Study of Purchase

Process
&
Study of Distribution
Chain of Finished Goods

A Division of Berger Paints India Limited

Supervisor: Mr. R. Coomar
Mr. H. S. Kapoor
Faculty Guide: Prof. M. Ghosh

By Pranav Chawla
IMT Nagpur
 Group History

• Trading in paints started way back in 1898.

• Rapid growth over the decades
• Prominent exporter status achieved in 1987
• Acquired Berger Paints in 1991
• Public issue of Rajdoot Paints in 1995
• Merger of Rajdoot with Berger in 1999
• Re-introduction of British Paints banner in 2009
 Infrastructure

• The head office is located in Delhi with 36 branch

offices (depots). The manufacturing units are located
in:

– Sikandrabad
– Samba
– Devla
– Surajpur
 Product Portfolio

• Enamels
• Interior Emulsions
• Exterior Emulsions
• Distempers & Primers
Study of Purchase Process

What is Purchasing..??

• In yesteryears, in a manufacturing company,

purchasing stands for buying of raw materials used
for manufacturing.

• In modern era, purchasing is a way of procurement of

raw materials with an objective of reducing the cost
of raw materials to facilitate the manufacturer’s
comparative position in the market.
 Objectives of the study

• To study the Purchasing Procedure of Berger Paints

India Ltd.
• To understand coordination between all departments
of the company.
• To understand the planning procedure of
manufacturing units.
• To get knowledge of stock keeping and Inventory
control in Berger Paints India Ltd.
• To analyze different strategies of inventory
management.
• To understand the need of documentation.
 Concepts Used
• Safety Stock – Consumption quantity during
Emergency Lead Time based on Average Monthly
Consumption.
• Minimum Stock – Safety Stock + Consumption
quantity during Normal Lead Time.
• Reorder Level – Minimum Stock + Average Monthly
Consumption.
(Store to raise indent when stock reaches this level)
• Maximum Stock – Minimum Stock + Highest
Consumption during the previous year during any
particular month
• Indent / Order Quantity – Difference between
Maximum Stock and Actual Stock.
 Objectives of the
Purchase Department
• To get the right material at most competitive price at the
right time.
• To minimize capital investment in materials.
• To maintain good vendor relations
• To provide necessary expertise, advice and information
about the best quality material available globally.
• To avoid duplication waste and obsolescence.
• To maintain company’s competitive position in the market.
• To maintain BPIL’s reputation and credibility into the market
by fair and ethical practices.
• To know the source and availability of needed products.
• To write manuals, provide training and supervise all
departments in meeting their purchasing needs.
• To inform department heads of market changes, new
products and other such factors.
Principle of Purchasing
 Functions of Purchase
Department

• Purchase Department here carries out the three main

functions related to material procurement across both
plant and corporate level
1. Planning and Procurement of Goods
2. Strategic Purchasing
3. Vendor development
 1. Planning and
Procurement of Goods
• Purchase is the most crucial and important function
performed by the purchase department. It includes
many functions, namely:
– Material Planning
– Scheduling
– PO Generation
– Activities for Payments
– Coordination with Supplier
– Coordination with Stores & Plant
– Monitoring Coverage & Availability according to Production Plan
– Inventory Management
– Supplier Payments
What is Purchase Order?
• Purchase Order (PO) is a legal commercial document
which contains the following information:
– Description of Material
– Reference of Indent
– Suppliers name for whom it is generated
– Transportation Terms
– Date
– Discount Price (if availed)
– Government levied terms

 If rules are not followed as per the details mentioned

in the purchase order, then any of the parties in
contract can sue the other in the court.
 2. Strategic Purchasing

Strategic purchasing is done basically for the following

category of items:
• Long delivery time items
• Items whose availability is scarce
• Imports

The benefits of Strategic Purchasing are:

• Cost effective as mainly items are imported
• To avoid stock out situation where the availability is scarce
 3. Vendor Development
Purpose:
• The main purpose of vendor development is to explore
the alternate sources, so that cost effective buying can
be made through competition/availability of material.
• This helps in reducing lead time as vendor information
is available for quick reference.

