THE THREE KEY SUPPLY CHAIN MANAGEMENT DECISSIONS {7.1.

01 Topic4}

Decision phases can be defined as the different stages involved in supply chain management
for taking an action or decision related to some product or services. Successful supply chain
management requires decisions on the flow of information, product, and funds that fall into
three decision phases.

Here we will be discussing the three main decision phases involved in the entire process of
supply chain. The three phases are described below −

Supply Chain Strategy {or design}

In this phase, decision is taken by the management mostly. The decision to be made considers
the sections like long term prediction and involves price of goods that are very expensive if it
goes wrong. It is very important to study the market conditions at this stage.

These decisions consider the prevailing and future conditions of the market. They comprise
the structural layout of supply chain. After the layout is prepared, the tasks and duties of each
is laid out.

All the strategic decisions are taken by the higher authority or the senior management. These
decisions include deciding manufacturing the material, factory location, which should be easy
for transporters to load material and to dispatch at their mentioned location, location of
warehouses for storage of completed product or goods and many more.
Supply Chain Planning

Supply chain planning should be done according to the demand and supply view. In order to
understand customers‘ demands, a market research should be done. The second thing to
consider is awareness and updated information about the competitors and strategies used by
them to satisfy their customer demands and requirements. As we know, different markets
have different demands and should be dealt with a different approach.

This phase includes it all, starting from predicting the market demand to which market will be
provided the finished goods to which plant is planned in this stage. All the participants or
employees involved with the company should make efforts to make the entire process as
flexible as they can. A supply chain design phase is considered successful if it performs well
in short-term planning.

Supply Chain Operations

The third and last decision phase consists of the various functional decisions that are to be
made instantly within minutes, hours or days. The objective behind this decisional phase is
minimizing uncertainty and performance optimization. Starting from handling the customer
order to supplying the customer with that product, everything is included in this phase.

For example, imagine a customer demanding an item manufactured by your company.

Initially, the marketing department is responsible for taking the order and forwarding it to
production department and inventory department. The production department then responds
to the customer demand by sending the demanded item to the warehouse through a proper
medium and the distributor sends it to the customer within a time frame. All the departments
engaged in this process need to work with an aim of improving the performance and
minimizing uncertainty.

MEANING OF PURCHASING {Topic 5}

Purchasing is the process a business or organization uses to acquire goods or services to

accomplish its goals. Although there are several organizations that attempt to set standards in
the purchasing process, processes can vary greatly between organizations.

IMPORTANCE OF THE PURCHASING FUNCTION IN AN

ORGANIZATION{Topic6]

Most major companies and even some government organizations have a purchasing or
procurement department as part of everyday operations. These departments provide a service
that is the backbone of many manufacturing, retail, military and other industrial
organizations. Many individuals, even some who work for these companies, are unaware of
what the purchasing department does, why it exists or what purposes it serves. To understand
better what the role of the purchasing department is, consider some functions it performs.

The purchasing department is responsible for procuring raw materials and other resources
at the best possible price {Value for money}

Procuring Raw Materials and Other Resources

One role of the purchasing department is to procure all necessary materials needed for
production or daily operation of the company or government organization. For a
manufacturing company, this might include raw materials such as iron, steel, aluminium or
plastics, but it also might include tools, machinery, delivery trucks or even the office supplies
needed for the secretaries and sales team.

In a retail environment, the purchasing department makes sure there is always sufficient
product on the shelves or in the warehouses to keep the customers happy and keep the store
well-stocked.

With a small business, it is especially important to keep inventory ordering at a reasonable

level; investing large amounts of capital in excess stock could result in storage problems and
in a shortage of capital for other expenditures such as advertising or research and
development. Purchasing also oversees all of the vendors that supply a company with the
items it needs to operate properly.

Achieving the Best Possible Price

A purchasing department also is charged with continuously evaluating whether it is receiving

these materials at the best possible price in order to maximize profitability. This can be
challenging for a small business that may purchase in lesser quantities than a larger vendor
and which thus may not receive the same type of bulk discounts. A purchasing department in
a small business needs to shop around to find the best vendors at the most reasonable prices
for the company's particular size orders.

Purchasing department staff may communicate with alternate vendors, negotiate better
pricing for bulk orders or investigate the possibility of procuring cheaper materials from
alternative sources as part of their daily activities.

Paperwork and Accounting

Purchasing departments handle all of the paperwork involved with purchasing and delivery of
supplies and materials. Purchasing ensures timely delivery of materials from vendors,
generates and tracks purchase orders and works alongside the receiving department and the
accounts payable department to ensure that promised deliveries were received in full and are
being paid for on time. In a small business, this means working closely with the accounting
department to ensure that there is sufficient capital to buy the items purchased and that cash is
flowing smoothly and all payments are made on time.
Compliance with Business Protocols

The purchasing department also must ensure that it is complying with all company policies.
For example, in a small business, individual staff members may communicate with the
purchasing department about purchasing needs for things such as office supplies or
computers. Before making a purchase, the purchasing department must ensure that it heeds
the proper protocols for purchase and budget approval and must ensure that any items are
purchased in accordance with the overall purchasing policy of the organization.

OBJECTIVES OF THE PURCHASING AND SUPPLY DEPARTMENT/FUNCTION

{Topic 7}

The object of purchase department is to arrange the supply of materials, spare parts and
services or semi-finished goods, required by the organisation to produce the desired product,
from some agency or source outside the organisation.

Here are the top objectives of most business's purchasing departments.

1. Lower costs. This is by far the primary function of the purchasing department. ...

Procurement savings can be made by focusing on ways to reduce the rate of cost
increases or negotiating contracts with value-added services (such as extended
warranties or free shipping). Often, you can make procurement savings by changing
your purchasing patterns.

2. Reduce risk and ensure the security of supply. ...

a: Diversify Your Supplier Base.

b: Have Backup Suppliers at the Ready.

c: Prepare for the Worst with Risk Management Plans.

d: Aim for End-To-End Supply Chain Visibility.

e: Share Responsibility by Including Partners in Risk Planning.

 f: Review Supply Chain Risks Periodically.

3.Manage relationships. ...

Purchasing and supply function initiates methods and Strategies for Better
Relationships such as –

Some strategies of managing relationships include but not limited to-

a. Your suppliers are not just vendors. ...

b. Technology makes supplier relationship management simple. ...

c. Realize that timely payments are crucial. ...

d. Relationships should be strong and deep. ...

e. Price is what you pay, value is what you get.

3. Improve quality. ...

5 Tips to improve supply chain Quality/ Efficiency with management solution

a. Increase your supply chain's visibility.

b. Automate where it counts — and keep all necessary parts well-managed.

c. Engage your IT department.

d. Assess your training programs.

e. Implement a good project plan

4. Pursue innovation. ...

Purchasing departments can help to improve quality by establishing target

performance levels for quality and then tracking performance against those targets.
 Critical to quality characteristics is a typical metric used to measure things such as
durability, the look and feel of the product or the timeliness of delivery.

5. Leverage technology.

Much can be done to reap the benefits of reduction in purchasing by following a simple
principle – listen and involve the supplier in your strategy. Sounds simple, but in practice this
requires a change in mind-set.-From market driven to customer and supply driven

HOW DOES PURCHASING AND SUPPLY HELP IN COST REDUCTION-

Top 10 Tips to Reduce Your Supply Chain Costs

1. Focus on the Customer

Focus on the Customer. ... Ensure you understand your customer needs and the most
cost effective way of satisfying and delighting them

The needs of your customers should be at the forefront of your mind when you consider your
supply chain structure and strategy. However, many supply chains follow policies and
systems that conflict with their customers‘ requirements. As a result, these companies deal
with frequent customer issues and complaints, and additional costs that are unnecessary. If
you focus on your customers by offering options like next-day delivery or unlimited free
shipping with a paid monthly membership, you will provide the solutions they want and be
more effective as a business.

