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Purchasing and Storeroom Training Module

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Fabbie Rojas

on 2 August 2013

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Transcript of Purchasing and Storeroom Training Module

Purchasing and Storeroom Training Module
design by Dóri Sirály for Prezi
INTRODUCTION
GENERAL POLICIES
PURCHASING PROCEDURES
First In First Out (FIFO)
This method assumes that inventory purchased first is sold first. Therefore, inventory cost under FIFO method will be the cost of latest purchases. Consider the following example:
Example
Bike LTD purchased 10 bikes during January and sold 6 bikes, details of which are as follows:
January 1 Purchased 5 bikes @ Php7,000 each
January 5 Sold 2 bikes
January 10 Sold 1 bike
January 15 Purchased 5 bikes @ Php10,000 each
January 25 Sold 3 bikes
The value of 4 bikes held as inventory at the end of January may be calculated as follows:
The sales made on January 5 and 10 were clearly made from purchases on 1st January. Of the sales made on January 25, it will be assumed that 2 bikes relate to purchases on January 1 whereas the remaining one bike has been issued from the purchases on 15th January. Therefore, the value of inventory under FIFO is as follows:



PURCHASING VIOLATION POLICIES
Procurement policies articulate the procedures, rules and standards that govern how goods and services are to be acquired.


This Manual identifies the procedures applicable to the purchase of goods and services at Azia Suites and Residences. It was developed to promote the use of good business practices, to ensure that the hotel meets appropriate government requirements, and to limit the hotel's risk and liability exposure. Buyer compliance with the guidelines contained herein is imperative in providing a more efficient, effective and consistent purchasing process, achieving related hotel goals and determining responsibility and accountability.

Definition of Terms
Account Codes – The Chart Field that categorizes the nature of a transaction as a specific type of revenue, expense, asset or liability
Approved- The requisition is approved and can become a purchase order.
Budget checking – The process of comparing expenditure or revenue transactions against a defined budget
Buyer – An individual that updates and approves Purchase Orders (PO)
Cancelled- The requisition was entered and saved but was cancelled. A cancelled requisition can be reopened within a certain number of days as specified for the Purchasing business unit; otherwise, it is closed permanently.
Complete- After the requisition is dispatched on a purchase order, the goods are received and the vendor is paid. A background process identifies the requisition status as Complete. Cancelled requisitions are also identified as Complete
Denied- The requisition is denied in the approval process.
Inventory- A complete list of items such as property, goods in stock, or the contents of a building
Item Catalogue – A collection of item categories
Item Category – A grouping of items
Items – A good or service purchased by Azia Suites and Residences, Inc.
Lead Time- The time between the initiation and completion of a production process
Open- The requisition has been entered and saved but not yet submitted, or the receipt has been entered and saved but might have errors.
Pending- The requisition has been submitted and is awaiting approval.
Purchase order – Commitments from an organization to vendors to purchase goods or services from that vendor on a specific date
Purchase requisition – Record of a request for items
Received- The requisition has been placed on a purchase order. The purchase order has been dispatched to the vendor, and the goods have been partially or fully received.
Reserve Stock- the number of nits you expect to use up
Requester – The individual that enters the purchase requisition.
Safety Stock- Extra stock
Schedule –The schedule defines when and where you want the line items delivered
Sourcing – The process of creating purchase orders from requisitions
Stock Cards- cards used to monitor stock levels
Suppliers – A supplier is any person or a company from which Azia purchases goods or services B
Purchasing Department Responsibilities
Provides departments, faculty, and staff with assistance in obtaining the best evaluated cost at the desired level of quality and service
Solicits and negotiates Pre-Qualified Supplier agreements, and Pricing/Discount agreements
Works to minimize the hotel's risk and liability exposure related to the procurement process and contractual documents
Maximizes the hotel's economies of scale/volume
Supports Azia Suites and Residences’ initiatives related to small business utilization and the use of environmentally friendly products
Coordinates the review of procurement contracts, licenses, maintenance agreements, and equipment leases, as appropriate
Assists with resolution of supplier disputes
Audits the procurement process for compliance with awarding agency’s regulations and the written purchasing policies and procedures
SELF-CHECK
Identify the following terms being referred to from the Word Bank.
Open, Pending, Purchase order, Purchase requisition, Received, Reserve Stock, Requester, Safety Stock, Schedule, Sourcing, Stock Cards, Suppliers, Account Codes, Approved, Budget checking, Buyer, Cancelled, Denied, Complete, Inventory, Item Catalogue, Item Category, Items, Lead Time

