STANDARD OPERATING

PROCEDURE

PURCHASE
DEPARTMENT
 Name Designation Date
Prepared By Ms. Samata Joil Manager HR

Reviewed By Mr. Suhas Bhole GM- Purchase

Approved by Mr. Anuj Agarwal Director & CFO

CONTROL OF CONFIDENTIALITY
The information contained in this document is the property of Bhagwati
Group, No part of this document may be reproduced in any form without the
prior permission in writing of Bhagwati Group

Date Status of Review

Created on
10.12.2023
Reviewed on
Bhagwati Group Procurement Policy
Bhagwati Group and its External Suppliers are independent and
Bhagwati recognizes that mutually beneficial relationships
enhance the ability of both to create value for our end customers,
society, and investors.
Principles of Procurement activities are…..

 Legal
 Accountable & auditable
 Ethically, environmentally, and socially responsible
 Economically effective
 Conducive to maintaining the organization's ability to
exploit appropriate technological, commercial, and
organizational development as they arise
 Capable of identifying, minimizing, and managing
risks that may threaten the supply chain or the wider
organization.
 Open to continuous improvement and development
 Fair and transparent to all
 Table of Contents / Index

S. No. Description Section

1. Title Page
2. Table of contents/Index A
3. Control Sheet B
4. Distribution List C
5. Objective 1
6. Scope 2
7. Purchase Structure And Responsibilities 3
8. Procurement Process Cycle 4
9. Definitions 5
10. Processing of Purchase Requisitions 6
11. Selection of External Supplier 7
12. Request for quote (RFQ) 8
13. Purchase Order Processing 9
14. Processing of Work Order 10
15. Follow-up of Delivery Schedule 11
16. Inspection at External Supplier’s premises 12
17. Transportation of Purchased Material 13
18. Goods Receipt 14
19. Acceptance & Rejection, Documentation 15
20. Corrective Action Request 16
21. Invoice Verification 17
22. Processing of Payments 18
23. Checks & Controls (MIS) 19
24. Annexure – I – Purchase Organisation 20
25. Annexure – II – Procurement Process Cycle 21
26. Annexure – III – External Supplier Registration 22
Form
 Control Sheet
Rev Section Page Revision Description Revision Remark
No. From To s
1.

DISTRIBUTION LIST
S.No. Copy No. Distributed To Location
1. 01
2. 02
3. 03
4. 04
5. 05
1.0 Objective

The objective of the SOP is to describe the complete process for procuring
goods and services in the company, starting from the indenting stage to the
receipt of the material/ services, till the release of final payment.

2.0 Scope

This SOP applies to all Domestic/Import purchases made in the company and
thus includes purchases of all raw Materials. Components, packing material,
Maintenance items etc.

3.0 Purchase Structure And Responsibilities

In-charge purchase is the process owner and is responsible for all activities of
the purchasing process. The purchase organization structure is defined in
Annexure –I

4.0 Procurement Cycle

The procurement process cycle is described schematically in Annexure -II

(attached)

5.0 Definitions:

Material Lead Time & MOQ for A&B class items:

Standard lead time and MOQ (Minimum Order Quality) of the materials are to
be maintained by the Purchase dept. and shall be circulated to PPC
(Production, Planning & Control)/ user dept. for their planning of the material.

Selection of External Suppliers:

It will be the responsibility of the purchasing department to maintain an

approved list of External Suppliers for various categories of items that are
directly used in the manufacture of the product. External Suppliers are
selected from the approved External supplier's list and RFQs (Request for
Quotation) shall be floated for the process of the PR (Purchase Requisition)

External Supplier’s approval and enlistment:

Vendor Registration Form:

For new External Suppliers, the purchasing department sends a registration

form to the External Suppliers to generate sufficient information about the
capability of the External Supplier with regard to their technical capabilities,
Material availability, machinery available, etc.
Method of evaluation and re-evaluation of External Supplier:

The External Supplier Evaluation Team comprising Purchase & QA shall

analyse the information available against the registration form and visit such
sources, that they consider suitable for the manufacture/supply of items in
accordance with our specifications and requirements. Based on approval
criteria the External Supplier is enlisted or rejected. Existing External
Suppliers are revalidated based on their quarterly performance rating and the
periodicity of re-evaluation is fixed based on the score.