2. Supply Chain Strategy

Creating an effective supply chain strategy will help you frame your goals and be more
efficient. Your supply chain‘s performance should be evaluated on a regular basis to ensure
you are meeting your customers‘ requirements and staying on top of your goals. An effective
strategy should meet the following criteria:

 Be clearly documented and understood

 Involve all areas of the company (sales and marketing, research and development,
purchasing, manufacturing, logistics, etc.)
 Address and resolve customer dissatisfaction cases to prevent recurrence
  Meet the needs of the customers and the business
 Be clear and precise to allow for quick decisions and improvements
 Supply Chain Strategy. All supply strategies must focus on customer concerns

3. Make Better Use of Space

It costs to store inventory and supplies in your warehouse, so you should make it part of your
plan to make the most of this space. Take an assessment of your warehouse and decide
whether you are achieving this goal. If there are ways to reorganize your inventory, you may
discover that you can save money and be more efficient in the way you use your space. Make
Better Use of Space. . space is a cost, make maximum use of it including mezzanine space..

4. Sales and Operations Planning

Sales and operations planning (S&OP) are required for a supply chain to operate at its highest
efficiency. Optimal performance depends on proper planning, but it can be expensive and
complicated. When you work with a 3PL provider, the team will eliminate waste and
redundancies, help you plan better through data analysis and forecasting, and increase
visibility so everyone involved is up-to-date. The following problems, if they exist, should be
addressed in the S&OP process:

 Uncontrolled SKU generation

 Frequent and unrestrained stock outs
 Commonly inaccurate forecasts
 High quantities of slow-moving or obsolete inventory
 Consistently adjusting demand and production schedules due to issue. Sales and
Operations Planning. . Proper planning will help avoid unnecessary expenses in
sorting errors/wastage etc..

5. Supply Chain Network Design

Supply chain network design involves reducing costs and increasing reliability to minimize
product handling. Each ―touch point‖ between your supplier and your customer raises costs
and increases the risk of error and damaged products. A poorly designed network can lead to
excessive handling, too many stock locations, and an inadequate use of your distribution
locations. As a result, you will experience high distribution costs and poor customer service.
Revising your supply chain network design will require special software and analysis that can
be costly and confusing to manage on your own. This is yet another reason why it saves to
work with a 3PL partner. They have the software and experience necessary to resolve issues
in your network by designing an effective plan.

Supply Chain Network Design. . Knowledge of networks will facilitate acquisition of

cheap/affordable requirements.

6. Move Supplies Faster

A 3PL provider can help you find ways to speed up shipments from suppliers so you can
order closer to when you need items. When inefficiency causes you to order in advance, you
can incur warehouse costs because you will need space to store these items when customers
order them. Additionally, you run the risk of losing or damaging stock because they sit
around in the warehouse. By outsourcing your warehousing and distribution, you can shorten
the time it takes you to get items from your supplier to fulfil customer orders.

Move Supplies Faster. A well planned Logistics system will help in movement of goods and
materials in a reasonably cheaper environment...

7. Automation

One of the biggest benefits of working with a 3PL provider is access to automation software.
Automation can help you reduce supply chain costs and make your operations more efficient.

Automation. ..Proper planning on automation / use of machines will reduce costs in labour
and speed up operations.

8. Outsourcing Supply Chain Operation/Management

Outsourcing your supply chain management to a 3PL provider will help you improve
performance while reducing costs. Warehousing and transportation are two of the most
expensive aspects of your supply chain and an outsourced partner can provide more cost-
effective and skilled services. By outsourcing, you will receive these benefits:
  Reduced costs
 Rapidly access services and resources
 More resourcing flexibility
 More opportunity for cost-effective growth
 Access to specialized services, technology, and equipment

Outsourcing Supply Chain Operation/Management.-compare on costs, whether to outsource

the supply chain operations or not cost effectively?

9. Utilizing Assets

Evaluating your assets and usage to find areas that need to be improved is one of the most
straightforward ways to improve your supply chain performance. Supply chains are complex
systems, so finding ways to increase efficiency and reduce errors is vital.

10. Track/Measure Performance

The next step to reduce your supply chain costs is to track your results. Observing your key
performance indicators (KPIs) will help you determine realistic targets and set trackable steps
to reaching those goals. Performance tracking will also help you accurately forecast for base
supply, logistics, and stock renewal

Relationship Between Purchasing and Supply and Other Business Functions /

Departments {Topic 8}
- Relations between Warehouse Department and Purchasing Department

Your purchasing and supply department keeps your other departments supplied with
everything from paper clips to manufacturing materials. Purchasing staff build relationships
and coordinate schedules with external partners, especially the businesses who supply your
essential parts and supplies. But purchasing must also sync activities with internal business
functions to understand what other departments need, when they need it and how and when
the company can pay for it. Successful internal purchasing relationships depend on clear
communication between purchasing staff and co-workers, who rely on the items they
purchase. A productive relationship between procurement and other departments also hinges
on having data and information systems in place to easily and accurately convey information.

-Relationship Between Purchasing and Sales Department

Your sales department depends on your purchasing department to have the inventory in place
to fulfil completed sales. Your purchasing department in turn depends on your sales
department to allow enough lead time between the time an order is placed and the promised
fulfilment date. Procurement staff can make this process easier by clearly communicating
how long it takes to obtain the items being sold. Sales staff can in turn make this process
easier by promising customers only what is comfortably possible for the procurement
department. If you sell furniture and it takes two weeks to obtain the materials for a custom
order, it's counterproductive to promise a customer that your company will have an order
ready in a week and a half.

-Purchasing and Finance

The relationship between your purchasing department and finance department requires
ongoing feedback in both directions. Your purchasing department needs to know about the
possibilities and constraints that your finance department handles. These include new sources
of capital that make it possible to make advantageous inventory purchases and cash flow
difficulties that limit purchasing power. In turn, your finance department needs to know when
purchasing and supply is working towards an upcoming expenditure such as a new piece of
equipment or a shipment of stock to keep your sales department supplied. Although there
may not be bountiful funds available, if there is an opportunity to buy a bulk amount of a key
item at an advantageous price, it may be worthwhile for finance to get creative and find the
money even if cash is tight. Similarly, your purchasing department may opt to buy in smaller
quantities or stagger orders to coordinate with your financing department's timeline.

-Disbursement Voucher

A disbursement voucher used to process payments includes the original vendor invoice, order
form and the material receipt document. The disbursement voucher documents the vendor
name and remittance address, purchase order number, tax identification number of vendor,
date payment is to be issued, vendor invoice date and number, description of item purchased
or service performed, purpose of purchase, project to be charged for the payment, invoice
amount or payment due, and invoice grand total, as well as the signature of authorized
personnel.

-Purchasing and Production

Smooth and timely production depends of having needed parts on hand. Ordering these parts
is the responsibility of the purchasing department. In turn, manufacturing managers are
responsible for communicating to purchasing and supply staff about what they need, with
enough lead time for purchasing to procure without bringing production to a standstill. This
effective communication depends on both purchasing and manufacturing staff knowing how
much time it takes to order and receive different parts, and also having clear and current
information about which parts are most critical to have on hand and which can be ordered
from multiple sources if there is an issue with your primary supplier. If your production can't
proceed without a specific type of glue that is only available from a single manufacturer, it's
especially important to avoid running out. Production must proactively inform purchasing if
you're running low, and purchasing must treat low inventory levels with appropriate urgency.

Inventory and purchasing software can be indispensable for facilitating the flow of
information between purchasing and production. Not only will purchasing automatically
receive updates when parts and materials are used, but a system can be set up with built-in
order points that correspond to the rhythm of each item's usage, as well as its timeline for
ordering and delivery.

-Purchasing and marketing-

Marketing and purchasing people constantly act together in relation to a unique perspective
that is to link suppliers and customers. As a consequence, they act as solution providers both
on the downstream and the upstream contexts for their efficiently, but mostly effective
coordination.

-Why Procurement and HR Should Work Together

Human capital is your biggest asset as well as your biggest expense. But as companies begin
to rely more on contingent workers, the hiring of these on-demand, non-permanent workers
will be done largely by the procurement department. But as human capital is as much of a
human resources issue as it is a procurement issue, these two departments have become more
entwined than ever before. Not only do they have human capital in common, but other
indirect products or services that are procured can also be HR-related, such as health
insurance. And as such, these two functions should work together, strategize, and collaborate
on this complex but critically important resource in order to get maximum value.
1.A Shift toward Strategy

In the past, procuring human capital and other products or services was largely just a source-
and-pay type of process. But as companies start to get leaner and meaner in order to stay
competitive, procuring and sourcing have become more strategic functions. As procuring
human capital becomes more about value and less about cost, a strong, mutually respectful
and beneficial relationship with HR can help procurement better identify and reduce risks,
create more effective talent acquisition processes, and ultimately, get the best value for their
dollar.