1. Categorizes the nature of a transaction as a specific type of revenue, expense, asset or liability
2. The requisition is approved and can become a purchase order
3. The process of comparing expenditure or revenue transactions against a defined budget
4. An individual that updates and approves Purchase Orders (PO)
5. The requisition was entered and saved but was cancelled
6. After the requisition is dispatched on a purchase order, the goods are received and the vendor is paid
7. The requisition is denied in the approval process
8. A complete list of items such as property or goods in store
9. A collection of item categories
10. A grouping of items
11. A good or service purchased
12. The time between the initiation and completion of a production process
13. The requisition has been entered and saved but not yet submitted
14. The requisition has been submitted and is awaiting approval
15. Commitments from the hotel to vendors to purchase goods or services from the vendor on a specific date
16. Record of a request for items
17. The requisition has been placed on a purchase order.
18. The number of nits you expect to use up
19. The individual that enters the purchase requisition
20. Extra Stock
21. The schedule defines when and where you want the line items delivered
22. The process of creating purchase orders from requisitions
23. Cards used to monitor stock levels
24. Any person or a company from which Azia purchases goods or services B


The Purchasing Department shall reserve the right to execute all purchases for the hotel.
Every individual goods transaction of Php5,000 or greater requires the establishment of competition (or a written source justification) and the submission of a Purchasing Checklist/Bid Summary Form when a non Pre-Qualified Supplier is used.
All purchases are to be based on the criteria of the lowest possible price where the best quality products and services for a specific purpose are served and the delivery schedule meets the hotel’s desired standards.
Orders must be placed in qualities that reflect past consumption patterns and the latest operating forecast in order to ensure that adequate but not excessive supplies of all required products are on hand at all times. This will minimize or eliminate any disruption in guest service and keep inventory investment as low as possible in order to utilize money in more productive activities.
Develop and maintain good external relationship with suppliers in order to enhance the ability to obtain valuable technical assistance, a favorable industry image and to secure smooth operation.
Maintain sound co-operative relationships with other departments, providing information and advice as necessary to ensure the effective operation of the hotel as a whole.
Employees making purchases for the hotel are prohibited from accepting or receiving gifts, incentives and/or kickbacks from anyone supplying goods and/or services to the hotel outside of Azia Suites and Residences’ Purchasing Policy.
Managing Inventory
Inventory management and control means that you must take care not to have too much or too little of the required stocks. Keeping more stocks than what is needed is having working capital tied up in non-moving goods that do not earn money. In the long run, it will cost you more money because goods tend to deteriorate while in stock. For example, fabrics become stained and dirty, iron and steel parts rust, flour and sugar become lumpy, etc. On the other hand, you must guard against having too little of the materials and supplies you need. Having extra stocks will allow you to meet sudden increases in demand or make up for rejected or damaged parts and products.
Types of Inventory
Basic stock-
Goods are those that are either regularly used in production like sugar and milk for ice cream production or those purchased at much the same rate at all times like coffee, cooking oil and canned goods.
Seasonal Goods
are those that move quickly at some time and slowly at other times. In a department store, these would be umbrellas and rain coats during or just before the rainy season, swimming outfits and light clothing during summer months and school bags, shoes and uniforms right before and during the opening of classes.
Types of Inventory Costs
Holding and Carrying Costs are costs to carry an item in inventory for a length of time, usually a year.
Examples include interest, insurance, taxes, depreciation, obsolescence, deterioration, spoilage, pilferage, breakage and warehousing costs
Ordering Costs are costs of ordering and receiving inventory.
Examples include shipping costs, preparing invoices and inspecting costs upon arrival.
Shortage Costs are costs resulting when demand exceeds the supply of inventory.
Examples include opportunity costs of not making a sale, loss of customer goodwill, late charges and similar costs.
Minimizing Inventory Costs
The basic idea behind inventory control is to operate your business effectively with the least amount of stock. In order to do this, you need to know:
When to order
How often to order
How much to order
In ordering replenishment for basic goods, you have to know the lead time required, or the time it takes between sending the order and the actual receipt of the delivery. You should take note that you need to order in good time to have the goods delivered before your present stocks run out.
After determining the lead time required, you have to estimate your reserve stock, or the number of nits you expect to sell during this time. For example, if the delivery date if after two weeks and you expect to use fifty units per week, then your reserve stock will be:
2 weeks x 50 units/week = 100 units

