Vertical Solution Series - Material Purchase Process
Material purchase process happens to be one of the vital Business processes in any manufacturing industry. For the beginners, this article should help you understand what steps are involved in a typical purchase process. Please note we are assuming that the organization already has ERP solution which takes care of Material Purchase. The Business Process involved in various stages is what should typically be tried with BPM
Material Indent is a request generated by the user which has details on what material needs to be procured. Typically a Material Indent process would have details on What is the Nature of Material, Brand, Quantity, Units. If you already have a list of materials defined in ERP, you can look it up here. Care must be taken to ensure that the client is able to submit multiple items together. I have a design on submitting multiple items together. I will share it in some post later.
Material Indent process could involve approvals from management, Stock etc. Depending on the availability of the material in stock, the request could either be fulfilled by the current stock or a requisition for purchase could be made. Both the processes have been discussed below.
There could be several rules associated with material indent process like Store Approval, Stock Validation, Approval level Change due to Change in Cost, Escalations, bifurcation based on Primary and Secondary (BOM and Non BOM) material (BOM= Bill of Material).
This is pretty simple. Based on your Indent request you can issue material from your stock. Normally a couple of approval could be added to make sure the financial and inventory calculation can be done smoothly. Care should be taken that you understand the different types of Stock like Blocked Stock, Reserved Stock, Quality Stock, and Scrapped stock before you build something around it.
This process involves approvals from Plant managers, Supervisors etc before purchase process can begin. Normally information like what material, what quantity needs to be purchased is provided. Accounts related information like inventorize or not, Which General ledger etc can also provided. If your company has a cost center based system of handling expenses, Cost center information can also be provided.
Purchase Order can be prepared using the data provided in the Purchase Requisition. Whenever a vendor has been indentified and amount has been agreed upon a PO can be released. All subsequent processing happens on the basis of this PO Number. Some companies could have the concept of market share which means a particular vendor has 50% share for a particular material. This means whenever a demand is raised, the request is divided into multiple vendors based on the market share.
Material Requirements Planning
This process involves planning how the material should be acquired. For companies keeping the inventory levels maintained can help reduce costs. This schedule normally is listed for the vendors to identify when to dispatch the asked material. This could be day wise, month wise or week wise depending on your requirement. Here noteworthy is that the PO could represent the entire material to be purchased but schedule could be sub parts of the entire order.
Based on published MRP, vendor could dispatch the requested items. He would provide invoice number, Delivery Challan Number, Dispatch Date and Dispatched Quantity. PO Number would also be specified. If the transport is taken care by the vendor itself, this process would even ask for vehicle type, Transport mode, Lorry Receipt Number, Material start Date, expected Delivery Date.