2.Splitting Up the Work

When you put two departments together that are used to working alone, you can expect some
resistance, distrust, and a possible blame game. The best way to create a harmonious
relationship is to split up the work and establish defined and specific roles and responsibilities
in a way that best utilizes the departments‘ skills, resources, and experience. Your
procurement professionals, for example, should still be in charge of overseeing and managing
vendors and contracting across the supply chain, and your HR specialist should be in charge
of bringing policy guidance to the table and recruiting expertise to the process. Establishing
specific roles will help both teams find success.

3.Communication and Respect Are Critical to Success

The relationship will not succeed without proper communication. The specialists in both
departments will have their own language, using jargon that the other may not understand.
They both need to make an effort to communicate clearly. If jargon is unavoidable, then both
should make efforts to explain the terms or ask for an explanation when they‘re not clear.

Just as important in the relationship is respect. Procurement and HR must engage in the
partnership without trying to dominate the other team. The only way to find valuable
solutions is to understand that they have a mutual goal in securing the right talent and
services for the organization‘s needs. Both teams need to respect each other‘s expertise, be
open to new recommendations and ideas, and have candid and honest dialogue—only then
can goals be met successfully.
The Benefits of the Relationship

If both teams can collaborate and communicate effectively, you will see great results.
Through the knowledge exchange, HR will have a better understanding of vendor
management and market intelligence, and procurement will be able to better understand the
needs of human resources and better support them through strategic sourcing of contingent
workers. When they learn from each other, each department can improve the quality of their
programs. Your company will also benefit from more streamlined invoicing, payment
processing, on boarding, and departures. And you will also be able to better reduce your risks
of using contingent workers.

Work Together for Better Results {improvement on leverage}

To best manage your total workforce, including your permanent employees and your
contingent workers, a strong partnership must be formed between your HR team and your
procurement professionals. Such a relationship between the two departments can lead to best-
practices approaches to procuring talent, more efficient processes, increased communication,
and better adherence to company policy. Using a single, centralized strategy for your entire
workforce will lead to better results and lower costs.

, and other similar functions or benefits.

THE CONCEPT OF SILO SYNDROME.

As much as relationships are important between individuals, so are they important between
organizations. Silos are storage facilities that are generally used to store grain and always
stand alone, hence it is believed that they never relate and have no relationship. Having no
friendlier relations will mean treating each other as enemy and such generally brings
organizations down. We are a ``Supply chain`` and should act as a chain` `joined in
relations and concerns for other functions or ``clients``
INTERNAL ORGANIZATION OF PURCHASING DEPARTMENT {Topic 9}

Purchase departments help keep organizations financially healthy. They procure goods
and services designed to meet operational needs while providing the highest possible value.
They established procurement policies and procedures to ensure their organization operates
with integrity and the marketplace.

Purchasing Department: Roles, Duties, and Responsibilities

Purchase departments help keep organizations financially healthy. They procure goods and
services designed to meet operational needs while providing the highest possible value. They
established procurement policies and procedures to ensure their organization operates with
integrity and the marketplace. Purchasing departments keep operations moving smoothly
because they monitor Supply chains and take care of tedious tasks like negotiating contracts
with vendors, so the department has can focus on other things.

The role of the purchasing department plays within a company depends on the size of the
organization. Outsourcing and technological advances have affected the job outlook for the
purchasing profession negatively, which is a trend we can expect to continue.

The Role of the Purchasing Department

Also known as a procurement department or a purchase department, the purchasing

department support company operations as the primary buyer of goods and services in private
sector companies, government agencies, educational institutions, or any other type of
organization.

The procurement department serves its internal customers by procuring the goods and
services they need in a timely manner while also maintaining the company‘s financial health.
They seek and purchase products and services at the best possible price and value.

As such, the purchasing department must understand the complexities of the operation it
supports as well as the markets that provide the goods or services required to meet its
objectives. The duties and responsibilities of a purchasing officer far extend beyond
procuring office furniture and supplies. Today‘s procurement staff must also understand
complex Network technology equipment, international travel needs, acquisition of
workspaces, and more.

Purchasing Department Staff

At the top of the purchasing department, there is a purchasing manager who supervises the
department staff and works closely with the organization executive do plan and oversee the
budget. The purchasing manager has to maintain close communications with department
heads to better understand their needs and the role their purchases play in the company. For
instance, a purchasing manager for an online retailer needs to have a working knowledge of
the way network servers play the company‘s operational workflow.

Purchasing officers, purchasing agents, and buyers all work under the supervision of the
purchasing manager. Their duties and responsibilities may vary depending on an
organization‘s size and priorities. A purchasing agent for a pharmaceutical company may
focus on purchasing the chemicals used in manufacturing specific drugs. A purchasing agent
for a mortgage broker may handle for curing goods and services that range from necessary
office supplies to vehicle rentals.

Procurement Policy and Procedure

Generally speaking, a procurement Department establishes the company‘s purchasing

policies and procedures. The rules that they set in place define spending limits and provide a
list of authorized vendors from which the staff must purchase items such as necessary office
supplies or catering services.

Generally, local, state and federal purchasing departments work under strict guidelines
determined by law. When it comes to government agencies, individual departments generally
must purchase the majority of their goods and services through a procurement department
process to prevent conflicts of interest such as buying from suppliers that are owned by
elected officials or their family members. In Kenya-The Public Procurement and Asset
Disposal Act 2015 and its Regulations MUST BE ADHERED TO.

MEANING OF QUALITY {Topic 10}

WHAT IS QUALITY?

Quality is the totality of features and characteristics of a product or service that bear on
its ability to satisfy given needs. {Fitness of a product or service to satisfy a need or
purpose?

WHY IS QUALITY IMPORTANT?

Customer Expectations

Your customers expect you to deliver quality products. If you do not, they will quickly look
for alternatives. Quality is critical to satisfying your customers and retaining their loyalty so
they continue to buy from you in the future. Quality products make an important contribution
to long-term revenue and profitability. They also enable you to charge and maintain higher
prices.

Reputation

Quality influences your company‘s reputation. The growing importance of social media
means that customers and prospects can easily share both favourable opinions and criticism
of your product quality on forums, product review sites and social networking sites, such as
Facebook and Twitter. A strong reputation for quality can be an important differentiation in
markets that are very competitive. Poor quality or a product failure that results in a product
recall campaign can create negative publicity and damage your reputation.

Meeting Standards

Accreditation to a recognized quality standard may be essential for dealing with certain
customers or complying with legislation. Public sector companies, for example, may insist
that their suppliers achieve accreditation with quality standards. If you sell products in
regulated markets, such as health care, food or electrical goods, you must be able to comply
with health and safety standards designed to protect consumers. Accredited quality control
systems play a crucial role in complying with those standards. Accreditation can also help
you win new customers or enter new markets by giving prospects independent confirmation
of your company‘s ability to supply quality products.

Costs

Poor quality increases costs. If you do not have an effective quality control system in place,
you may incur the cost of analyzing nonconforming goods or services to determine the root
causes and retesting products after reworking them. In some cases, you may have to scrap
defective products and incur additional production costs to replace them. If defective
products reach customers, you will have to pay for returns and replacements and, in serious
cases, you could incur legal costs for failure to comply with customer or industry standards.

Quality helps determine a firm‘s success in a number of ways:

• Customer loyalty – they return, make repeat purchases and recommend the product or
service to others.
• Strong brand reputation for quality
• Retailers want to stock the product
• As the product is perceived to be better value for money, it may command a premium
price and will become more price inelastic
• Fewer returns and replacements lead to reduced costs
• Attracting and retaining good staff

EXAMPLES OF QUALITY IMPLEMENTATION STRATEGIES.

How to do a Fishbone analysis—{Oshikawa Fish borne concept}

How do you do a fishbone analysis?

