it will have to be re-authorised.
• The life of the PR will end if the PR is cancelled in the First level or Final level authorisation
13.4 Final level Authorisation of PR
The Final level of authorisation of PR is done by the Production / Finance Director.
While authorising PR’s they will be provided with the following information to enable them to authorise PR’s.
• Part Code
• Relevant Drawings and other documents if they were attached
• Past 6 months consumption
• Past 6 months purchase pattern
• ROL
• Maximum Stock Qty
• Minimum Stock Qty
• Equivalent Part’s stock
• Total Cost incurred by the Department in the current financial Year
• Cost of the item during last purchase
Option to cancel the PR in this screen will be provided.
An alert will be sent to the PR Creator once the Final level approval/rejection occurs
13.4.1 Business rules
• Purchase Requisition cannot be edited after the final level of authorisation
• The life of the PR will end if the PR is cancelled in the First level or Final level authorisation
• The PR’s status should be automatically changed when the relevant events occurs. The Different events which can occur for a PR are
1) Enquiries sent
2) 1st Level Approval Done
3) Final Approval Done
4) PR Rejected
5) Purchase Order Created
6) Purchase Order Approved
7) Purchase Order Cancelled
8) Partial Material Received
9) Complete Material Received
13.5 Enquiries to Vendors
In this process, the Purchase department sends out enquiries to the vendors, based on the quality and commercial aspects one of the vendors is chosen to supply the materials requested in the PR.
In this option the user would be presented with a screen showing the following information.
• PR No.
• PR Date
• List of vendors to whom the Enquiry has to be sent
• Unique Enquiry No
• Enquiry Date
• Expected date of receiving Quotation
The following additional information would be shown to allow the user take smart decisions.
• Part Code
• Last Purchased On
• Last Supplied vendor
• Last Purchase Price
• Last Purchased UOM
Additionally the user would be able to see the entire purchase history of the particular Part code
A Unique Enquiry No would be generated for each enquiry sent to a vendor. It is suggested that the Enquiry number has a link to the original PR No to enable ease in tracking
13.5.1 Business rules
• Only PRs for which final Authorisation is done will be allowed to prepare Enquiries
• Sending of Enquiries is not a compulsory option
• The Enquiry will be an exact replica of the PR. Only additional comments would be allowed to be keyed into the Enquiry
• The Enquiry can be sent to the vendor by Fax or Email or Couriered
• Option to combine multiple PRs into one Enquiry should be possible
• Option to prepare enquiry for only few items of the PR also should be possible
• Only one Enquiry of a particular item can be approved (i.e. Qtn Accepted)
13.6 Linking of Old Purchase Order’s to New Purchase Requisition
In this process, the Purchase executive will be allowed to link a PR to a previous purchase Order. This would enable the system to automatically pick the prices from the previous PO to the new PO, which will be created for this PR.
14. Purchase Order
This is a process of placing a physical order to vendor for items such as packing material, spares, consumables and raw material, whenever there is one or more Purchase Request(s) from the department(s).
The purchase executive collects various approved purchase requests from the departments. Decides the vendor and negotiates / finalises the price based on different conditions such as Time of Delivery, price, Vendor history, requirement etc.
Multiple PO’s can be created based on a Purchase Requisition (it happens, when a purchase Requisition contains different items which are to be sourced from different vendors).
Purchase Order can be classified into two:
1. Normal PO
2. Fabricator PO
Fabricator PO is made when the raw material is supplied by the Mettube to make a consumable product to another vendor. For eg: Bobbins (Round wooden boxes for packing copper tube).
Once again these PO Types will be classified in 3 types:
1. Normal PO
2. Open PO
3. Contract PO
Key inputs required in the purchase order:
a. PO number
b. Vendor code
c. Vendor Address with Phone and Fax No
d. Item details
e. Payment terms (this describes the percentage of advance – standard terms as defined in the master set up)
f. Facility for entering Multiple Payment Terms will be provided.
g. Duration (the time given to the vendor to supply the goods – in week/month/ days etc.)
h. Scheduled delivery information (i.e. Delivery schedule and Schedule qty also)
i. Estimated Time of Departure and Estimated time of Arrival. (For Foreign Suppliers).
j. Duration type (immediately or between or after)
k. PO type (Normal PO or Fabricator PO)
l. PO Sub type (Normal PO or Open PO, Contract PO)
m. Currency code
n. Quotation number (or any other references)
o. Additional cost (if any – freight and insurance)
p. Approval
After preparing PO, four copies of print out will be taken. Two copies will be given to the vendor, one copy will be given to accounts department and one copy to purchase department.