But since you might use more than expected or that your orders may arrive later than schedule, you need some extra stock or safety stock so that you do not run out of them. The usual rule is that the safety stock should be one-half the reserve stock.
In the example above, the safety stock will be one-half of 100 units or 50 units. You may increase or decrease this quantity according to your own experience with your suppliers. The sum of the reserve stock and the safety stock, 100 + 50 = 150 units in the example, becomes the reorder level. When your stock reaches this level, you know that it is time to reorder.
To monitor stock levels, you may use stock cards:


Use Stock Cards for every item in stock. These stock cards may be filed in a box and updated every time a requisition is made. The reorder level must be prominently written on each card. When the quantity on stock reaches the re-order level, it is the time to place an order.

This system can be computerized such that every time the re-order level is reached, the computer will prompt the inventory staff to print a purchase requisition slip or the system will send the requisition directly to the supplier.
How often to order
. Basic Goods should be ordered regularly, maybe on a weekly basis. There may be cases when you need to consider the minimum orders implemented by suppliers or the transport and delivery costs charged to you whenever your orders are delivered. It is obvious that seasonal goods should be ordered per season.
How much to order. Basically the quantity you should re-order when the re-order point is reached should be sufficient to replenish the stocks. For basic goods, you should order as much as you think you will use in production within the period until you order again. In the case of seasonal goods, you should order as much as you will use during the next production.
The amount to order would be the maximum amount less any inventory over the maximum consumed during the delivery period. In order to keep inventory investment at the lowest possible level sufficient for continuous consumption, maximum stock level, at any given period, may be derived from the following pre-condition factors:
Minimum quantity per order as required by the supplier, or discounts for quantity buying
Value of the order to be placed
Frequency and type of merchandise (perishability)
Delivery schedule of supplier
Storing facilities
Turnover desired
Production schedule
It is the joint responsibility of user department purchasing department and Hotel Financial Controller to determine the appropriate stock level (base on forecast of needs and past consumption pattern).
Example:
XXX requires two weeks for the delivers from the order date. It is estimated that a stock of 100 units will be consumed during two weeks period. In order to allow for unusual consumption during that period, 10% or 10 units is being provided for as a safety stock. It is agreed by the management that the maximum stock desired to be on hand is 250 units. The reorder points in this case are 100 units (i.e. whenever a stock level reaches 110 units, a purchasing requisition is raised by the party concerned) and the amount to be ordered is 250 units. However, if the present stock level is 180 units and it came time to order, the amount to be ordered would be the maximum amount (250 units) less any inventory over the maximum (100) consumed during the delivery period (180-100 = 80). Therefore the order quantity would be 250-80 = 170 units.
Purchase Requisitioning
All the authority to request a needed item is rested on those responsible for running specific department. Therefore in is necessary that all the departments concerned communicate their needs to the Purchasing Department. This is generally handled by way of purchase requisitions which the quantity to order is often left to the discretion of the department head involved.
There are three ways for a storeroom clerk to initiate a purchase of goods or services:
Raise a Purchase Requisition
Raise a Daily Market List (Pre-printed form)
Apply for petty cash (not exceeding Php5, 000)
Item a) and b) must be approved by Division Head and submitted to the Purchasing Department together with the balance of stock on hand.
User departments are responsible for initiating the purchase of goods or services required. The person who authorities the requisition should ensure that the items to be purchased are necessary for the department’s operation and are within budget.
Preparing Purchase Requisition
A Purchase requisition is prepared for all non food items (purchase of food items are handled by means of daily market list). It is prepared by the user department according to the budget allocated and is then sent to the Purchasing Department who will obtain quotations. After this process, the requisition is passed on to the purchasing department for budget checking. A purchase order will be made according to the requisition.
The person in the user department who has responsibility for raising requisitions prepare a pre numbered Purchase requisition, in triplicate, stating the following details:
The department name
Date
The required delivery date
Place of delivery
Description of goods or service and quantity required
Reason for purchase
Special instruction
In preparing the Purchase Requisition, the responsible person should take into account the detail time requires in order to ensure that the materials or goods will be delivered on the date required. The Purchase Requisition number should be entered in a control book before submission of the Purchase Requisition to the authorized person for approval. The authorized person (Usually department head) should review the items requested to ensure that they are necessary for the department’s operation and that are within the approved budget before signing the Purchase Requisition as evidence of approval.
The Purchase Requisition is distributed as follows:
Original:
Purchasing Department, filing in numerical order
2nd copy: Purchasing Department, for action on purchasing
3rd copy: (via Purchasing Department) Finance and Accounting Department, to be attached to Purchase Order for matching with payment supporting document; and
4th copy: Requisition/User Department, for filing and follow-up of purchase.