NB-SIMPLIFY THE DIAGRAM!

Fishbone Diagram Procedure / Analysis

1. Agree on a problem statement (effect). ...

2. Brainstorm the major categories of causes of the problem. ...
3. Write the categories of causes as branches from the main arrow.
4. Brainstorm all the possible causes of the problem. ...
5. Again ask "Why does this happen?" about each cause.
The 5 Whys and the Fishbone Diagram
The 5 Whys can be used individually or as a part of the fishbone (also known as the cause
and effect or Ishikawa) diagram. The fishbone diagram helps you explore all potential or real
causes that result in a single defect or failure. Once all inputs are established on the fishbone,
you can use the 5 Whys technique to drill down to the root causes

FOR EXAMPLE, YOU CAN ASK?

1. Why did your car stop?

– Because it ran out of gas.

2. Why did it run out of gas?

– Because I didn‘t buy any gas on my way to work

3. Why didn‘t you buy any gas this morning?

– Because I didn‘t have any money.

4. Why didn‘t you have any money?

– Because I lost it all last night in a poker game.

5. Why did you lose your money in last night‘s poker game?
– Because I‘m not very good at ―bluffing‖ when I don‘t have a good hand.

As you can see, in both examples the final Why leads the team to a statement (root cause)
that the team can take action upon. It is much quicker to come up with a system that keeps the
sales director updated on recent sales or teach a person to ―bluff‖ a hand than it is to try to
directly solve the stated problems above without further investigation.

Additional tips on - How to Ask and Complete the 5 Whys

1. Write down the specific problem. Writing the issue helps you formalize the problem
and describe it completely. It also helps a team focus on the same problem.
2. Ask Why the problem happens and write the answer down below the problem.
3. If the answer you just provided doesn‘t identify the root cause of the problem that you
wrote down in Step 1, ask Why again and write that answer down.
 4. Loop back to step 3 until the team is in agreement that the problem‘s root cause is
identified. Again, this may take fewer or more times than five Whys.

WHAT IS QUANTITY {Topic 10 cont.}

Quantity is defined as an amount, measure or number. An example of quantity -

How many apples are in a barrel?

How many bolts are there in that sack / drum?

How many litres are there in those drums etc

FACTORS TO CONSIDER IN DETERMING QUALITY OF

PRODUCTS/MATERIALS AND SERVICE. {Topic11}

 Company appraisal. It's important to buy from a reputable company that will be able
to supply the materials every time. ...
 Identity. One requirement is demonstrating that the material used is indeed the
material claimed. ...
 Purity. ...
 Potency. ...
 Shelf life. ...
 Composition. ...
 Value.
 Satisfaction/outcome from a service

FACTORS THAT AFFECT QUALITY INCLUDE-

 Use of production technology. -How developed is your technology in making your

products or service
 Skill set, tools, and experience of labour. -How experienced/skilled is your workforce
 Availability of needed raw materials. -Are the right Materials for production available
 Storage facilities. -How well are we storing the raw materials and the finished
products? Proper storage safeguards quality as the products will maintain their value
until when they are consumed, utilized or sold.
  Carriage or transport Facility-Transportation adds the value of place, if goods are
safely transported, it means they will reach the users, consumers or buyers in their
best expected status {Original quality}eg-avoid breakages, spillage etc.

PURPOSE OR REASON FOR SPECIFYING MATERIALS {Topic 12}

1. The specification provides clear instructions on project intent, performance and

construction.
2. It can reference the quality and standards which should be applied.
3. Materials and manufacturers‘ products can be clearly defined.
4. Installation, testing and handover requirements can be identified.
5. Classification within the specification can be used to support handover and asset
management.
6. It eliminates the need for information overload on the drawing or model, making
identifying information easier.
7. A specification can support project costing, not only the materials and products but
the performance and workmanship.
8. Along with the drawings, the specification forms part of the contractual documents,
helping minimise project risk and providing support should there be any legal
disputes.
9. It supports client brief interpretation and gives the client assurance that their
commissioned asset is the one being delivered.
10. It is essential for the construction phase and an important part of the soft-landing
process, subsequent asset management and the lifecycle plan.
11. By being clear, concise and information-rich, a specification provides answers to
many onsite construction questions, saving the project team, client and contractor
time and money.
12. After project finish, office masters can incorporate best practices and lessons learnt,
improving efficiency, providing quality assurance and ensuring project consistency.
13. Office masters also save the team time and money because they can be developed
over time and adapted to suit a project's specifics, drawing on specialist knowledge
when needed.
14. The specification is a living document to be used by the complete project team
throughout the construction phase; its value does not end at the design phase.
15. Along with any variations or value engineering, it becomes a part of the project audit
trail and a crucial part of the handover documents, forming the basis for asset
management, asset maintenance, and even feeding into staff training and human
resources policies.

FEATURES OF A GOOD SPECIFICATION {Topic13}

1.Consistent: Every pair of specification/S should be mutually consistent, i.e., it should

not contradict others or itself.

2.Sufficient (Maximal Behaviour): Should have sufficient information on what is

expected, no unclear areas should exist.

3.Necessary (Minimal Specification): Every specification should be necessary to allow

at least for easy understanding and be vital.

4.Checkable: We should be able to check if a realization/implementation satisfies the

intended need and reference of to it can e made from the achieved outcome. It should
allow for comparison.

METHODS OF SPECIFYING NEEDS OR MATERIALS REQUIRED. {Topic14}

Clients or potential customers may use the following methods when specifying their
needs-

1.By Samples- Displaying physically an item/service that resembles what one

requires, e.g. in motor vehicle spares, one can carry the faulty part to shop around
showing out their need.

2.By Jigs-this are metal like fabrications of images that are similar to the required
item

3.Moulds-Structes either made from timber, metals etc. that will resemble a required
shape or design, commonly used in construction of house columns, pillars amongst
other shapes.

4.By Design-Refers to making structures that resemble the need

 5.By Drawing-Trying to make sketches that resemble what is required eg-Tailors will
always try drawing what their clients describe so that they will have a rough idea of it.

6.Use of Measurements-Use of standard units to show what is required.

7.Use of Word of Mouth –Clients may describe what they need by their own
explanations

8.By use of Brand name eg-a client may specify their favourite soda by saying I need

``Coca-Cola` etc.

9.Use of Model name, eg- when buying vehicles, one may say ``I need a Toyota
car``

KEY FACTORS THAT DETERMINE WHAT QUANTITY OF MATERIAL

TO BUY{T15}

Some of the important factors which affect the quantity supplied of a commodity in
isolation are as follow.

 Price-Generally, the more affordable the material, the more of it will we buy.
 Prices of Related Goods-How affordable or expensive are it`s substitutes
 Cost of Production-When cost of production is high, price will subsequently be high
making it not easy to buy a lot and vice versa.
 State of Technology-Is that technology easily available? If yes, then we buy less of
the item but if technology is scarce, then there is a likely hood of wanting to buy more
to keep for safety.
 Goal of Producer:-Is the producer a Cartel or an ordinary supplier who is not dictating
the market.
 Natural Factors: -eg, source and availability of raw materials used in manufacturing,
to avoid insufficiency in supply, it is advisable to buy more.
 Means of Transportation, Communication, Banking and Insurance: ...
 Length of Time: -What time does it take to make what is needed, if it takes too much
time to make, then buy more to cushion the lead time
METHODS USED TO DETERMINE WHAT QUANTITY TO BUY {Topic 16} Buying
can be divided into the following categories on the basis of quantity of the goods to be
purchased.

 Market Purchasing: ...

 Speculative Purchasing: ...
 Purchasing for Specific Future Period: ...
 Contract / Tender Purchasing: ...
 Scheduled Purchasing: ...
 Group Purchasing of Small Items: ...
 Co-operative Purchasing:
 conservative buying
 speculative buying,
 Purchasing by Requirement:

WHAT IS PRICE {Topic 17}

 Perhaps the simplest definition is to say "price is the value of a product (good) or
service". A price can be expressed in other goods, services, or in money.

WHAT IS A GOOD PRICE? {Topic 17 cont..}

A good price is that price which one is willing and able to pay in exchange for goods
or services

MEANING OF LEAD TIME IN SUPPLY CHAIN MANAGEMENT. {T17 cont]

Purchase order lead time is the number of days from when a company places an order for
supplies, to when those items arrive.

