Montine foods limited

PROCUREMENT
DEPARTMENT
STANDARD OPERATING PROCEDURE

REVISION: 00
REV. DATE: 01/04/19
SERIAL NO: ……………..
REF: MFL/PRC/DPT/SOP-00 2019

2019
 PROCUREMENT DEPARTMENT

Contents
A. DOCUMENT CONTROL .............................................................................................................................. 5

A.1. Preparation, Review, Approval and Issue .......................................................................................... 5

A.2. Circulation List ................................................................................................................................... 5

B. RESPONSIBILITY TO ENSURE THAT THE PROCEDURE IS FOLLOWED ........................................................ 6

C. REFERENCES .............................................................................................................................................. 6

1. PURPOSE ................................................................................................................................................... 7

2. SCOPE ........................................................................................................................................................ 7

3. OBJECTIVES ............................................................................................................................................... 7

3.1 Department objectives ....................................................................................................................... 7

3.2 Procedure objectives .......................................................................................................................... 8

4. THE STRUCTURE OF ORGANIZATION OF PROCUREMENT DEPARTMENT, ROLES AND RESPONSIBILITIES

...................................................................................................................................................................... 9

4.1 The Structure of Organization............................................................................................................. 9

4.2 The Roles and Responsibilities .......................................................................................................... 10

4.2.1 Procurement and Supply Director ............................................................................................. 10

4.2.2 Sourcing Manager (Buyer) ......................................................................................................... 11

4.2.3 Supply Research Manager.......................................................................................................... 11

4.2.4 Procurement Administration Manager ...................................................................................... 12

4.2.5 Material management Officer ................................................................................................... 12

5. DESCRIPTION OF ACTIVITIES ................................................................................................................... 13

5.1 General .............................................................................................................................................. 13

5.2 Receiving indents: ............................................................................................................................. 13

5.3 Assessment of demand or description of need: ............................................................................... 13

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5.4 Selection of sources of supply: ......................................................................................................... 13

5.5 Receiving of quotation: .................................................................................................................... 13

5.6 Placing order: .................................................................................................................................... 14

5.7 Making delivery at the proper time by following up the orders: ..................................................... 14

5.8 Verification of invoices:.................................................................................................................... 14

5.9 Inspection of incoming materials:..................................................................................................... 14

5.10 Meeting transport requirements of incoming and outgoing materials: ........................................ 15

5.11 Maintaining purchasing records and files: ...................................................................................... 15

5.12 Reporting to top management ....................................................................................................... 15

5.13 Developing coordination among departments: .............................................................................. 15

5.14. Creating goodwill of the organization in the eyes of the suppliers: .............................................. 15

6. RISK AND OPPORTUNITY MANAGEMENT ............................................................................................... 16

6.1 General .............................................................................................................................................. 16

6.2 Risks and Risk management .............................................................................................................. 16

6.3 Opportunity management ................................................................................................................ 17

7. RECORDS ................................................................................................................................................. 18

7.1 General .............................................................................................................................................. 18

7.2 The Invoice ........................................................................................................................................ 18

7.3 The Purchase Order .......................................................................................................................... 18

7.4 Delivery Note .................................................................................................................................... 18

7.5 Goods Received Note ........................................................................................................................ 18

7.6 Goods Returned Note ....................................................................................................................... 18

7.7 The Receipt ....................................................................................................................................... 18

8. RECORD OF AMENDMENTS MADE TO THE PROCEDURE........................................................................ 19

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9. APPENDICES ............................................................................................................................................ 20

9.1 Acronyms .......................................................................................................................................... 20

9.2 Terms and definitions ...................................................................................................................... 20

9.3 Forms ................................................................................................................................................ 22

9.3.1 General ....................................................................................................................................... 22

9.3.2 Purchase Order Form ................................................................................................................. 22

9.3.3 Goods Received Note Form ....................................................................................................... 23

9.3.4 Goods Returned Note Form ....................................................................................................... 24

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A. DOCUMENT CONTROL

A.1. Preparation, Review, Approval and Issue

The development, review, approval and issuance of this Standard Operating Procedure will be carried
out as follows;

PREPARED BY REVIEWED BY APPROVED BY ISSUED BY

NAME PROCUREMENT QUALITY MANAGING PROCUREMENT

AND SUPPLY MANAGEMENT DIRECTOR AND SUPPLY
DIRECTOR REPRESENTATIVE DIRECTOR

DATE

SIGNATURE

A.2. Circulation List

This Standard Operating Procedure will be circulated as follows;

S/NO RECIPIENT

01/07 Managing Director

02/07 Quality Management Representative

03/07 Procurement & Supply Manager

04/07 Sourcing Manager

05/07 Supply Research Manager

06/07 Procurement Administration Manager

07/07 Material Management Officer

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B. RESPONSIBILITY TO ENSURE THAT THE PROCEDURE IS FOLLOWED

Procurement & Supply Manager will ensure that this procedure is followed by all the personnel in
Procurement department.