The raiser of the Purchase Requisition records the return of the authorized Purchase Requisition in the control book. This book should be reviewed weekly for Purchase Requisitions not action within a reasonable period which should then be followed up and approved.
Revision of Purchase Requisition
Should the approved Purchase Requisition need to be revised in respect of cost increases, e.g. upgrading specification/quality and increase in quantity require, a new Purchase Requisition should be issued to replace the previous one. The new Purchase Requisition should contain the reason for reissue and refer to the previous requisition. The old Purchase Requisition should be attached to the new Purchase Requisition for processing. The revision of other details such as delivery date or place of delivery should be made by revising/correcting the original Purchase Requisition (copy of the Purchasing Department) and should be initialed by the responsible person.
Preparing Specifications
Whenever practical, it is recommended that purchasing specification be completed for major items of expenditure. The Purchasing Manager, together with user department head, has to develop a specification for all the major items of expenditures. This will form the basis for the description, quality, packing, and other requirements for the purchasing staff which will reduces or eliminate misunderstanding between supplier and the hotel and allow the person responsible for receiving to check the quality of delivery goods against a written description of the quality desired.

Specifications should be classified in the following major categories:
Meat
Poultry
Sea food
Fruits
Vegetables
Dairy products
Dry store items
Housekeeping supplies
Kitchen equipment
Sample Requisition Form
Purchasing
The Purchasing Department should ensure that every purchase serves the company’s best interest. The quality of materials or goods should be in accordance with requirements. Prices should be as low as possible and delivery should be punctual.
1. Pre Purchase Review
Prior to conducting a purchase the purchasing personnel should take the following action:
a) Check the authorization to ensure that it is in accordance with the approved limit;
b) Check the requested to ensure that they are for normal business requirements. Any irregularities should be referred to the Purchasing Officer; and
c) Check and record, against the capital expenditure budget, the accumulated budget used both month-to-date and year-to-date, and the budget balance upon rising purchase order.

The purchasing personnel then initial his name on the Purchase Requisition as evidence of checking. The Purchasing Officer reviews the Purchase Requisition and distributes it to the relevant purchasing personnel.

2. Sourcing of Supplies
In selecting a supplier, the purchasing personnel should make a short list of three potential suppliers, whenever possible.
a) Experience;
b) Yellow pages;
c) Trade journals;
d) Advertisements, etc.