Goal:
• To develop strong vendor base for new components,
alternate sources for existing components and to
reach progressively a level of the following:
– Efficient, effective vendors
– Assured process capability and quality
– Committed deliveries.
– Cost effective process.
– Better services based on needs from vendors.
– Continuous technological improvements.
– To break monopoly.
– Partnerships for New ideas.
 Operations
• Store will in the beginning of every month after entering the
consumption figures of the previous month will check which
items have touched or gone below reorder levels.
• Store will raise indent for these items. The indent quantity
will be the difference between Maximum Stock level and
actual stock as on the beginning of that month.
• Immediately on receipt of indents, Purchase Department will
take action for placing Purchase Order.
• Purchase Department will prepare a statement every month
where in following parameters will be considered and orders
placed accordingly : -
 Documentation

• Approved Vendor’s List

• Product Information:
 Technical Data Sheet
 Material Safety Data Sheet
• Product Development Documentation
• Purchase order Supporting Documents
• Strategic Purchase Documents
• Planning Documentation :
– Master List
– Purchase Indent
– Purchase Order
– MRN
 Study of Distribution
Chain of Finished Goods
• A channel of distribution is the route or path along
which goods move from producers to ultimate
consumers.
• Channel of Distribution consists of producer,
intermediaries, and consumers.
 Objectives of the study

• To understand the meaning of channels of

distribution.
• To identify different channels of distribution.
• To minimize the cost and time of transportation and
to keep the finished goods inventory at the optimum
level.
• To describe the functions of depots, warehouses and
dealers.
• To understand the importance of effective distribution
chain.
 Terminologies
• Indent = Maximum Stock – Actual Stock
• Ideal indenting =
Volume of budget of current month + Volume Budget
equivalent to stock norm days – Opening stocks of
current month.
• Total Stock Quantity =
Free Stock + Blocked Stock + Untraceable Stock
• Non Moving Stocks – No sale at all in the last 90
days. So Indent generated will be zero.
• Slow Moving Stocks – Stocks as on date are in
excess of actual sales of the SKU’s in last 60 days
• Fast Moving Stocks – Rest all SKU’s will fall in this
category.
Stock Norm Quantity:
It is calculated based on Stock Norm Days for the Depot.
If a Stock Norm Days for the Depot is 30 days then depot
will be entitled to do indenting not exceeding that
month’s budget + next month’s budget.
• For Stock Norm Days 30:
Stock Norm Quantity = Current Month’s Budget +
Next Month’s Budget
• For Stock Norm Days 45:
Stock Norm Quantity = Current Month’s Budget +
Next Month’s Budget + 15 days of Next to Next
month budget
 Damaged Stocks

• Decantable: The goods which can be repacked and

sold at full rates.
• Invoicable: That which is to be sold without
repacking, but may be at some discount.
• Job Lot: That which is totally empty/jelled etc. and
has to be sold on as is where basis.
• Product Complaint: That which is certified as
defective as per approved HO advises
Distribution Channels of
British Paints

The distribution channel of the finished goods followed

by British Paints:
 Benefits of Distribution

Each of the intermediaries provides value. The marketing

intermediaries offer value in the form of:
• Information
• Promotion
• Negotiation
• Funding
• Matching
• Risk taking
 Dealers

Responsibilities and Functions of the

Dealers :
• Buying of Goods
• Storage of Goods
• Credit Facility
• Personal Services
• Risk Bearing
• Display of Goods
• Supply of Information

 The dealers should be in regular touch with the

customers, keep taking his feedback and ensure
maximum customer satisfaction. The dealer should
also try and convince the customers to try newer
products of the company
 Depots

They store goods in bulk that is manufactured by the

producers and deliver them in relatively smaller
quantities to the dealers.

Some of the functions of the depots are:

• Procurement of goods
• Storage of goods
• Distribution
• Risk taking
Support/Role of Depots

• Guiding and Motivating Project Sales Officer (PSO)

• Regular Monitoring of Working
• Ensuring Output
• Support w.r.t. Sampling/Complaint Handling/Material
Supply
• Sharing of Market Information and Updating them
• Giving Project Information/Continuous Support
 Bibliography

• Manuals and Documents of Berger Paints India Limited

(British Paints Division)
Thank you