Approval for offshore External Supplier:

External Supplier evaluation /assessment is carried out by Bhagwati Group

Auditors/Bhagwati Group designated 3rd party at offshore External Suppliers
establishments.

List of Approved External Suppliers:

It is the list of approved External Suppliers. The External Supplier is added to

the approved External Suppliers list after External Supplier registration and
approval by the evaluation team. A non-performing External Supplier is
deleted from the list if their performance is below the rating.

Purchase Requisition (PR):

PR is the official intent for initiating any procurement. User releases online /
hard copy PR form duly approved by authorized approvers and sends to
purchase for subsequent process.

Revenue Items- Purchase requisition (PR)/Material Requirement

Planning (MRP):

PPC/User shall raise PR based on the monthly MRP/user requirement(s)

respectively. The PR should be approved through an online release strategy.
The purchase shall verify the PR for the correctness of pre-requisites like item
description, delivery schedule as per lead time, MOQ, drawing No.
/Specification No. etc., and shall process thereafter.

Request for Quotation (RFQ):

The purchase shall float RFQ by E-mail to preferably a minimum of 3 External

suppliers with required drawings/specifications. For RM/BOM items, the
External suppliers are to be selected from the Bhagwati Group-approved
External suppliers list.
Rolling Plan:

A minimum 3-month roiling plan is generally expected for PPC for critical raw
materials and long lead items for purchase to supplier projection to External
Suppliers for their readiness.

Normal Purchase & Emergency Purchase:

Normal Purchase PR (Purchase Requisition) is generated based on the

monthly MRP/indent. The purchase department will arrange RFQ and release
orders (PO) on selected vendors based on the most suited commercial terms
and lead time.

For express/emergency purchases shall have the approval of the Unit Head.
The item(s)/may be procured without following the usual procedure of
collecting multiple quotes and comparisons. However, the PR (Purchase
Requisition) has to have duly justifiable reasons in writing for making such
an express/emergency purchase.

Coasting & Price break-up:

A scientific/technical methodology of costing/cost breakup is adopted, taking

into account the material cost, labour, overheads, and any other relevant
factor, etc. for arriving basic price of the material prior to the comparative
statement.

Comparison of Quotation:

Based on the quotes received, a detailed comparative statement is made for

the landed cost of the material along with the details of payment terms,
delivery, freight, etc. price break-up shall be considered as the basis for
further negotiation.

Purchase Order (PO):

Based on the approved PR, the PO is the official agreement that is released by
the External Supplier for the supply of ordered items as per the terms and
conditions indicated therein.

Purchases order processing:

Based on the comparative statement and subsequent negotiations, the price

and terms and conditions are manually agreed upon for the processing of the
PO. PO is subsequently released after approval through the release strategy
and as per the following delegation of authority. The approved PO is forwarded
to the External Supplier through mail or a hard copy.
Negotiation Strategies:

Price finalisation through Negotiation:

For standard BOM items, RFQ is floated to the External Supplier, and
preferably 3 quotes are collected the comparative statement is made, the price
is negotiated and the PO checklist is prepared for the release of the order and
approval.

E-Procurement:

For most of the raw materials/items, BOM items, standard items like……etc.
& capital items the price is finalised through the e-procurement platform. Few
offline quotes are collected to estimate the start price for conducting the e-
bidding process.

Price finalisation through Purchase Committee:

For any non-standard items/items having no previous purchase history and

valued generally more than ……… rates are reviewed and finalized by a
committee comprising of members from the Purchase, user department,
maintenance department, and finance, which is referred to as purchase
committee, generally items covered under the scope of purchase committee
are – Project items, R&D items, First-time procurement items, job work items
of high value, items, etc.