How can you effectively shorten your lead times and optimize inventory management?

The first thing to do when trying to reduce lead times is to understand your supply chain
processes, from end-to-end intimately. Document your supply chain journey and identify all
the points along the way where you can expect waiting times for you to start by reducing
these wastages.Once you understand what the long possible lead time looks like you can
work from there to reduce it.
Here are some factors you can consider:

 Increase the frequency of orders and decrease the volume

Instead of ordering a large amount of inventory, order smaller amounts that take less
time to manufacture and ship. Your inventory is then replenished more frequently,
more consistently and economically.

 Incentivize your suppliers

Work a lead time clause into your contracts with suppliers. This could either be in the
form of a bonus should they deliver well in advance of what they estimated or in the
form of a penalty if they are delayed. This helps in getting your suppliers to stick to
the agreed lead times.

 Automate your inventory management process

Speed up your time to market by automating your inventory management workflows.
With tools like ILS{Integrated logistics system},QuickBooks Commerce etc you can
reduce the time taken to create and manage purchase orders, always be in contact with
your suppliers, keep track of stock levels{Use systems such as S.A.P-Systems
application programes} all without worrying about manual data entry and human
error.

 Go local
It should not come as a surprise that shipping your products from international
suppliers will increase your lead time. Finding international suppliers may seem
appealing due to potentially lower manufacturing costs, but in the long run, it could
cost your business more if you are just waiting for stock to arrive. Finding local
suppliers could help reduce your lead time significantly.

MAJOR FACTORS THAT INFLUENCE PRICE OF MATERIALS {Topic 18 add

explanations}

 Product Cost: The most important factor affecting the price of a product is its cost. ...
 The Utility and Demand: ...
 Extent of Competition in the Market: ...
 Government and Legal Regulations: ...
  Pricing Objectives: ...
 Marketing Methods Used:

MAJOR METHODS OF MATERIALS PRICING {Topic 19}

 Replacement Cost or Market Price on the Date of Issue:

 Fixed Price: ...
 Standard Price: ...
 Inflated Price: ...
 Highest in First Out (HIFO) Method: ...
 Next-in-First out (NIFO) Method: ...
 Moving Average Method: ...
 Base Stock Method:

FACTORS THAT CONTRIBUTE TO DETERMINE RIGHT TIME TO BUY{Topic

20}

What are the factors that influencing you when buying?

The personal factors include
1.age
2.occupation
3. lifestyle
4. social and economic status
5.The gender of the consumer.
6. Psychological
7. Cultural
8.Personal
These factors can individually or collectively affect the buying decisions of the consumers

DIFFERENCE BETWEEN LEAD TIME AND DELIVERY TIME {Tp 21}

Lead time;
Represent the time taken from the receipt of an order request until the time that order is
delivered to the client. This also includes the manufacturing time if necessary
Delivery time; is only transport period from source to customer.
That mean delivery time is part of lead time and part of supply chain process.

WHAT IS SOURCING
Sourcing, also known as procurement, is the practice of locating and selecting businesses
or individuals who can supply goods or services based on set criteria. ... Businesses that
can find the most appropriate suppliers at the lowest cost can develop a competitive
advantage

Different Types of Sourcing Methods{Explain}

 Low-cost Country Sourcing. ...

 Global Sourcing. ...
 Prime/Sub Arrangements. ...
 Captive Service Operations. ...
 Conventional Agreements. ...
 Operational. ...
 Professional Services. ...
 Manufacturing.

WHAT IS OUTSOURCING{Topic 22}

Outsourcing is a business practice in which a company hires a third-party to perform

tasks, handle operations or provide services for the company, one factor that is key is that
the company will only outsource the Non-Core activities to those who can do them in a better
quality way. Core or Main activities are Never outsourced {You can‘t risk out your best or
cash cow}. Organizations frequently outsource customer service and call service
functions.
Note-Only services are outsourced, never products

SOME OF THE MOST IMPORTANT FACTORS TO CONSIDER WHEN SELLECTING

A SUPPLIER OR SERVICE PROVIDER. {Topic 23}
Generally, there are many factors to consider, but here are the most common. {Expound
on the bullets}
 1.Does the supplier offer discounts?

2.Does the supplier offer trade credit?

3.Are there any additional charges?

4.Can the supplier deliver on time?

5.Are the supplier's prices competitive?

6.Is the supplier able to supply the quantity needed?

7. Is the supplier experienced? - Question whether the supplier has experience and
what type of experience they have.

SOURCES OF INFORMATION ON POTENTIAL SUPPLIERS. {T-24}

The most common sources of information regarding the potential suppliers are:

 Newspaper advertisements.
 Trade directories.
 Catalogue, price lists etc.
 Trade journals.
 Salesmen.
 Advertised tender.
 Telephone directories.
 Exchange of information between similar companies.

MAIN DOCCUMENTS USED IN SOURCING .{Topic 25}

The three most common types of procurement process documents are 1.Request for
Information (RFI)- An RFI, or request for information, is a preliminary document to get
general information from potential vendors

2.Request for Proposal (RFP)- RFP, or request for proposal, is a document a company
requests from vendors to get an overview of offerings and costs for a specific service/product
3. Request for Quotation (RFQ). - A request for quotation or quote (RFQ) is a document
that details a buyer's requirements and asks vendors to respond with pricing and
payment terms. An RFQ is different from an RFP because it focuses almost exclusively on
the cost of a specific item or items#

CRITERIA TO EVALUATE POTENTIAL SUPPLIERS {Topic 26]

1. Communication

Knowing from the onset that the supplier is readily available for questions (i.e. Picks up the
phone and responds to e-mails quickly), lays a great foundation for a customer-supplier
relationship. It should be clear who the main contact person will be, as well as his capability
to effectively communicate your needs with his own team. It is also important that should
problems arise, you have the ability to speak with senior executives on the team.

2. Competency

Check out the suppliers‘ capabilities against your needs. Most of these service lists are
available on their websites or in brochures, but talking to account heads or agents personally
will give you an even further look into the true expertise of the supplier. Getting information
from other customers similar to you will also be of big help.

3. Capacity

See if the supplier has the capacity to handle your requirements and how quickly they can
deliver to you. How do they handle fluctuations in supply and what are their resources to
service all customers?

4. Commitment

Check their commitment to provide only products of the highest quality. Do they qualify
within the standards of Six Sigma or ISO 9001? They should also signify that they are
committed to you, as their customer, on a long-term basis.
5. Control

Inquire about how much control the supplier has over the supply chain, the procedures and
the processes. How can they ensure that delivery of goods to your company will remain
reliable and consistent?

6. Cash

A supplier can effectively deliver on clients‘ expectations when they have a good state of
finances. Ask for proof of the strength of their finances and make sure that they can weather
economic uncertainties.

7. Cost

This pertains to their pricing scheme. More often than not, supplier comparisons depend
greatly on this, but be sure to keep in mind that cheap does not always equate to high
quality. Their price should be competitive and bring in value for money concept. The pricing
is ultimately just one of the factors to consider when choosing suppliers.

8. Consistency

Can the supplier consistently provide high quality goods? A good basis for this is to ask how
long they have been working with their other clients. If they have long standing relationships
with other clients, it is a good sign that they can continuously deliver over time.

9. Culture

As much as company culture is important to your business, it should also manifest in your
supplier. Values such as speed, quality, excellence, innovation, and reliability are existent in
trustworthy companies and you want to be sure that the same can be said about your own
suppliers.

10. Cleanliness
Are your supplier‘s production methods sustainable? Are their processes environment
friendly and are they ethical in the way they treat their employees, how are they respecting
the green issues? Are they capable of handling growth and able to expand as your business
expands too?

Keep all the information you gather about your suppliers in an easy-to-understand table
format, and it should be easy for you to identify the supplier that suits your needs perfectly.

WHY IT IS IMPORTANT TO FOLLOW THE PURCHASING PROCEDURE {Topic

27}

The purchase requisition process plays a key role in the buying process of an organization. It
ensures that fraud is prevented, and organizations get the value for their money while
upholding ethics and fairness. This is possible due to the fact that the request must go through
a number of approvals to ensure its accuracy and adherence to the laid down procedures.