Option will also be provided to the users to enter the Scheduled deliveries
To reduce the data-entry load for creation of purchase order, the following method are planned to be adopted
• Based on Vendor Enquiries
The user will select the vendor; the system will list out all the enquiries sent to the vendor, now the PO will get filled with the items selected in the Enquiry. The user will be allowed to make changes/additions to the selected list
• Based on Previous PO
If the Purchase executive is going to place a repeat order on a particular vendor, they will be allowed to select the previous PO No. Now the system will automatically pick all the items from the PO for which new PR’s have been raised and authorised.
• Raw Data entry (i.e. based on PR Selection)
14.1 PO is of Four types, normal PO, open PO, Contract PO and Adjustment PO
14.1.1 Normal PO
For a specific purpose and one time purchase, normal PO is used. In a normal PO, the Price and the Qty is fixed.
14.1.2 Open PO
If an Open purchase Order, the Qty is kept open, which means that we can receive any number of Qty from the vendor and there would not be any restriction. But the price would be fixed.
The user would be given an option to decide on the maximum limit of qty that can be received.
A closure date/time period can be set for closing the PO
The PO would be closed once the closure date or the time period specified elapses. The PO would also be closed if the total supplied qty reaches the Maximum limit (it set) set by the user.
Open PO is used for packing material. It will be raised in the beginning of the month based on the PR and vendor will be delivering goods part by part in shipment, periodically.
14.1.3 Contract PO
A Contract PO is an advanced form of Open PO. In this case in addition to the Qty the price also would be flexible. The price would depend based on the qty supplied per month (or any specific period fixed during creation of the PO)
The price for each item would range in a group.
For e.g. For an Item X.
Qty Supplied (in a month) Unit Rate
1 - 5000 RM 1000
5001 – 6000 RM 950
6001 - 7000 RM 900
> 7001 RM 850
So the price of the item supplied would be calculated at the end of the period specified (say a month)
14.1.4 Adjustment PO
An adjustment PO is done whenever there is a physical difference in the stock Qty.
14.2 PO Authorisation
The PO has to be authorised by an authorised personal, before authorisation the user will be allowed to take only a draft print of the Purchase Order. Only after authorisation can the user take the Original PO Print out.
After the PO is authorised no modifications can be done to the PO.
14.3 Modification of PO
No modification can be made to the PO after the PO is authorised.
14.4 PO Revision
If a PO has to be modified after authorisation, we have to prepare a revised PO. In the revised PO the same PO Number would be retained, but the revision no. would be incremented by 1.
The revised PO would become active only after it is authorised.
14.4.1 Revised PO Authorisation
When a revised PO is authorised, the user should be shown details of the differences between the previous authorised PO and the Revised PO.
Once the revised PO is authorised, the previous authorised PO would now be automatically closed/cancelled. Any further GRNs prepared will be received only against this Revised PO.
But all the previous GRN’s will still remain in the previous Authorised PO.
14.4.2 PO to Fabricators
Whenever any type of PO is created for a fabricator, the fabricator may be provided with the relevant Raw Materials (Copper Strip in case of Copper clip manufacturer, Plywood in case of Bobbin manufacturer).
PO’s to fabricators can be created for only items for which Bill of Materials are created
While creating the PO, the user will have to provide the information from where the Raw Material will be given to the Fabricator. The Raw Material to the fabricator can be given from the following methods
1) From the stores by issuing a “Gatepass”
2) Directly from the vendor of Raw Material
In this case, while creating the PO the reference to the PO of the Raw Material will be provided. Option to provide multiple PO references should be available
A separate PO Print format should be generated which will show the Raw Material value along with Fabricator Value.
Additional Business rules for Fabricator POs
• Bill of Material should be created for the Items
• If any revision is done to a PO of the Raw Material, the revised PO should be now linked to the Fabricator PO.
14.4.3 Business rules for all type of PO’s
• PO number is of 7 digits. (First 2 digits from the current year and the rest are 5-digit serial number) Ex: - 0700001(05 is current year, 00001 is serial number)
• A prefix can be given to denote the various type of PO’s
• PO date must be the current date.