3. Price Comparison and Selection
After obtaining quotations from the potential supplies the purchasing personnel should prepare a Price Comparison and selection form indicating following details:
Code and description of materials and goods
Method of purchase (e.g. quotation, negotiation or price inquiry)
Names and addresses of suppliers who submitted quotations
Quotations
Delivery schedule
After-sales service
The purchase personnel should review the offers and select the supplies based on the criteria set out. During the review of quotations they should consult with the Purchasing Manager to ensure that the best offer is selected. The purchasing personnel, after selection of the supplier, may ask the selected supplier for discount or better terms of payment, if possible.
Where the price has been negotiated, the Purchasing Manager, after negotiation, should prepare the Price Comparison and Selection form to document the results of the negotiation. The Purchasing Manager and the Management Team member who participates in the negotiations should also sign on the form.
Selection Criteria
The selection criteria which should be applied in vendor selection are as follows:
The VALUE FOR MONEY of the materials or goods from the suppliers
The QUALITY of the offer compared with those at a lower price
The PERFORMANCE of the offer supplier in terms of punctuality of delivery, after sales-service, and cooperation with the company.
4. Preparation of Purchase Order
After selection of the supplier, the purchasing personnel should place the order with the supplier. The Purchasing Manager is responsible for issuing purchase orders. They are to be issued in a numerical sequence stating the following details:
Date of Purchase Order
Vendor’s name and address
Reference to vendor’s quotation
Description of items to be purchased
Quantity
Unit price
Amount
Purchase Requisition reference
Terms of payment
Date of delivery
Delivery address
The purchasing manager then submit the Purchase Order to the Financial Controller and General Manager/or the designated person for approval. The Purchase Order in five copies is distributed as follows:
Original: Vendor confirmation of terms and conditions of purchase
2nd copy: Purchasing Department, for monitoring delivery (filed by delivery date pending matching with the receiving report).
3rd copy: The Account Payable section for notification of purchase and for matching with the Purchase Requisition and the supplier’s invoice.
4th copy: The Requisitioned department, for notification of purchase processing.
5th copy: The Receiving section for matching against goods received.
6th copy: Store for goods inward information.

Revision of Purchase Order
Should a Purchase Order already issued to be revised for specification, quantity or unit price the purchasing personnel should issued a new Purchase Order. The new Purchase Order should indicate that the reissue is for replacement, and the reference number of the previous order should be shown and attached to the Purchase Order which it replaces.
For other changes, e.g. delivery date and place of delivery, the purchasing personnel should prepare a letter to the supplier notifying the changes.

5. Purchase of Food Products
Generally, food products can be classified into either perishable or nonperishable items. Perishable items are those that have a relatively short storage, such as dairy and bakery goods, fresh fruit and vegetables, and fresh meat, poultry and seafood products. Nonperishable items, on the other hand, have a much longer shelf life that could, conceivably, run into years. Purchasing certain types of food products demand specific skills which can only be acquired with long experiences and training. The buyer must understand and familiar with kitchen procedures as well as those of food outlets. Purchasing of perishable is usually handed on a daily basis by telephone according to the hotel specifications.
The daily request for food purchase (daily market list) is initiated by the responsible chef who completes the inventory volume. This list will then be sent to the Executive Chef who will fill in the quantity of items which he considered should be ordered. This list must be completed by afternoon so that orders can be earlier given to suppliers for next day delivery. The Purchasing Department will be guided by this list and order accordingly. It is recommended that, whenever possible, a minimum of three quotations to be obtained before food orders are placed. The Purchasing Manager should consult with the Executive Chef if a food order seems to be unusually large or the price of a particular item seems to be expensive, and another item could be substituted. With all ordering, whether for perishable or non-perishables, the Purchasing Department should buy from the supplier who can meet the specifications and provide the quality desired at the lowest price. Reliability of the supplier and frequency of shipping can be a consideration.
The market list is also used by the Receiving Section as a receiving sheet to identify incoming goods. The receiving clerk checks the invoice or delivery note against the daily market list. After all merchandise has been received, the clerk sends the invoices/delivery notes and the daily market list to the Accounts Department.
6. Purchase of Beverage Items
Since most beverages have a relatively long life, Beverage items will be purchased on a weekly basis and the established specification (if any) will be used as a guide. The purchasing agent should familiar with alcoholic brands and types. Normally, alcoholic beverages are classified into two major categories:
Malt beverages are produced from malted barley, corn, sugar, herb and other ingredient. Beer, ale, porter, stout and bock fall under this category.
Wine is the pure, naturally fermented juice of fresh ripe grapes
Obviously, since mostly brand names are purchased, there is no major task involved in obtaining quality, since all liquor of a particular brand will be of the same quality. There is normally no deterioration of quality while in transit or storage. For most beverage products, specifications would not need to be prepared, since there is generally one agent or vender in the area, quotation sheet become unnecessary due to the price are public knowledge and little deviation occurs from month to month. However, the person responsible for purchasing should be alert to quantity discounts, sales items, or other specials that are of an appropriate quality for purchase by the hotel. In addition, should there by an increase in price, the Food & Beverage Division should be informed immediately so that proper action could be taken for the benefit of the hotel. A requisition should be prepared by the storekeeper head and approved by the F&B Manager and Director based on the inventory issues of the week (or other period as established by the hotel).
All beverage purchases should be supported by an authorized purchase order. Unusual or special requests for the purchase of beverage should be approved by the Food & Beverage Manager and Director before an order is placed.
The buyer who is responsible for purchasing general store items must have thorough knowledge of a wide range of items and at times involved in technical aspects of the purchase. Therefore, it is necessary to develop specifications for frequently purchased items and for items with a high consumption.
7. Purchase of Supplies
The brand of all spare parts, electric wires and lamp bulb, etc. must be specified on the purchase requisition by the Maintenance Division. There different quotations must be obtained, one from the sole agent and other from the distributors.
In the case of repair and maintenance, the maintenance department must state clearly on the requisition what needs to be done, the specification of materials and the time limit. Three tenders should be obtained.