C. REFERENCES
 ISO 10013, Quality Management System Documentation
 ISO 9001, Quality Management System Requirements

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1. PURPOSE
This procedure provides guidelines on how to perform various activities in Procurement
department so as to ensure effectiveness and efficiency of its operations.

2. SCOPE
This procedure applies to all the activities carried out in MFLC Procurement department only. It
describes MFLC Procurement department organization structure, roles and responsibilities, as
well as outlining the sequence and description of activities.

3. OBJECTIVES

3.1 Department objectives

a) To develop sourcing and procurement activities that support key business objectives.

b) To develop and execute a long-term strategy to facilitate improvements for

Procurement Services.

c) To ensure the execution of procurement strategies across the firm to ensure consistent
and high quality value delivery.

d) To implement best practices in procurement and supplier management to support

commercial and operational objectives.

e) To ensure the execution of standards, controls, policies, procedures and performance

metrics to effectively and efficiently manage the acquisition and reporting of third-party
spend across the company.

f) To conduct business review meetings with key stakeholders to assess risk, review future
strategies, and identify potential cost down and improvement opportunities.

g) To identify areas for improvement to continually drive performance and business results.

h) To maintain strong working relationships with strategic suppliers to assure cost, quality,
and delivery targets are met.

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i) To build market intelligence capabilities within the category management team on key
markets, suppliers and solutions to support strategy development purposes.

j) To analyze market and delivery trends so as to develop procurement technologies and

processes which support those trends.

k) To update procurement strategies based on changing market conditions.

3.2 Procedure objectives

a) To describe organization structure of Procurement department.

b) To outline the roles, responsibilities and authorities in Procurement department.

c) To describe the key activities of procurement department.

d) To address various potential risks and opportunities in Procurement department.

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4. THE STRUCTURE OF ORGANIZATION OF PROCUREMENT DEPARTMENT, ROLES

AND RESPONSIBILITIES

4.1 The Structure of Organization

Procurement &
Supply Director

Sourcing Supply Procurement Material

Manager Research Administration Management
Manager Manager Officer

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4.2 The Roles and Responsibilities

4.2.1 Procurement and Supply Director

The Procurement and supply director in Montine Foods Ltd will;-

l) Develop sourcing and procurement activities that support key business objectives.

m) Develop and execute a long-term strategy to facilitate improvements for Procurement

Services.

n) Ensure the execution of procurement strategies across the firm to ensure consistent and
high quality value delivery.

o) Implement best practices in procurement and supplier management to support

commercial and operational objectives.

p) Ensure the execution of standards, controls, policies, procedures and performance

metrics to effectively and efficiently manage the acquisition and reporting of third-party
spend across the company.

q) Lead rigorous and objective contract negotiations with key internal stakeholders, legal
department and support groups.

r) Conduct business review meetings with key stakeholders to assess risk, review future
strategies, and identify potential cost down and improvement opportunities.

s) Identify areas for improvement to continually drive performance and business results.

t) Maintain strong working relationships with strategic suppliers to assure cost, quality,
and delivery targets are met.

u) Manage recruiting, training and supervising a team of Category Managers who are
responsible for day-to-day category management activities.

v) Oversee the development and execution of sourcing strategies across all categories
within span of control including targets, timelines and resource plans.

w) Build market intelligence capabilities within the category management team on key
markets, suppliers and solutions to support strategy development purposes.

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x) Analyze market and delivery trends so as to develop procurement technologies and

processes that support those trends.

y) Update procurement strategies based on changing market conditions.