• The Purchase price cannot be changed once the final approval of the Purchase order is done
• GRN can be prepared only for authorised PO’s
• The PO’s status should be automatically changed when the relevant events occurs. The Different events which can occur for a PO are
1) Purchase Order Approved
2) Purchase Order Cancelled
3) Partial Material Received
4) Complete Material Received
5) Purchase Order Closed
In Addition to the above Status, the following additional status should be shown for the PO’s done to fabricators.
6) Raw Material delivered through Gate Pass
7) Raw Material Not yet delivered
8) Raw Material delivered by RM Vendor
• The Same Part No/Item code should not be repeated in a Single Purchase Order
14.5 Generation of Reminders to vendors
In this process, the system would auto-generate reminders to vendors who have not yet supplied the materials after the due date.
A summarised alert also would be sent to the person who generated the PR and his/her department head
14.6 Vendor Rating
A vendor can be rated based on the following dynamic properties
• Delivery Time
• Delivery Quality (i.e. material quality)
Additionally the vendor can also be rated based on the following static properties
• Has the vendor responded well to emergency situation
• Has the vendor’s failure to deliver in time resulted in Production stoppages/delay
• Is the vendor ISO certified or any other certification
• Does the vendor give us enough confidence to enable us to keep less stock
Inventory Transaction process can be broken into various modules. The modules into which it can be broken into are as below
1. Purchase Requisition
2. Purchase Module
3. Receipt Module
4. Issue Module
5. Vendor Bill Matching (Consolidated GRN)
13. Purchase Requisition
13.1 Overview
Whenever there is a shortage of a part or the Part has gone below the ROL, it has to be procured to replenish the stock. For purchasing a part, the user would raise a Purchase Requisition to the purchase department
The process flow of Purchase Requisition module is as given below
(To be pasted from Excel)
13.2 Creation of Purchase Requisition
While preparing the Purchase Requisition the following fields have to be entered by the Users
• Department
• Cost Centre
• Part Code
• UOM
• Qty
• Any Drawing/Quotation or any other documents info
13.2.1 Enhancements planned
• Attaching the soft copy of Drawings, Quotations and any other documents to the Purchase Requisition
• Link to the Document Management System being implemented in Mettube Sdn Bhd
• Summarised Alerts of the PRs to be sent to respective superiors
13.2.2 Business rules
• The user should be prompted if the PR Qty + Stock in Hand + PO Qty exceeds the Maximum Qty
• PR date is the current date and no one will be permitted to change it.
• PR details can be changed before second level approval.
• Once finance director approves PR, no one will be permitted to amend the Purchase Request.
• PR can be cancelled before the 2nd level approval.
• The PR Description is not editable
• One PR will have only 1 Cost Centre, multiple Cost Centre’s cannot be mixed.
13.3 First level Authorisation of PR
The First level of authorisation is done by the relevant heads of the department.
While authorising PRs they will be provided with the following information to enable them to authorise PR’s.
• Part Code
• Relevant Drawings and other documents if they were attached
• Past 6 months consumption
• Past 6 months purchase pattern
• ROL
• Maximum Stock Qty
• Minimum Stock Qty
• Equivalent Part’s stock
Option to cancel the PR in this screen will be provided.
An alert will be sent to the PR Creator once the First level approval/rejection occurs
13.3.1 Business rules
• If the Purchase Requisition is edited after the first level of authorisation, it will have to be re-authorised.
• The life of the PR will end if the PR is cancelled in the First level or Final level authorisation
13.4 Final level Authorisation of PR
The Final level of authorisation of PR is done by the Production / Finance Director.
While authorising PR’s they will be provided with the following information to enable them to authorise PR’s.
• Part Code
• Relevant Drawings and other documents if they were attached
• Past 6 months consumption
• Past 6 months purchase pattern
• ROL
• Maximum Stock Qty
• Minimum Stock Qty
• Equivalent Part’s stock
• Total Cost incurred by the Department in the current financial Year
• Cost of the item during last purchase
Option to cancel the PR in this screen will be provided.
An alert will be sent to the PR Creator once the Final level approval/rejection occurs
13.4.1 Business rules
• Purchase Requisition cannot be edited after the final level of authorisation
• The life of the PR will end if the PR is cancelled in the First level or Final level authorisation
• The PR’s status should be automatically changed when the relevant events occurs. The Different events which can occur for a PR are
1) Enquiries sent
2) 1st Level Approval Done
3) Final Approval Done
4) PR Rejected
5) Purchase Order Created
6) Purchase Order Approved
7) Purchase Order Cancelled
8) Partial Material Received
9) Complete Material Received
13.5 Enquiries to Vendors
In this process, the Purchase department sends out enquiries to the vendors, based on the quality and commercial aspects one of the vendors is chosen to supply the materials requested in the PR.