Note- If you are procuring for a Government entity, the Public Procurement and Asset
Disposal Act 2015 with its regulations Must be followed

ORDERING / PURCHASING PROCEDURE {Topic 27 cont.}

The Purchasing Process involves the following-

1. Needs Analysis. ...

2. Purchase Requisition to Purchase Order. ...
3. Purchase Order Review and Approval. ...
4. Requests for Proposal. ...
5. Contract Negotiation and Approval. ...
6. Shipping and Receiving. ...
7. Three-Way Matching. ...
8. Invoice Approval and Payment.
 9.

MEANING OF RECEIVING {Topic 28}

MEANING OF RECEIVING AND ISSUING OF GOODS

Receiving: this is the act of taking possession of goods in order to stage them for inspection
or place them into inventory
It is also the process of accepting from all sources, all materials, equipment and parts used in
the organization
Issuing/dispatch: this is the process of receiving, demands, selecting the items required and
handing them to the user.
It can also be the physical movement of goods or materials from the warehouse
what is order picking
Order picking is when the products listed in an order are retrieved from their respective
warehouses.
It is the first stage in fulfilling a customer‘s order, and it‘s essential that the process is
flawless so that the remaining fulfilment processes—order packing, shipping, and post-sales
activity—can also run smoothly.

FACTORS TO CONSIDER DURING INSPECTION AND RECEIVING OF

MATERIALS{Topic29}

1.Countercheck the documentation

2.Confirm the packages intactness

3.Check on any breakages

4.Confirm Quantity

5.Collour

6.Length

7.Check on spillage
8.Check on expiry dates among others

NOTE! - The Supply Chain staff members should avoid the duties of quality Inspectors but
can do physical checks/Inspection on materials/works. Generally, they are the secretariat of
the Inspection process and presenters of the Materials to be Inspected.

MEANING AND IMPORTANCE OF INSPECTION {Topic 30}

Methods used in the Process of Inspection of Goods and the use of ADHOC
Committees.
ADHOC COMMITEES – are committees formulated from stake holders to sort a particular
need or issue at hand and they get dissolved once they solve the need for their formation.

METHOD-

1. 100% Inspection
This is inspection of every item supplied by the supplier. This method of inspection is
appropriate for high value items which cannot be destroyed during inspection. It is also
appropriate when the material have a significant effect on the quality of the final product.

2. Sampling Inspection
Sampling is a set of procedure or a method of selecting some part of a group to represent the
whole or total. The advantages of sampling over 100% inspection have been recognized
relatively arbitrary and crude spot checking procedures being employed long before the
development of statistically based sampling techniques. To be successful an acceptance
sampling plan must be designed to suit each particular case seeking an economic balance
between the cost of inspection and the increased cost of processing defective items. If the
defective parts are dispatched to customers a balance between the cost of re-handling,
replacement and possible loss
of goodwill verses the cost of increasing the cost of quality control and inspection effort. In
the simplest form acceptance sampling decision are based on the testing of a sample size (n)
taken at random from the batch size or population size v(N). If a rejection condition is
indicated it is usual to carry 100% inspection of batch. In general acceptance sampling is
appropriate where:-

-Inspection involves destructive testing

-The costs of acceptance of defective items are not prohibitive.
-Materials arrives in large batches
-It is possible to take truly random sample
-It is economically feasible to consistently identify material as acceptable or not.

3. Inspection by storekeeper

Where there is no separate inspection department or where that department deals only with a
limited number of commodities the storekeeper may be required to undertake the examination
of goods for quality as well as quantity. He is therefore provided not only with a copy of
official order by the supplier but also with relevant specifications or samples and with
suitable equipment necessary for the degree of inspection which he is required to perform. In
those circumstances the storekeeper signs the goods received note not only for receipt of the
goods but also for their inspection.

4. Inspection by Technical staff

In some organizations, inspection arrangements by storekeepers may also be supplemented
for items of a technical nature by some degree of examination carried out by suitable
members of the technical staff such as the plant engineers or works manager. Appropriate
instructions should be issued making clear to all concerned which items are to be inspected
by storekeepers and which require also the signature of a technical officer.
5. Inspection by inspection department
Inspectors have authority to accept or reject materials and endorse goods received note
accordingly, unless separate inspection certificates are prepared. Storekeepers are instructed
that goods awaiting inspection are to be segregated in separate place in the storehouse and
that they are not to be made available for issue until cleared by the inspection department.

6. Inspection at supplier‘s premises

In large organizations particularly government departments arrangements may be made for
materials to be inspected at the supplier‘s premises including in some cases examination
during the various stages of manufacture. Where this is done, an inspection certificate is
given before the goods are dispatched and no inspection or at least only a limited check is
necessary at the point of receipt. In these circumstances a copy of the inspection certificate is
sent to the storekeeper as soon as it is available. This avoids the need for the material to be
held in the inspection bay and it can be put away in its appropriate place in the storehouse
immediately on receipt, thus avoiding double handling.

7. Spot checks
Spot checking is the practice of making random checks of some stores items at irregular and
unspecified intervals. It is often done by senior stores officials in the course of their
supervisory duties, but can be operated in parallel with the stocktaking program, irrespective
of whether the periodic or continuous method is used.

DOCUMENTS used in receipt, inspection and issuing of goods to customers{ Topic 31}
}
The normal process of purchasing, storing, control and issue of materials consists of the
following documents: -
1. Bill of Materials
2. Purchase Requisition
3. Purchase Order
4. Material Inspection Note
5. Goods Received Note (GRN)
5. Goods Received Note (GRN)
6. Stores Requisition Note
7. Material Transfer Note
8. Material Return Note
9. Bin Card
10. Stores Ledger.

Document # 1. Bill of Materials:

Bill of Materials is a comprehensive list of materials, with specifications, material codes and
quantity of each material required for a particular job, process or production unit. It will also
include the details of substitute materials. It is prepared by the engineering or planning
department for submission of quotation and after the receipt of work order. It is a method of
documenting materials required for execution of the specified job work.
Bill of Material acts as an authorization to the Stores Department in procuring the materials
and the concerned department in material requisition from the stores. It is an advance
intimation to the concerned departments of the job, work order to be completed.
ADVERTISEMENTS:

It is circulated to:
(a) Purchase Department,
(b) Stores Department,
(c) Cost Accounts Department, and
ADVERTISEMENTS:

(d) Product Department.

Advantages:
(a) It acts as a guide in planning the execution of job, process or product units by
documenting all materials required for that specified work.
(b) It is a base for action to be initiated by the Stores Department in placing the purchase
requisition with the purchase department.
(c) The information mentioned in the bill of materials act as a standard with which any
deviation can be detected and remedial measures are taken if deviations take places.
(d) It is a good control measure on material cost.
(e) The material cost to be charged to a particular unit, job or process can easily be
determined beforehand.
(f) It helps in submission of tenders and quotations.
(g) It is a planning exercise for the proposed production or work.
(h) It serves as an advance intimation to stores department about the raw material
requirement.
Document # 2. Purchase Requisition:
CIMA defines Purchase Requisition as ―an internal instruction to a buying office to
purchase goods or services. It states their quantity and description and elicits a
purchase order‖.
The manager in-charge of Purchase Department should obtain requisition from the Stores in-
charge, departmental head or similar person requiring goods before placing orders on
suppliers. If the present stock run down to the reorder level, then the stores department send a
Purchase Requisition to Purchase Department, authorizing the department to order further
stock.
The specimen of Purchase Requisition is given below:

Document # 3. Purchase Order:

If the Purchase Requisition received by the Purchasing Department is in order then it will call
for tenders or quotations from the suppliers of materials. It will send enquiries to prospective
suppliers giving details of requirement and requesting details of available materials, prices,
terms and delivery etc. Quotations will then be compared and will place order with those
suppliers who will provide the necessary goods at competitive prices.
ADVERTISEMENTS:

The number of copies of routing of Purchase Orders depends on the procedure followed in
the organization. Normally, the copies of the purchase orders will be sent to the Supplier,
Department originating Purchase Requisition, Inspection Department, and Accounting
Department.
The specimen of the Purchase Order is given below:

Document # 4. Material Inspection Note:

When materials are delivered, a supplier‘s carrier will usually provide a document called
‗delivery note‘ or ‗delivery advice‘ to confirm the details of materials delivered. When
materials are unloaded, the warehouse staff check the material unloaded with the delivery
note. Then the warehouse staff prepares a Materials Receipt Note, a copy of which is given to
the supplier‘s carrier as a proof of delivery.
ADVERTISEMENTS:

After receiving the materials the Inspection Department thoroughly inspects whether the
quality of material is in accordance with the purchase order and the quality of material
received and it prepares a note called ‗material inspection note‘, copies of which are sent to
the supplier and stores department.
A specimen of material inspection note is given below:
Document # 5. Goods Received Note (GRN):
Once the inspection is completed, GRN is prepared by the stores department, and copies of
GRN is sent to the purchasing department, costing department, accounts department and
production department, which initiated purchase requisition.
A specimen of goods received note is given below:

After receipt of GRN from the Stores Department and invoice from the supplier, the accounts
department will check with the purchase order and take necessary steps for making payment
to the supplier.
Document # 6. Stores Requisition Note:
ADVERTISEMENTS:

It is also called ‗materials requisition note‘. When Production or other departments requires
material from the stores it raises a requisition, which is an order on the stores for the material
required for execution of the work order. This note is signed by the department in-charge of
the concerned department. It is documents which authorize the issue of a specified quantity of
materials.
It will include the cost centre or job number for which the requisition is being made, a
specimen stores requisition note is given below:

Any person who requires materials from the stores must submit stores requisition note. The
store keeper should only issue materials from stores against such a properly authorized
requisition and this will be entered in the bin card and stores ledger. A copy of the requisition
will be sent to the costing department for recording the cost or value of materials issued to the
cost centre or job.
Document # 7. Material Transfer Note:
If materials are transferred from one department or job to another within the organization,
then material transfer note should be raised. It is a record of the transfer of materials between
stores, cost centres or cost units showing all data for making necessary accounting entries.
A specimen of ‗material transfer note‘ is given below:
Document # 8. Material Return Note:
If materials received from the stores are not of suitable quality or if there is surplus material
remaining with the department, they are returned to stores with a note called ‗material return
note‘ evidencing return of material from department to stores.

A copy of material return note is sent to the costing department for making necessary
adjustments in accounts.
Document # 9. Bin Card:
A ‗bin card‘ indicates the level of each particular item of stock at any point of time. It is
attached to the concerned bin, rack or place where the raw material is stored. It records all the
receipts of a particular item of materials and its issues. It gives all the basic information
relating to physical movements. It is a record of receipts, issues and balance of the quantity of
an item of stock handled by a store.
A specimen bin card is shown below:
Document # 10. Stores Ledger:
Stores department will maintain a record called ‗stores ledger‘ in which a separate folio is
kept for each individual item of stock. It records not only the quantity details of stock
movements but also record the rates and values of stock movements.
With the information available in the stores ledger, it is easier to ascertain the value of any
stock item at any point of time. The minimum, maximum and reorder levels of stock are also
mentioned for taking action to replenish the stock position.
A specimen stores ledger account is given below:
RECEIVING GOODS

WHAT IS ‗GOODS RECEIVING‘?

‗Goods receiving‘ is the function of checking items delivered to the business, either coming
in as new stock or as supplies. This includes inspecting the quality, condition, and quantity of
any incoming goods, and allocating them to a space in the warehouse.

Why is it important?
All items purchased by the business serve a specific function, whether they are supplies to be
used internally, or stock to be on sold to customers. Keeping track of all items coming into
the warehouse ensures that that the right products are received and promptly stored in an
appropriate place.
Following a goods receiving process can help to maintain an efficient warehouse and identify
any issues with suppliers.

STAGES-
1. Match the delivery to a purchase order
First, ensure the delivery has come to the right place by matching the details on the
Consignment Note to the Purchase Order raised by your business.
The Purchase Order should also be used to check that each item matches the description and
quantities ordered. Generally, the boxes or cartons will have a description of the item and
quantities of its contents.
Ensure you record the following for each new delivery:
• The date and time goods arrived
• The name of the delivery partner and driver
• Check off quantities and description of goods against purchase order
• Note any discrepancies
• Names of the personnel who performed these checks
Maintaining accurate reports is essential for accurate bookkeeping as well as resolving any
disputes that may arise in the future regarding the items or supplier.
If there is no purchase order or record of the order, check with your supervisor or purchasing
department before rejecting the goods.
2. Check products are not damaged
Before accepting the delivery, it‘s important to conduct a quality check to ensure the items
are not damaged or malfunctioning.
It‘s not always feasible to open each carton and check every single item, particularly for large
shipments. So in these cases you may wish to complete a spot check rather than open each
and every carton.
Check for signs of breakage or faults, and ensure all items are as described on the purchase
order.
If any damaged items are found in the delivery, record the extent of the damage on the
consignment note and immediately notify the supplier with details of the issue to discuss the
next steps.

3. Log received items into your inventory

Enter the items you have received into your warehouse management system as soon as
possible, including the date and quantities received. This will allow the stock to be allocated
to new orders right away.

4. Allocate storage space for goods

It‘s important to pack away a new delivery promptly to ensure no items become lost or
damaged.
Supplies should be distributed to the appropriate person in the business, or packed away in
the usual space to be accessed when required.
For goods received in as stock, these items will need to be allocated a space in the warehouse
for storage until ready to be picked for an order.

5. Notify your accounts/Procurement department

Send a copy of the signed and dated consignment note to your accounts payable/Procurement
team. This information can then be matched with the invoice from the supplier to ensure
payments are only made for items that were actually received.

FACTORS TO CONSIDER DURING INSPECTION AND RECEIVING OF

MATERIALS{Topic29}

1.Countercheck the documentation

2.Confirm the packages intactness

3.Check on any breakages

4.Confirm Quantity

5.Collour

6.Length

7.Check on spillage

8.Check on expiry dates among others

NOTE! - The Supply Chain staff members should avoid the duties of quality Inspectors but
can do physical checks/Inspection on materials/works. Generally, they are the secretariat of
the Inspection process and presenters of the Materials to be Inspected.

HOW TO HANDLE REJECTED GOODS OR SERVICE BY THE BUYER {Topic 32}

As soon as goods/services have been delivered, any problems should be notified to the
supplier immediately. Preferably this notification should be in writing and if verbal,
confirmed in writing, immediately. The longer a delay in rejection, the more difficult it will
be to argue that your silence did not imply acceptance of the goods/services delivered.

Where, as part of the acceptance process, there is commissioning and acceptance testing,
these should be completed within an agreed timescale and any problems notified, in writing.

If goods are rejected, solutions available to the buyer are

 To seek replacement goods or services that meet the product specification, and
 Damages, where the failure to supply acceptable goods or services has caused
problems that cannot be solved by providing replacements

Once goods have been accepted, the buyer's only recourses are to

 Sue for damages for breach of contract, or

 Claim for contravention of statutory obligations, or
 Claim against any guarantee that is available.

The remedy of rejection is not available forever, however, acceptance cannot occur until the
buyer has had a reasonable opportunity of examining the goods to check conformance
PAYMENT METHODS FOR GOODS DELLIVERED AND SERVICES RENDERED
{Topic 33}

Different Ways to pay for goods and services include-{Payment options}

1. Cash. The one that is most familiar to all of us is to pay for a purchase using
cash. ...
2. Cheques. ...
3. Credit Cards. ...
4. Debit Cards. ...
5. Pre-Loaded (Pre-Paid) Credit Cards. ...
6. Store Cards, Grocery Cards & Gift Cards./vouchers ...
7. Mobile payments. {eg- Mpesa etc}
8. Electronic bank transfers. {eg-Bank Money Transfers-Western union money
transfer}

WHAT IS PHYSICAL DISTRIBUTION {Topic 34}

Physical distribution is the group of activities associated with the supply of finished
product from the production line OR Distributor to the consumers, Retailers,
Wholesalers among other distribution outlets.