For these items, the purchase obtains quotes from preferably from a minimum
of 3 External suppliers, and a comparative statement is made, the price is
finalized through negotiation in the presence of the Purchase Committee.

Note:
PO checklist to be filled up with every PO approval process. (Sample checklist
is annexed)

Material follow-up:

Purchase conducts regular follow-ups with External Suppliers (over the

phone/Mail/Vendor visits) in accordance with the delivery time/completion
time mentioned in the PO to ensure that the materials are delivered/services
are completed as per the agreed schedule. All supplies shall be made as per
the PPC-suppliered schedule keeping in mind lead time, MOQ, etc.

Outstation External Suppliers:

In accordance with purchase order terms the material is transported through

our logistics empaneled transporters.
Offshore external Suppliers/ CHA:

Approved custom House Agents (CHA) and freight forwarders are engaged for
clearing at customs and pickup of imported consignment. After receipt of
shipping documents, Import Purchases dept. forwards details to the Import
Logistics group under EXIM for further clearing process and delivery to
respective plant.

Waybill:

Waybill is the mandatory document to be accompanied by the material from

the External suppliers during road transport within India. An online bill will
be issued by Bhagwati Group against scanned invoices copies/LR supplied by
the External supplier. The transporter has to carry the same with the material.

Material receipt- acceptance/Rejection:

Materials should be received with External Suppliers test reports along with
other statutory documents, The inward quality control team inspects at the
inward stage by the inspection plan. Depending on the item, some of the items
are inspected at the External Suppliers’ works as well. However, the final
acceptance/rejection is done at our work. Based on the quality inspection
reports, the store will generate the GRN (Goods Receipt Note)

Accepted Material:
Material once accepted and cleared by the Quality control department shall
be taken into stock at stores and issued for production according to the
production plan.

Rejected Material:

If the material is rejected at the inward stage, a rejection report with reasons
for rejection will be forwarded to the purchasing department for onward
communication to the External Supplier. The rejected material shall be stored
separately in stores till further disposal.

Rejection returns:

The purchase department depending on the nature of the defect, calls the
External Supplier for rectification/re-work or sends back the replacement
material.

External Supplier Corrective Action Request (SCAR):

Based on the rejection report, QC generates SCAR for respective External

Suppliers for their corrective actions. It is the responsibility of the Purchaser
to obtain compliance from the External Supplier for the closure of SCAR.
Sub Contract, Outstanding & Service Orders:

For customized jobs, sub-contract orders shall be released from the approved
External Suppliers list or ancillary. The selection of the External Supplier shall
be done based on comparative quotations as well as evaluating the work
content. The evaluation of work content and rate finalization shall be done by
the Purchase Department in consultation with the HOD of the user dept. The
sub-contract order apart from the rate shall contain the norms for conversion
and the wastage allowed (Retrievable and non-retrievable) wherever
applicable.

Outsourcing:
Reason for Outsourcing:
1. Cost saving
2. Focus on core business
3. Improve quality
4. Operational expertise

Product Realisation:

In the process of execution of a contract, the decision to transfer/outsource

may be taken at any of the following:
a) At design stage (outsourcing of design itself)
b) At the time of submitting the quotation to the customer
c) At the time of planning for production after the contract is successfully
won
d) During the production at various stages.

The details in the purchase order/job work order shall indicate the
controls/specifications and the important quality parameters/specifications
that should be met by the job worker/subcontractor. The contractor shall
produce input material/component test certificates to Bhagwati Group on
demand.
Whenever necessary and as indicated by the functional area in charge, first
article inspection (FAI) shall be ensured by the Purchase Department by
coordinating with the job worker or External Supplier and in-coming
inspection of QA/QC. Details of parameters to be checked shall be laid down
by the design department of Bhagwati and shall be executed by QA/QC.