In this option the user would be presented with a screen showing the following information.
• PR No.
• PR Date
• List of vendors to whom the Enquiry has to be sent
• Unique Enquiry No
• Enquiry Date
• Expected date of receiving Quotation
The following additional information would be shown to allow the user take smart decisions.
• Part Code
• Last Purchased On
• Last Supplied vendor
• Last Purchase Price
• Last Purchased UOM
Additionally the user would be able to see the entire purchase history of the particular Part code
A Unique Enquiry No would be generated for each enquiry sent to a vendor. It is suggested that the Enquiry number has a link to the original PR No to enable ease in tracking
13.5.1 Business rules
• Only PRs for which final Authorisation is done will be allowed to prepare Enquiries
• Sending of Enquiries is not a compulsory option
• The Enquiry will be an exact replica of the PR. Only additional comments would be allowed to be keyed into the Enquiry
• The Enquiry can be sent to the vendor by Fax or Email or Couriered
• Option to combine multiple PRs into one Enquiry should be possible
• Option to prepare enquiry for only few items of the PR also should be possible
• Only one Enquiry of a particular item can be approved (i.e. Qtn Accepted)
13.6 Linking of Old Purchase Order’s to New Purchase Requisition
In this process, the Purchase executive will be allowed to link a PR to a previous purchase Order. This would enable the system to automatically pick the prices from the previous PO to the new PO, which will be created for this PR.
14. Purchase Order
This is a process of placing a physical order to vendor for items such as packing material, spares, consumables and raw material, whenever there is one or more Purchase Request(s) from the department(s).
The purchase executive collects various approved purchase requests from the departments. Decides the vendor and negotiates / finalises the price based on different conditions such as Time of Delivery, price, Vendor history, requirement etc.
Multiple PO’s can be created based on a Purchase Requisition (it happens, when a purchase Requisition contains different items which are to be sourced from different vendors).
Purchase Order can be classified into two:
1. Normal PO
2. Fabricator PO
Fabricator PO is made when the raw material is supplied by the Mettube to make a consumable product to another vendor. For eg: Bobbins (Round wooden boxes for packing copper tube).
Once again these PO Types will be classified in 3 types:
1. Normal PO
2. Open PO
3. Contract PO
Key inputs required in the purchase order:
a. PO number
b. Vendor code
c. Vendor Address with Phone and Fax No
d. Item details
e. Payment terms (this describes the percentage of advance – standard terms as defined in the master set up)
f. Facility for entering Multiple Payment Terms will be provided.
g. Duration (the time given to the vendor to supply the goods – in week/month/ days etc.)
h. Scheduled delivery information (i.e. Delivery schedule and Schedule qty also)
i. Estimated Time of Departure and Estimated time of Arrival. (For Foreign Suppliers).
j. Duration type (immediately or between or after)
k. PO type (Normal PO or Fabricator PO)
l. PO Sub type (Normal PO or Open PO, Contract PO)
m. Currency code
n. Quotation number (or any other references)
o. Additional cost (if any – freight and insurance)
p. Approval
After preparing PO, four copies of print out will be taken. Two copies will be given to the vendor, one copy will be given to accounts department and one copy to purchase department.
Option will also be provided to the users to enter the Scheduled deliveries
To reduce the data-entry load for creation of purchase order, the following method are planned to be adopted
• Based on Vendor Enquiries
The user will select the vendor; the system will list out all the enquiries sent to the vendor, now the PO will get filled with the items selected in the Enquiry. The user will be allowed to make changes/additions to the selected list
• Based on Previous PO
If the Purchase executive is going to place a repeat order on a particular vendor, they will be allowed to select the previous PO No. Now the system will automatically pick all the items from the PO for which new PR’s have been raised and authorised.
• Raw Data entry (i.e. based on PR Selection)
14.1 PO is of Four types, normal PO, open PO, Contract PO and Adjustment PO
14.1.1 Normal PO
For a specific purpose and one time purchase, normal PO is used. In a normal PO, the Price and the Qty is fixed.
14.1.2 Open PO
If an Open purchase Order, the Qty is kept open, which means that we can receive any number of Qty from the vendor and there would not be any restriction. But the price would be fixed.