4.2.2 Sourcing Manager (Buyer)

The sourcing Manager in Montine Foods Ltd will;-

a) Manage the company’s supply portfolio ensuring transparency of spending

b) Generate and implement efficient sourcing and category management strategies

c) Analyze and calculate costs of procurement and suggest methods to decrease

expenditure

d) Invent negotiation strategies and secure profitable deals

e) Optimize sourcing procedures to attain maximum efficiency

f) Cooperate with stakeholders to guarantee agreement on terms and processes

g) Research and anticipate shifts in the negotiating power of suppliers

h) Perform cost and scenario analysis, and benchmarking

i) Estimate risks and apply risk minimizing techniques

j) Discover and partner with trustworthy vendors and suppliers

k) Determine quantity and timing of deliveries

4.2.3 Supply Research Manager

Supply research manager in Montine Foods Ltd will be;-

a) Communicating with Procurement director on the research objectives.

b) Selecting the most appropriate research methodology and techniques

c) Designing research questionnaires and moderator guides

d) Determining the best suppliers based on research findings

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e) Interpreting data, writing reports, and making actionable recommendations

4.2.4 Procurement Administration Manager

The PA Manager of Montine Foods Ltd will;-

a) monitor inventory stock

b) negotiate with suppliers

c) prepare purchase orders

d) resolve order problems

e) update and file records

4.2.5 Material management Officer

The MM Officer in Montine Foods Ltd will;-

a) Direct, supervise or perform materiel management activities for an agency or institution;

plan and supervise the procurement of supplies and equipment or other material.

b) Prepare or approve requisitions, purchase orders and other documents used in the
procurement process; supervise the receipt of supplies and equipment; verify shipping
documents against invoices and other data.

c) Direct the storage of supplies and equipment; supervise the completion of perpetual
inventory actions and the preparation of various reports.

d) Ensure that warehouse items are properly stored and protected to prevent breakage
and pilferage; supervise the maintenance of warehouse physical facilities, trucks,
forklifts and other equipment used in the storage of supplies and equipment.

e) Develop, recommend and implement agency policies and procedures to ensure

compliance with federal and state laws and rules.

f) Confer with department heads, vendors and outside agencies concerning purchases,
deliveries and acceptability of supplies.

g) Serve as agency liaison to the Central Purchasing Division of the Department of Central
Services.
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5. DESCRIPTION OF ACTIVITIES

5.1 General
This section gives description of all key activities carried out in Procurement department of
Montine Foods Ltd.

5.2 Receiving indents:

MM Officer will be receiving demand/requisition of material from different departments of the
organization. After receiving the indent from users’ departments, will examine in detail and
take action according to the need and urgency of any item.

5.3 Assessment of demand or description of need:

MM Officer will ensure there is proper description of the item required by user department, in
terms of quality and quantity. This will help prevent inconveniences where supplier will deliver
what was not required. This will also maintain good relationship between the supplier and the
organization.

5.4 Selection of sources of supply:

Sourcing Manager will select reliable suppliers of particular items, who are committed to supply
quality materials within the required time. The Sourcing Manager will ensure there are at least
two suppliers of a given commodity to avoid production inconveniences in case expected
supplier to deliver the commodity delays or diverts attention.

5.5 Receiving of quotation:

As soon as the purchase requisition is received in the purchase department, sources of supply
will be located by Sourcing Manager and will make a decision in respect to the method of
tendering quotations from prospective suppliers. Prices will be ascertained by preparing a
comparative statement with the help of either of the following documents supplied either by
the supplier or taken from the previous records of advertisements, like:

(a) Catalogues, price lists

(b) Telephonic quotations.

(c) Previous purchase records.

(d) Quotation letter or tender i.e., letter of inquiry.

(e) Sample and related price cards.

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(f) Negotiation between suppliers and the purchase department like catalog, price lists

Purchasing department will keep this information up to date. For the items which will be
purchased on a regular basis, the purchasing section will invite tenders and know well the
market price. It will ensure that prices being paid to the existing vendor are competitive.

5.6 Placing order:

Before placing orders, Procurement Administration manager will verify orders to ensure are
always accurate, clear and acceptable to both. This is because purchase order is a legal binding
document. The purchase order will contain the following particulars:

(a) Description and specifications of the material.

(b) Quantity order.

(c) Transport and packing charges and shipping instructions.

(d) Name and address of the supplier.

(e) Date, time and place of delivery.

(f) Price, discount and terms of payment.

(g) Signature of the purchase manager.

(h) The name and address of the buyer.

5.7 Making delivery at the proper time by following up the orders:

The PA Manager will make follow-ups of the orders, he/she places on different suppliers. The
aim will be to ensure that the items are delivered when required and in good condition.