Planning for the Outsourced activity:

The activities to be outsourced shall be intimated by PPC or users for

necessary planning of outsourced activities like material movement etc., by
purchase for further process as per the schedule.
 Evaluation of outsourcing agency, feasibility study/risk analysis:

For the items decided to be outsourced, in the process of selecting the sources
for the purpose, the purchase shall carry out a feasibility study through an
External Supplier registration format and external supplier evaluation.
Reports & MIS:
MIS report will generated for periodical review.

Cheque Indent to finance:

For advance payments, the “Down Payment” option is tagged in the system for
finance to prepare a cheque. For others/balance payments, a hard copy
cheque indent is filled up and sent to the finance for the processes of payment
(Sample cheque indent is annexed)

Debit Note:

It is the responsibility of the purchasing department to monitor the debit

balances with the External Suppliers and update finance from time to time
basis against the debit note generated by the finance.
Reconciliation of book of accounts:
The purchase department shall collect statements of the book of accounts
from all the External Suppliers and submit the same to finance for ledger
reconciliation.
The purchase Department Conducts the Following Activities, Standard
Operating Practices (SOPs) for each such activity are annexed.

6.0 Processing of Purchase Requisitions

6.1 Purchase Requisitions (Domestic/Import)

Purchase requisition is the basic document on which purchase activities are

initiated. Purchase can refer to the signed hard copy.
The purchase shall carry out a requisition review for the adequacy of the user
requirements before sending an inquiry to External Suppliers.

6.2 BOM items

The production planning and control (PPC) department shall Purchase
requisition for procurement of all the production-related items as per the bill
of materials of the job under production/MRP after considering store stock
and material in the pipeline. These purchase requisitions shall be approved
by the head PPC.
6.3 General items, Consumables, Tools, etc.

Concerned section IC shall raise requisitions for general & and consumable
items based on average consumption levels and store stock. These shall be
approved by the concerned division head or plant head.
6.4 Requirement of other departments:

For items required by all other departments like maintenance, finance,

engineering/design, administration, R&D, etc. the requisitions shall be raised
by respective departments, which shall be approved by in charge of the
respective departments or plant head.
6.5 Capital Items:

All requisitions shall be based on the approved budget for capital items. AON-
Acceptance of Necessity Documents is generally approved by the
CMD/Directors/COO. The requisitions shall be raised by respective
departments and approved by the plant head.

7.0 Selection of External Supplier

External Supplier Registration

The purchase department can obtain the information of source/External

supplier through the following ways:

Information from other departments/divisions/sister concerns, through a web

search, newspaper advertisements, magazines/Journals/Yellow Pages /
Business catalogues & Exhibitions, Seminars, electronic media, etc.
customer/collaborator/existing external supplier’s recommendations.

After identification/introduction of the external supplier through any of the

above methods, the purchasing department shall send the registration form
and start initiating external supplier evaluation if needed. All external
suppliers must be ISO 9001 certified. A typical vendor registration format is
attached in Annexure – III

Planning for External Supplier Evaluation

The External Supplier selection for evaluation shall be done based on the
contents of the External supplier registration form collected.

1) Suitability of the infrastructure to suit Bhagwati Group’s requirements,

financial strength, Component Manpower, Machinery availability, etc.
2) Product range of external suppliers meeting Bhagwati’s requirement.
External Supplier Evaluation:
Evaluation of the selected external suppliers for enlistment shall be carried
out as per mutually agreed dates between the external suppliers and Bhagwati
Group. The external supplier evaluation team consists of representatives from
purchase, QA, and others (Expert groups such as representatives from stores,
etc.) The team shall analyse the information gathered from the registration
form and visit such sources that they consider suitable for the manufacture
of items to our specifications and requirements.

However, for outstation external suppliers, visits shall be decided based on

the merit of each. In specific cases where required, a representative from
design & and development may accompany the team. This is applicable for job
work with external suppliers also. The evaluation format also includes
requirements of EHS and social responsibility at the external supplier’s end.