8. Petty Cash Purchases
Single, items costing less than Php5,000 or multiple items purchased in aggregate value less than Php5,000 shall be made through petty cash purchase method. The purchasing personnel, after sorting and selecting the supplier/vendor, should note the supplier/vendor name, unit price, and the total amount on the Purchase Requisition. If each purchase on a Purchase Requisition is less than Php5, 000 a Purchase Order need not be issued.
The purchasing personnel should:

a) Pass the Purchase Requisition to the authorized officer for approval;

b) File the original Purchase Requisition in the Small Item/Petty Cash Purchase file.

With regards to petty cash purchases the buyer will ask for a petty cash advance in order to purchase the required items. After purchasing the require items, the buyer should clear the advance by submitting the receipt and Purchase Requisition supporting the payment to the cashier.
Maintenance of Purchasing Data
The Purchasing Department is responsible for maintaining relevant purchasing information in order assist them in purchasing good or services efficiently. In order to establish an information source about the Hotel’s suppliers, the following records are the minimum to be kept:
o purchase records
o price records/contract files
o stock and consumption records
o supplier’s records
o good specification files and blue print
o files of manufacture’s catalogues

All purchase record will be divided into four categories: General Store, Food and Beverage, Engineering’s Store and Capital Items.
1. General Stores:
1. Housekeeping Department
a. Guest suppliers
b. Linen
c. Miscellaneous
2. Stationery and printing (forms)
3. Cleaning supplies
a. Soaps and detergents
b. Polished and waxes
c. Sanitary supplies
d. Household sundries
4. Paper goods
a. Cocktail napkins
b. Napkins
c. Coasters
d. Place mats
e. Menus
f. cocktail plastic supplies

2. Food & Beverage Department:
1. Food
a. Staples
b. Dry Stores - Canned goods
c. Bottles
d. Chinese dried goods
e. Cold Store - Fresh fruit
f. Fresh and frozen vegetable
g. Daily products
h. Meat and meat products
i. Fish and shell fish
j. Poultry and poultry product
k. Frozen products
l. Other perishables
m. Gourmet foods
2. Beverage
a. Liquor
b. Beer
c. Wine
d. Mixers - Sodas
e. Syrups
3. Miscellaneous

3. Maintenance Store:
1. Tools
2. Nails and screws
3. Timbers
4. Paints
5. Lamp bulbs and fluorescent tubes
6. Electric Wires
7. Spare parts
8. Lubricants

4. Capital Items:
1. Furniture and fixtures
2. Office furniture and equipment
3. Machinery
4. Food & Beverage Department
a. China
b. Glass
c. Silver
d. Linen
e. Kitchen Utensils