Components of Physical Distribution {Topic 36}

(1) Order Processing:

A company receives orders from other companies, middlemen, or directly from customers
through mail, e-mail, fax, phone, or salesmen. Order processing is an importation component
of the distribution system. It is considered as a key to customer service and satisfaction.

Order processing mainly includes:

a. Receiving order

b. Recording order

c. Filing order
d. Executing order or assembling of products for dispatch {Marshalling the ordered items}

e. Credit and collection.

Thus Distribution is concerned with processing the orders quickly, accurately, and efficiently.
The time period from the receipt of an order to the date of dispatch of products must be as
short as possible The physical distribution must be customer-oriented.

The person in charge of order processing must be careful for the following aspects:

1. Assembling product must be exactly as per demand of customers in terms of quantity,

quality, features, and price.

2. Execution must be as quick as possible.

3. The dispatch must be in appropriate mode of transportation.

4. Credit discount and other allied benefits must be offered as per policy.

5. Assessing the effectiveness of order processing. That includes feedback and follow-up.
{Why is feedback important?}

(2) Warehousing:

In today‘s context, production is made in expectation of demand. Therefore, products are to

be stored or preserved safely for the future demand. And also, all the production is not sold
directly. Warehousing plays an important role for balancing demand and supply. For
example, most of the agricultural products are produced seasonally, but have demand
throughout the year. {Explain Time utility}

(3) Transportation:

Transportation is one of the core components of distribution system. It consists of moving or

transferring products from producers to final users or main Distribution centres.
Transportation involves two parties, carriers and shippers. Carriers are those companies that
provide transportation facilities to others, such as the Railways, Airline, Shipping Companies,
and many other private carriers provide transportation services by road, rail, water, air and
underground pipes. Transportation is the general movement of goods from their source to a
particular point while distribution is the movement of specified good to one or several
specified clients, it is detailed in that it will have,quantity for the particular client, contact
info, expected arrival time etc

(4) Organisational Responsibility for Physical Distribution:

Physical distribution is an important decision in today‘s marketing management. It involves a

wide range of activities. Therefore, an effective coordination of various activities, such as
order processing, warehousing, transportation, inventory control, etc., is indispensable to
contribute in overall success of marketing strategies.

Physical Distribution Department:

Some companies treat physical distribution as a separate area of marketing management and
maintain a separate physical distribution department. This department is headed by physical
distribution manager. HE/SHE is solely responsible for managing physical distribution
activities.

Factors to Consider while choosing the most Suitable Mode of Transport {Topic 37}
1. Cost of Service:

The cost of transportation adds to the cost of the goods so it should always be kept in mind.
Rail transport is comparatively a cheaper mode of transport for carrying heavy and bulky
traffic over long distances. Motor transport is best suited and economical to carry small
traffic over short distances. Motor transport saves packing and handling costs.

Water transport is the cheapest mode of transport. It is suitable to carry only heavy and bulky
goods over long distances where time is not an important factor. Air transport is the
Mcostliest means of transport but is particularly suited for carrying perishable, light and
valuable goods which require quick delivery.
2. Speed of Transport:

Air transport is the quickest mode of transport but it is costliest of all. Motor transport is
quicker than railways over short distances. However, the speed of railways over long
distances is more than that of other modes of transport except air transport and is most
suitable for long distances. Water transport is very slow and thus unsuitable where time is an
important factor.

3. Flexibility:

Railways, water and air transport are inflexible modes of transport. They operate services on
fixed routes and at pre-planned time schedules. The goods have to be carried to the stations,
ports and airports and then taken from there. Motor transport provides the most flexible
service because it is not tied to fixed routes or time schedules. It can operate at any time and
can reach the business premises for loading and unloading.

4. Regularity of Service:

Railway service is more certain, uniform and regular as compared to any other mode of
transport. It is not much affected by weather conditions. On the other hand, motor transport,
ocean transport and air transport are affected by bad weather such as heavy rains, snow, fog,
storms etc.

5. Safety:
Safety and security of goods in transit also influence the choice of a suitable means of
transport. Motor transport may be preferred to railway transport because losses are
generally less in motor transport. Water transport exposes the goods to the perils of sea and,
hence from safety point of view, sea transport is thought of as a last resort.
6. Nature of Commodity:

Rail transport is most suitable for carrying cheap, bulk and heavy goods. Perishable goods
which require quick delivery may be carried through motor transport or air transport keeping
in mind the cost and distance.
7. Other Considerations:

A number of special services such as warehousing, packing, loading and unloading are also
taken into consideration while deciding about a mode of transport. From the above discussion
it is clear that each mode of transport is suited for a particular type of traffic.

The rail transport is particularly suited for carrying heavy and bulky goods over long
distances. Motor transport is suitable for carrying small consignments over short distances.
Air transport is suited to light and precious articles which are to be delivered quickly. Ocean
transport is appropriate for carrying heavy bulky goods over long distances at the cheapest
possible cost.

What are the essentials of a good transport system in cities?

All the primary components of a transport system help to facilitate the movement of
passengers, information, and freight. But what are the essentials of a good transport system in
cities? essentials of a good transport system an aerial view of the modern highway structure.
Transport systems are the primary arteries of a country‘s economy. Many people refer to
them as the lifeline of a nation as they are a major opener of most if not all economies

EMERGING ISSUES AND TRENDS IN SUPPLY CHAIN MANAGEMENT AND

PURCHASING PRINCIPLES{Topic 38}

Supply chain digitization

According to a report by PwC, the goal of digitization is to enable an efficient and

transparent supply chain that enhances responsiveness. A digital environment provides
increased visibility into operations. From resolving issues to being future-ready, it will help
organizations anticipate any potential threats and devise a plan for preparedness and
response. It will reduce the dependency on silos and streamline output at all levels.

Cloud-first operations
Cloud solutions will drive processes and will be preferred by firms over on premise
computing infrastructure owing to costs and maintenance. The rise of Software as a Service
(SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS) in the supply
chain domain indicate that cloud computing is the future. Integrated cloud-based supply chain
applications offer an intuitive user experience, improved functionality, and easy access to
new features and releases.

Omni channel supply chains to become the norm

To deliver value and meet customer demands, businesses will focus on offering an Omni
channel buying experience. This allows customers the freedom to shop both online and in
stores. Omni channel supply chains will increase logistic demands to cater to both individual
customer orders as well as replenishing stock at outlets, boosting growth at an operational
level and increasing satisfaction at a customer level.

Sustainability to take centre stage

Sustainability has become a key global trend with customers demanding products built
through sustainable practices. Manufacturers and suppliers have been compelled to try
alternatives to traditional supply chain practices. Some key changes that are being adopted in
delivery and manufacturing include:

 Switching from plastic to cardboard packaging

 Using smaller packaging
 Reducing carbon footprint
 Adopting initiatives to become carbon neutral
 Including sustainability as part of their supply chain planning

Growth in circular supply chains

The traditional linear supply chain model is being replaced by circular supply chains.
Manufacturers are opting the 3R model — recycle, reuse, and rework discarded products.
Customers favor businesses that opt for recycled materials for production and practice safe
disposal. Through circular supply chains, many leading companies are discovering additional
value in the market.
The rise of agile supply chains

Unlike the traditional supply chains that focused on reliability, consistency, and low cost,
new supply chains need to additionally develop flexibility and agility to stay relevant in the
market and beat competition. One of the major changes in the supply chain management
trends is a switch to local or near-shore supply, which adds agility. This change offers
advantages such as:

 Shorter delivery times

 Lower shipping costs
 Quicker response to demand changes

With customizable, future-ready supply chain solutions for enterprises across industries such
as FMCG, e-commerce, consumer durables, etc., H&S stays on top of all supply chain
management trends. We aim to revolutionize logistics with our unique 4.5PL model which
reduces global carbon footprint, optimizes cost, and improves efficiency. We also use
technologies such as block chain, artificial intelligence, and IoT to build digital, automated
supply chains for our clients.

Conclusion
Supply chain management is undergoing transformation at digital, design, and operation
levels, which will benefit manufacturers, consumers, and the environment (to an extent).
Omni channel supply chains will become the new norm and organizations will have to
increasingly focus on adopting a digital-first and sustainable-first approach to meet
expectations of the new consumer.

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