External supplier evaluation is also carried out periodically for already listed
external suppliers.
Enlistment of External Supplier – Approved External Supplier’s list

A numerical External supplier’s rating systems/audit score is followed. Based

on the external supplier's ratings/score, the external supplier shall be enlisted
or asked for corrective actions. The following are the criteria:-

# The score obtained Approval of Remarks

by the external external
supplier supplier
1 0% to 59% </= Disystemproved Corrective action shall be
requested from the external
supplier to be carried out
within 30 days for
registration and approval
2 >/=60% to 74%</= Conditionally External suppliers shall be
approved registered and conditionally
approved for supply.
Further improvements shall
be recommended.
3 75%>/= 75% and above Approved for enlistment.
Suggestion for continual
improvement in the
systems/process

On the closure of all SCAR (open issues if any – except mutually agreed
for/extended issues with a clear action plan to close them) Bhagwati External
Suppliers evaluation team shall recommend the external supplier for
enlistment in the approved external supplier list (Refer serial Nos. 2& 3 of
above criteria).

Master Data Team is requested through HOD purchase by mail for the
addition of a new External supplier. Other changes like external supplier
name, address, commercial details, deletion or blocking of an external
supplier, etc. are also informed to the master data team through mail.
Subsequently “External Supplier Master” is created/ changed/ deleted/
blocked.
After a new external supplier is registered can asked to forward the sample as
per our specifications/drawings for evaluation.
 First article inspection:

After receiving the initial samples from the external suppliers, it is verified by
the QC department as per drawing or specification. A report, which is called a
First Article Inspection (FAI) is made based on Dimensional inspection,
physical appearance, chemical analysis, etc. FAI reports are sent to the
external supplier for their reference and compliance.
Approved external supplier list:

It is the responsibility of the purchase department/D&D to maintain an

approved external supplier list for BOM items that are directly used in the
manufacturing of the product. The approved external supplier list can be
updated within 6 months when there is an addition of an approved external
supplier or a deletion of the external supplier.

Additionally, external suppliers qualified and approved by the sister concern

of the group as per their standard procurement procedures may also be
included in the approved external supplier list. However, a copy of the external
supplier approval documents shall be obtained and maintained.
Bought out items/services:
Purchase of bought-out items/services that are directly used in the
manufacturing of our product, accessories, and spares to be supplied to
customers are made based on any one of the following criteria.

(a) Products are on the approved list of major consultants/reputed external

suppliers.
(b) Recommended by our customers or consultants.
(c) Product has ISI certification or any other quality certification bureau.
(d) Internal testing of samples and trials.
(e) Past continuous usage by us without any major quality problems.
(f) The above bought-out items could be supplied by any of the following types
of external suppliers:
(a) Manufacturer
(b) Authorised dealer
(c) Trader
(d) ERP/business process service suppliers

The performance of these external suppliers is judged based on the recommendation

of the quality control department/user until and unless a report for poor
performance is given by the user the performance is deemed to be satisfactory and
supplies shall continue.
The organization shall determine and apply criteria for the evaluation, selection,
monitoring of performance, and re-evaluation of external suppliers, based on their
ability to supplier processes or products and services following requirements. The
organization shall retain documented information on these activities and any
necessary actions arising from the evaluations. The type and extent of control on
external service suppliers shall be decided by the organization and be monitored by
dedicated team members representing all functions.
Services:

Services related to calibration, testing, etc. shall be evaluated once to form a part of
the approved services suppliers list wherever applicable.
External supplier performance rating and classification:
Analysis and review of the approved external supplier is done every quarter based on
the performance of the external supplier for the supplied lots (BOM items) and
updated by criteria given in Table – 1 with subsequent external supplier performance
rating. External supplier/service supplier evaluation report from the system.

Performance rating/external supplier/service supplier evaluation of each external

supplier is the average of the quality of the individual batches supplied by the
external supplier along with delivery, price, and service. The external
supplier/service supplier evaluation score is shown in the system as an overview.