5.8 Verification of invoices:

The PA Manager will verify all the invoices to ensure there are no errors, after which he/she will
submit them to Finance department for the payment to be done. The PA Manager will verify
these invoices and submit them to finance department without due delay so that payments are
processed in time.

5.9 Inspection of incoming materials:

The purchasing department will keep a close contact with inspection personnel. On receipt of
the materials from different suppliers, they will be inspected as per specifications indicated in
the purchase order to verify their quality and quantity. If inspection will be delayed, the
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payments of the suppliers will also likely to be delayed, resulting in bad relations between
suppliers and purchasers. MM Manager will ensure timely inspection to avoid this incident.

5.10 Meeting transport requirements of incoming and outgoing materials:

The PA Manager will be required to have a thorough knowledge of the means of transportation.
He/she will make a correct choice of carriers or routes because otherwise it may entail delay
and additional transportation costs.

5.11 Maintaining purchasing records and files:

The PA manager will maintain all purchasing records and files. These records will include;-
quotations, goods received notes, goods receipt, inspection notes. These records will be used
for reference very frequently which makes it imperative to maintain them in appropriate
manner.

5.12 Reporting to top management

The procurement Director will prepare weekly, monthly, quarterly, bi-annually and yearly
reports regarding expenditures of this department and send the same to top management
along with details of purchases made and suggestions or improvements, if any.

5.13 Developing coordination among departments:

The Purchasing department will work in close coordination and cooperation with other
departments of the company. The Procurement Director will ensure that there exist mutual
trust and cooperation between the purchasing department and other departments to secure
high degree of efficiency.

5.14. Creating goodwill of the organization in the eyes of the suppliers:

The PA Manager in conjunction with Procurement Director will ensure good vendor relationship
is maintained and developed to reflect company's image and goodwill. Maintaining such
relations will require mutual trust and confidence which will grow between the two parties over
a period of time.

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6. RISK AND OPPORTUNITY MANAGEMENT

6.1 General
This section addresses all potential risks and opportunities in procurement department which
may have great impact on the overall performance of the company.

6.2 Risks and Risk management

No. RISK; incident, triggered by, impact. MITIGATION MEASURE

1. Delayed verification and submission of PA Manager will be verifying and submitting

invoices to finance department due to the invoices to finance department on daily
ignorance of PA Manager. This may lead basis without due delay.
to delayed payments which damages
good relationship with vendor.

2. Delayed inspection of delivered materials MM Manager will ensure delivered materials

due to lack of preparedness by inspecting are inspected without due delay in order not
officer. This will keep vendor waiting for to keep vendor waiting for long.
long time and become annoyed thus
damaging relationship.

3. Delivery of damaged goods due to failure
to specify the right transportation means
to be adopted by the vendor. This will
incur the company production delay and
huge financial loss.
PA Manager will specify the right means of
transportation to be adopted by the vendor
when supplying the goods to prevent their
damage so as to save the company costs.

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6.3 Opportunity management
No. OPPORTUNITY
1. Cutting down purchase costs as a result
of proper research and identification of
vendors with cheaper quality goods. This
will save the company money and
maximize profits.
2. Having alternative suppliers of similar
goods due to thorough research work.
This ensures company's operations are
not interrupted when one supplier fails.
3. Maintaining good reputation of the
company due to purchasing department
maintaining good relationship with
suppliers. This gives the company a
competitive mileage in the market.
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MANAGEMENT
Research Manager will conduct many
researches in the market to identify vendors
of similar goods and select those with
cheaper quality commodities.
Research Manager will conduct research in
order to identify alternative suppliers of
similar goods.
PA Manager will strive to maintain good
relationship with suppliers by negotiating
with them and resolving problems when they
happen to arise.
 PROCUREMENT DEPARTMENT

7. RECORDS

7.1 General
This section contains the records that Procurement department will retain to ensure effective
and efficient operation of its activities.

7.2 The Invoice

PA Manager will retain copies of all invoices from the suppliers. These invoice records will be
filed in orderly manner according to serial numbers in the file PRC-IR-01 and the file be kept in
PA Manager's locker.

7.3 The Purchase Order

PA Manager will prepare purchase orders by filling the form MFL/PRC/DPT/POF-00 2019 (see
clause 9.3.2). These records will be filed in orderly manner according to serial numbers in the
file PRC-POR-01 and the file be kept in PA Manager's locker.