Delivery Monitoring
When a purchase is being made, the buyer and supplier must determine which of two ways a shipment will be handled:
FOB Delivered (Destination): Ownership (title) of the goods transfers to the buyer when the item is received by the hotel; this is significant when there is a shortage or damage to the goods. FOB Delivered means that the supplier will be responsible to file a damage claim with the freight hauler.
FOB Shipping Point (Origin): The buyer takes ownership of the goods at the supplier's dock. If the item(s) is damaged when received, it is the buyer's/Azia’s responsibility to file a claim with the freight company.
The Purchasing Department is responsible for monitoring delivery to ensure that the supplier delivery the goods according to the schedule stimulated in the purchasing order. The Purchasing personnel should perform a review of all the outstanding orders, including partially filled orders on a daily basis or more frequently as operational needs to expedite the delivery. The purchase personnel should keep users informed of delivery dates. This is to enable them to take any corrective actions if delivery cannot be made. Upon receipt of a Receiving Report issued by the Receiving section, the Purchasing Clerk should:
Match the Receiving Report with the copy of the Purchase Order (2nd copy) in the follow-up file
Records the receipt in the Purchase Order Register
File both of them together in the supplier’s file
Storing and Warehousing
The hotel will carry inventory to fill unexpected demands. We will therefore have to provide storage or even warehousing space for the inventory. Safe and efficient storage keeping helps preserve the value of goods and maintain saleability over a longer period of time. Before making decisions, the purchasing department together with the storeroom clerk should consider the following:
What kind and quantity of goods will be stored? How much space is needed?
Will the inventory need air-conditioned space? Will it require loading docks or special materials handling equipment? Will it need shelves?
How frequently will the storeroom clerk need to access the stored items?
In addition, a system for tracking the movement of the items to and from the storeroom is needed. The condition of the stored items also has to be monitored, particularly perishable goods. For chemicals and flammable materials, you may have to provide special handling facilities, aside to prevent potential accidents to people and leaks to the immediate environment.
Receiving
The receiving sections are responsible for receipts of materials or goods. They should ensure that the quantity and quality of the materials or goods received are in accordance with the required specification stated on the Purchase Order. They are also responsible for transports and distribute merchandise or goods to appropriate area of use or storage. All suppliers are to be instructed to deliver all goods order to the receiving section.
Before accept any goods delivered, the Receiving Officer, and/or Store Keeper has to ensure that the purchases are supported by approved purchase orders.
Under no circumstances should they accept delivery for which no purchase orders have been placed. Suppliers must be instructed to submit delivery notes in triplicate, fully priced together with the merchandise. Supplier should be instructed that no invoices will be paid unless they have copies signed by authorized personnel. In case the Hotel does not receive 3 copies if the supplier’s invoice or delivery orders, the receiving clerk must arrange the necessary number of photo-stat copies.
The receiving clerk should receive information regarding price of items purchased in order to facilitate Food and Beverage inventory control and Food/Beverage cost recording so that inventory record can be up-to-date and daily Food and Beverage report can be produced on a timely basis. (Without price being know by the receiving clerk may generate a bottleneck in Food and Beverage cost recording).
The following is a set of standard receiving practice which has to be followed:
a) The receiving clerk must inspect the merchandise received by counting on each item or carefully weighted and checking against the specification contained in the respective purchase orders and invoice/delivery order accompanying the delivery. Depending upon the kind of merchandise being received, the Chef or maintenance personnel may be requested to inspect the quality of merchandise and reject items not meeting the purchase specification.
b) For the perishable food items, an examination to detect sign of deterioration and an inspection to determine freshness may be determined by a visual examination or in some cases from the date stamps used by purveyors. After acceptance it may be advisable for the receiving clerk to date stamp and/or affix tag or note the date on the item. This is to facilitate the first-in first-out use of materials in the production process.
c) If goods were delivered without an invoice or delivery order, a triplicate “memorandum invoice” should be prepared listing name of supplier, date of delivery, description, count or weight of items along with prices copied from the respective purchase order/the market quotation sheet so that if can be later matched with the actual invoice sent later by the supplier to the accounting office.
d) After checking by the receiving clerk, all invoices or a memorandum invoice should be initialed and rubber stamped to show that the merchandise has been checked and accepted.
e) If goods are delivered and then returned to the supplier because they are not of acceptable quality, short shipped or for some other season (e.g. discrepancies in the prices/extensions between delivery order and the purchasing order), the receiving clerk prepare a credit memorandum in triplicate carrying necessary details including an clear explanation for request for credit and obtaining delivery person’s signature acknowledging the credit. An immediate notification to the purchasing department should be made at this time by the receiving clerk.
f) The receiving clerk prepares five copies of good received note and four copies in case of FF& E items which are classified into the following categories each of which is prepared separately for each individual good received note.
Food
Beverage
Engineering and General Supplies
Furniture, Fixture and Equipment
The note refers to the number of purchase order or daily market list and lists all invoices/delivery orders of merchandise received. The receiving clerk then distributes the good received note as follows:
1st copy: Store clerk for perpetual inventory record updating in BIN (with no price being recorded in this copy for internal control purpose)
2nd copy: Accounts Payable Section, in case of FF&E items.
3rd copy: Inventory control section together with a copy of supplier’s delivery note updating stock card.
4th copy: Purchasing Department, for matching with the purchase order in the & 3rd copy delivery follow up file; and (FF&E items)
5th copy: File in sequential number in receiving section/department concerned & 4th copy (FF&E items)