Evaluation Criteria % of weighted avg.

Quality 50
Delivery 40
Price 10

Table – 1 External suppliers/suppliers performance rating classification

# Grade Score Approval Status Classification Remarks

1 A >=75 - <=100 approved Excellent Should maintain
the performance
2 B >=60 - <=74 Conditionally Good Maintain and could
Approved improve
performance
3 C < 59 Disesteem Disqualified To be warned
proved and on Hold

External supplier evaluation frequency for enlisted external suppliers.

The approved external suppliers shall be evaluated by the Bhagwati Group-trained
external supplier/services evaluation team periodically as per the following
guidelines.

Table – 2 External supplier evaluation frequency

# Grade of external supplier External supplier Re-evaluation guidelines

1 A Once in 3 years
2 B Once in 3 years
3 C To be re- evaluated
Note:

1) For Grade - A&B - External Supplier evaluation is need-based.

2) Disqualified vendors may be reassessed on confirmation from them on
improvement.
External supplier evaluation plan for an enlisted external supplier:
Based on quarterly external supplier performance rating refer to Table 1, an
evaluation plan is made and is communicated to the respective external suppliers
well in advance. Evaluation for OEM (original equipment manufacturer) External
supplier excluded for re-evaluation.
Urgent supplies:
In case of urgent requirement of BOM material for production, if the material is not
available with an approved external supplier, procurement can be initiated from
sources other than the approved External Supplier list. However, the items
purchased shall be of approved make and grade or equivalent grade certified by the
user/D&D. Such purchases shall be regularized against External Supplier
registration and subsequent External Supplier Disqualification of external supplier
list as per the periodicity laid down in this procedure.

Disqualification of external supplier:

In Case of persistent failure in terms of quality and delivery and also based on the
performance rating criteria, the external supplier can be disqualified and removed
from the approved external supplier's list. However, on a case-to-case basis, external
suppliers can be granted three more chances for improvement, beyond which HOD
purchase is authorized to disqualify such external suppliers.
-The external supplier shall also be blacklisted under the following additional
circumstances, bankrupt, insolvent, closure of business, or dissolved.
i. Violation of statutory and regulatory requirements
ii. If the external supplier or partner or representatives are found indulged in fraud,
malpractice etc.

iii. The information on banned/blacklisted external suppliers shall be circulated to

all HODs.
Re-evaluation of external supplier
External supplier re-evaluation is done under the following circumstances.
Based on the performance rating in Table 2.

1) Disqualified external supplier.

2) Change in location of external supplier.
3) Change in process.
4) Change in management.
5) Discontinued external supplier.
6) Low score as per the external supplier evaluation.

8.0 Request for quotation

Sending RFQ

Against purchase requisitions, requests for quotations (RFQ) for the supply of
goods and services are requested from the system and are sent to the approved
external suppliers through post/e-mail.

Comparison of Quotations:

Quotes received are manually entered into the system for the generation of
comparative statements. However manual comparative statements are
prepared for comparison based on landed cost and other influencing
parameters like lead time, payment terms, and after-sales services, etc.

Risk assessment/analysis/impacts & controls:

It is a process to identify and analyse risks involved before procurement

(Import and domestic). Risk factors like price, delivery, service, payment
status, No. of sources etc. shall be updated and reviewed regularly for major
critical production items.

Also to study the criticality of parameters involved with the purchased

product, their impacts, and subsequent impact categorization (like minor,
product, safe, and high) are specified for the critical items (BOM/CAPEX). The
same is to be communicated to the respective external suppliers for better
control.

Negotiation with external supplier

Concerning the comparative statement, negotiations with external suppliers
are carried out.

9.0 Purchase order processing

After negotiation purchase order is prepared on a successful external

supplier/service supplier for further approval as per the value of the purchase
order and approval strategy set as per the system.