The user would be given an option to decide on the maximum limit of qty that can be received.
A closure date/time period can be set for closing the PO
The PO would be closed once the closure date or the time period specified elapses. The PO would also be closed if the total supplied qty reaches the Maximum limit (it set) set by the user.
Open PO is used for packing material. It will be raised in the beginning of the month based on the PR and vendor will be delivering goods part by part in shipment, periodically.
14.1.3 Contract PO
A Contract PO is an advanced form of Open PO. In this case in addition to the Qty the price also would be flexible. The price would depend based on the qty supplied per month (or any specific period fixed during creation of the PO)
The price for each item would range in a group.
For e.g. For an Item X.
Qty Supplied (in a month) Unit Rate
1 - 5000 RM 1000
5001 – 6000 RM 950
6001 - 7000 RM 900
> 7001 RM 850
So the price of the item supplied would be calculated at the end of the period specified (say a month)
14.1.4 Adjustment PO
An adjustment PO is done whenever there is a physical difference in the stock Qty.
14.2 PO Authorisation
The PO has to be authorised by an authorised personal, before authorisation the user will be allowed to take only a draft print of the Purchase Order. Only after authorisation can the user take the Original PO Print out.
After the PO is authorised no modifications can be done to the PO.
14.3 Modification of PO
No modification can be made to the PO after the PO is authorised.
14.4 PO Revision
If a PO has to be modified after authorisation, we have to prepare a revised PO. In the revised PO the same PO Number would be retained, but the revision no. would be incremented by 1.
The revised PO would become active only after it is authorised.
14.4.1 Revised PO Authorisation
When a revised PO is authorised, the user should be shown details of the differences between the previous authorised PO and the Revised PO.
Once the revised PO is authorised, the previous authorised PO would now be automatically closed/cancelled. Any further GRNs prepared will be received only against this Revised PO.
But all the previous GRN’s will still remain in the previous Authorised PO.
14.4.2 PO to Fabricators
Whenever any type of PO is created for a fabricator, the fabricator may be provided with the relevant Raw Materials (Copper Strip in case of Copper clip manufacturer, Plywood in case of Bobbin manufacturer).
PO’s to fabricators can be created for only items for which Bill of Materials are created
While creating the PO, the user will have to provide the information from where the Raw Material will be given to the Fabricator. The Raw Material to the fabricator can be given from the following methods
1) From the stores by issuing a “Gatepass”
2) Directly from the vendor of Raw Material
In this case, while creating the PO the reference to the PO of the Raw Material will be provided. Option to provide multiple PO references should be available
A separate PO Print format should be generated which will show the Raw Material value along with Fabricator Value.
Additional Business rules for Fabricator POs
• Bill of Material should be created for the Items
• If any revision is done to a PO of the Raw Material, the revised PO should be now linked to the Fabricator PO.
14.4.3 Business rules for all type of PO’s
• PO number is of 7 digits. (First 2 digits from the current year and the rest are 5-digit serial number) Ex: - 0700001(05 is current year, 00001 is serial number)
• A prefix can be given to denote the various type of PO’s
• PO date must be the current date.
• The Purchase price cannot be changed once the final approval of the Purchase order is done
• GRN can be prepared only for authorised PO’s
• The PO’s status should be automatically changed when the relevant events occurs. The Different events which can occur for a PO are
1) Purchase Order Approved
2) Purchase Order Cancelled
3) Partial Material Received
4) Complete Material Received
5) Purchase Order Closed
In Addition to the above Status, the following additional status should be shown for the PO’s done to fabricators.
6) Raw Material delivered through Gate Pass
7) Raw Material Not yet delivered
8) Raw Material delivered by RM Vendor
• The Same Part No/Item code should not be repeated in a Single Purchase Order
14.5 Generation of Reminders to vendors
In this process, the system would auto-generate reminders to vendors who have not yet supplied the materials after the due date.
A summarised alert also would be sent to the person who generated the PR and his/her department head
14.6 Vendor Rating
A vendor can be rated based on the following dynamic properties
• Delivery Time
• Delivery Quality (i.e. material quality)
Additionally the vendor can also be rated based on the following static properties
• Has the vendor responded well to emergency situation
• Has the vendor’s failure to deliver in time resulted in Production stoppages/delay
• Is the vendor ISO certified or any other certification
• Does the vendor give us enough confidence to enable us to keep less stock
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