The store clerk stores all items in proper storage locations as soon after delivery as possible. Items that are put directly into production (either in the kitchen or sales area) are referred to as direct purchases. The normal procedure is to record the amount into direct purchase column in daily receiving report (apart from storeroom purchase) and have the party receiving the merchandise sign for the amount received.
In case of inventory control of direct purchase to kitchen, the receiving clerk stamps “Direct” on invoice and good received note. Otherwise the receiving clerk stamps “Inventory” If goods are sent to storeroom.
g) At the end of each day, daily receiving summary is prepared for four copies to summarize all kinds of merchandises purchased, i.e. food, beverage, supplied both direct to purchase and purchase to the store.
The report details good receiving note number, supplier name, invoice number and other relevant information. The receiving clerk distributes the daily receiving summary as follows:
1st copy: Cost control
2nd copy: Account payable section
3rd copy: Store
4th copy: File in the date order in receiving section
Delivery Issues or Failure to Perform
Further steps required in instances of delivery or performance problems are:
1. It is the responsibility of the requesting department experiencing dissatisfaction with the supplier performance to notify the purchasing department, in writing, of the complaint.
2. Purchasing will review the facts through discussions with the requesting department to determine the appropriate course of action.
3. The requesting department may be required to provide specific details and reasons for dissatisfaction, in writing.
Training Objectives
After completing this training, you will be able to:
- learn the procedures, rules and standards that govern how goods and services are to be acquired
- to promote the use of good business practices
-View and understand purchase requisition
-Manage purchase requisitions
-Define basic purchase requisition terms

Self-Check Exercise

You have been asked by the purchasing department to notify them whenever you, the requesting department, become dissatisfied with the purchased items delivered to you. Suppose the items you received were of dismal quality or didn’t meet the specifications indicated, express in writing your dissatisfaction or complaint.

OUTLINE
All Azia Staff must avoid conflicts of interest between their obligations to the hotel and their personal affairs. No admin or staff member or a relative of either group, should have an economic interest in, or relationship with, any firm, person or corporation doing business with the hotel if there is a chance, or a perception, it could influence the employee’s actions on behalf of the Azia. Azia Suites and Residences’ code of ethics, gift guidelines for employees and anti-kickback clause, and conflict of interest policy are applicable to various hotel stakeholders, including the hotel’s authorized buyers/ purchasers.
Self- Check Activity:
Divide the class in to four groups and have each group do a role play on each of the situations below:
1. Mary, a purchasing staff, was offered 3% of the total amount of purchases if she awards it to X supplier. She thinks it is alright since X Supplier proved to be the lowest bidder.
2. Janice wants to award the supply of meat and poultry to Edward, her secret lover whom she wants to please. Secret as it is, she believes she isn’t violating anything.
3. James is faced with the dilemma when Supplier A asks him for Supplier B’s final quoted price so he can lower his price and be awarded. James knows it isn’t ethical to disclose such information to Supplier A, but he thinks lowering the quoted prices will benefit the hotel.
4. Armand’s brother, a supplier of electrical wires and cables, is interested to quote for the hotel where Armand also happens to work. He makes this known to the management while refraining from participating in any manner with the decision of the purchase.
Full transcript