The approved PO is then sent to an external supplier with the latest print of
the drawing/specifications by e-mail or post. The superseded
drawing/specification shall be withdrawn from the external supplier to make
sure that the external supplier does not produce/supply as per the old
drawing/specification. Any special requirement e.g. vendor’s compliance with
quality, and safety requirements (EMS/OHSAS), joining inspection of external
suppliers' premises, or any other controls shall be specifically mentioned in
the PO in line with the requirement. External suppliers shall send an order
acceptance (OA) after receipt of an order from Bhagwati Group and send the
 certificate of conformity (CoC) wherever applicable. PO check list vide
Annexure V.

Every PO has a validity (Time specific) which is mentioned in the PO terms.

Repeat Purchase order:

When there is no change in the price and other terms, the old reference may
be considered for approval and release of a repeat purchase order.

PO approval/Release strategy in system:

Approver Value in INR

Purchase Executive 0 to 200000
Purchase Manager/Deputy HOD/ 200001 to 3000000
Plant Head (I/C plant purchase)
HOD 3000001 to above

Amendment to Purchase order:

The purchase order once issued can be amended for price/qty/payment

terms/change of address, change in commercial tax, or on any other terms
depending on mutual acceptability.

Purchase order amendments are approved as per the PO approval strategy.

Cash Purchases:

A cash purchase is normally done in case of emergency requirements and

generally for a total value of up to Rs. 5000.00 after the due approval of
respective heads. Any such procurement related to BOM items is mandatorily
regularized in the system through a regular process.

10.0 Processing of work orders:

Production items:

For customized jobs, job orders shall be awarded to successful subcontractors

from approved external suppliers list or ancillary, in other cases the selection
of the external supplier is done based on comparative quotations as well as
evaluating the work content. The evaluation of this work content shall be done
by the purchasing department in consultation with the IC of the concerned
user department The job order apart from the rate shall contain the norms for
conversion, and the wastage allowed (retrievable and non-retrievable)
wherever applicable.
 Maintenance items:

For services required by other departments like maintenance, R&D, etc., the
service requisition is raised by respective users and approved by the
department head. Service orders are released after the study of quotations,
comparisons, and due approval of the user dept. Another ordering process
shall be as described in Sl. No.8.1.

11.0 Follow-up of delivery schedule:

Delivery schedules in purchase orders are followed up for adherence:

The delivery schedule given in the purchase order is a probable date based on
supply lead time/mutually agreed delivery schedule. However considering our
type of business which is customer-dependent, the delivery schedule is likely
to change considering the following reasons:

(1) Change in production schedule by marketing & sales

department/customers revised requirements.
(2) Design changes.
(3) Better inventory control
(4) Customer order put on hold/cancellation

12.0 Inspection at external suppliers' premises

The Bhagwati Group reserves the right to inspect any material before dispatch
at the external supplier's premises to check process quality.
External suppliers shall be notified in advance for such inspection/audit.
Bhagwati may also accompany customers for such inspections/audits.
13.0 Transportation of purchase material to factory:

Outstation external suppliers

The material is transported through a reputed or mutually acceptable
transporter as per INCO terms mentioned in the order.

Local external suppliers:

The material from the external supplier’s premises is collected by our contract
van. At times, local external suppliers also arrange delivery to respective
plants as per their arrangements on a freight prepaid/to-pay basis.

14.0 Goods receipts & GRN:

Upon receipt of material along with bill/delivery challan/cash memo, inbound

entry at the gate is generated in the system, and on further quality verification,
documentation GRN is created in the system.
15.0 Acceptance & rejection, Documentation:
Acceptance

Material is inspected by the quality control department at the inward stage by

the inspection plan decided by them. Depending on the items, some of the
items are inspected at the external suppliers' works. However, the final
acceptance/rejection is done at our work. In case different test results are
found between the external supplier test and the Bhagwati Group test, a third
party is referred to for acceptance/rejection. The quality control department
will maintain the reports regarding the quality of the item(s). Material once
accepted and cleared by the quality control department shall be deposited in
stores and issued for production according to the production plan.