7.4 Delivery Note

Sourcing Manager will retain copies of all delivery notes accompanying goods delivered by
suppliers within company premises. These records will be filed in orderly manner according to
serial numbers in the file PRC-DNR-01 and the file be kept in Sourcing Manager's locker.

7.5 Goods Received Note

Sourcing Manager will prepare Goods received notes by filling the form MFL/PRC/DPT/GRNF-00
2019 (see 9.3.3). Copies of these records will be filed in orderly manner according to serial
numbers in the file PRC-GRNR-01 and the file be kept in Sourcing Manager's locker.

7.6 Goods Returned Note

Sourcing Manager will prepare Goods returned notes for goods rejected by filling the form
MFL/PRC/DPT/GRNF1-00 2019 (see 9.3.4). Copies of these records will be filed in orderly
manner according to serial numbers in the file PRC-GRN1R-01 and the file be kept in Sourcing
Manager's locker.

7.7 The Receipt

PA Manager will retain copies of receipts issued to the suppliers upon payment by finance
department. These receipts will be filed in orderly manner according to serial numbers in the
file PRC-RR-01 and the file be kept in PA Manager's locker.

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8. RECORD OF AMENDMENTS MADE TO THE PROCEDURE

Amended by Reviewed by Approved by

Name Procurement & Supply Quality Management Managing Director

Director Representative

Signature

Date

DESCRIPTION OF CHANGE:

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9. APPENDICES

9.1 Acronyms
 DPT- Department

 MD- Managing Director

 MFLC- Montine Foods Limited Company

 PRC- Procurement

 PSD- Procurement & Supply Director

 Ref- Reference

 SOP- Standard Operating Procedure

9.2 Terms and definitions

TERM DEFINITION

CONTINUAL Recurring activity to increase the ability to fulfill requirements.

IMPROVEMENT

DELIVERY NOTE Document that accompanies goods on delivery and it serves as

evidence that goods have been physically delivered.

EFFECTIVESS Extent to which planned activities have been realized and planned
results achieved.

EFFICIENCY Relationship between resources used and results achieved.

INVENTORY Detailed list of all items in stock.

INVOICE Document send by the supplier to the buyer showing the amount of
money to be paid for goods delivered.

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PROCUREMENT Act of getting possession of something.

PURCHASE ORDER Document send by the buyer to the seller requesting certain goods
be delivered within specified period of time.

QUOTATION Statement of current market price of a commodity

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9.3 Forms

9.3.1 General
This section outlines all forms required to be filled for the purpose of retaining records.

9.3.2 Purchase Order Form

PURCHASE ORDER S/No: .......

PREPARED BY: PSD DATE: 01/04/19 APPROVED BY: MD DATE: 01/04/19

PROCUREMENT & SUPPLY DIRECTOR,

TO MONTINE FOODS LIMITED,

SUPPLIER ADDRESS P.O BOX 322-00100,

NAIROBI.

Date: ..........................

DEAR SIR/MADAM,

RE: ORDERING GOODS

Please deliver the following goods into Montine Foods Ltd by date.....

Quantity Particular @ KSHS CTS

TOTAL AMOUNT TO BE PAID

NB: Payment will be made once goods are delivered in good condition and within stipulated
time above.

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9.3.3 Goods Received Note Form

GOODS RECEIVED NOTE S/No: .....

PREPARED BY: PSD DATE: 01/04/19 APPROVED BY: MD DATE: 01/04/19

PROCUREMENT & SUPPLY DIRECTOR,

TO MONTINE FOODS LIMITED,

SUPPLIER ADDRESS P.O BOX 322-00100,

NAIROBI.

Date: ...............................

DEAR SIR/MADAM,

RE: GOODS RECEIVED AND THEIR CONDITION

This is to inform you that, Montine Foods limited has received the following goods whose conditions are
indicated alongside by date........

Quantity Particular Condition ( Good/Bad)

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9.3.4 Goods Returned Note Form

GOODS RERURNED NOTE S/No: ......

PREPARED BY: PSD DATE: 01/04/19 APPROVED BY: MD DATE: 01/04/19

PROCUREMENT & SUPPLY DIRECTOR,

TO MONTINE FOODS LIMITED,

SUPPLIER ADDRESS P.O BOX 322-00100,

NAIROBI.

Date: .............................

DEAR SIR/MADAM,

RE: RETURN OF GOODS

This is to inform you that, Montine Foods limited has returned the following goods due to reason
indicated alongside.

Quantity Particular Reason for Rejection

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