Rejection:

If the material is rejected at the inward stage, a rejection report with reasons
for rejection shall be forwarded by the quality control department to the
purchasing department. The rejected material shall be stored separately in
stores. The purchase department depending on the nature of the defects calls
the external supplier and requests the external supplier for the corrective
action report against the relevant request (SCAR/CAR). The decision shall be
taken for rectification/re-work or for sending back the material for
replacement.

Documentation:

External suppliers shall follow Bhagwati Group’s laid down producers on

documentation. Generally, Bhagwati Group provides a warranty for 10 years
or more. Hence external suppliers must maintain records for 10 years after a
supply is made to Bhagwati Group.

16.0 External provider’s corrective action request (SCAR/CAR):

Where the entire lot/frequent rejections are observed, a corrective action
request form will be raised and sent to the external supplier through
purchase.

External suppliers shall fill up the CAR/SCAR form and send it to purchase
indicating corrective actions taken by them.

17.0 Invoice Verification:

The invoice verification is done by Finance. However, before invoice verification

is carried out by finance, the following steps are followed.
a) Inbound delivery is done by stores after receipt of material, thereby tallying
with PO.
b) Based on inbound delivery is created in the system by stores after verifying
duties.
c) Stores forward the original invoice to finance for invoice verification.
18.0 Processing of payment:

Once the invoice verification is done and verified by finance, the payments to
the external suppliers/service providers are processed as per the payment
terms indicated in the PO.

19.0 Checks & control – MIS:

Following are various monthly reviews for additional checks and controls.

a. Debit balance review

b. Credit balance review
c. Job works Review
d. Open POs
e. Review of SCARS
Annexure I

Purchase Organisation:

The purchase of the organization generally conforms to the following based on

product categorization.

1. The central purchase team (Domestic and Import) sitting at the Mumbai office
deals generally with all A, B, and selectively C class items.
2. Local purchase team sitting respective plants deals generally with all C glass
items, maintenance/emergency Items, consumable items, cash purchases, and
service orders.

Note: items handled by the respective team are shown in the following table.
Categorization and classification of items with procurement strategy:

Items are categorized and classified into A = critical B = Important C =

General as follows:

Categorization & Classification Prize finalization location

and strategy
# Categorization Classificatio CPT-BH Local Remarks
n Purchase
Team
Negotiation Preferably
1 Raw material A E-Proc - min. 3
Contracts quotes
Negotiation Preferably
2 BOM B - min. 3
E-Proc
quotes
Negotiation Preferably
3 Capital items Capex E-Proc - min. 3
quotes
4 Standard B&C Negotiation PO based on (General
bought-out ARC /AMC nego/ARC/AM consumable
items, by pur C by local team , PPE &
consumables, comm Maint)
general items,
packing
5 Non-standard Projects and - Purchase (R&D)
items R&D committee
 ANNEXURE - II
CONTROLLER

PPC & PUR PR

CHECK INDENT FOR

PPC NO
CORRECTNESS

PUR PR TO BUYER

PUR RFQ

PUR COLLECTION OF QUOTES

PUR COMPARISON

PUR NEGOTIATION

APPROVAL FOR
PUR
ORDERING

RELEASING OF PO TO
PUR
SUPPLIER
 ORDER IF ADVANCE
SUPPLIER ACCEPTANCE PROCESS

PUR, USER PO TRACKER, DRG

APPROVAL

USER/QC INSP AT VENDORS

PREMI/DISP CLEARANCE

USER/QC ACCEPT/REJECT/DISPATCH
REJECTION

EXIM CD PAYMENT AND

CLEARANCE

STORE RECEIPT AT STORES

STORE GRN PROCESS

QC INWARD INSPECTION

STORE GRN POSTING

FINANCE A/C POSTING

FINANCE PAYMENT PROCESS