1. A
PROJECT REPORT
ON
STUDY OF PURCHASE PROCEDURE OF PATSONS METALLICS PVT.LTD.
MANUFACTURING COMPANY
SUBMITTTED BY
MR. MOHAN BIHARILALJI PANDEY
IN FULFILMENT OF MASTER OF BUSINESS ADMINISTRATION
GUIDE
PROF. SHIVANAND SANMATH
SUBMITTED TO
UNIVERSITY OF PUNE
THROUGH
ASM’s INSTITUTE OF INTERNATIONAL BUSINESS RESEARCH
PIMPRI, PUNE-411018
YEAR
2011-2013
1

2. 2

3. DECLARATION
I MR MOHAN PANDEY CERTIFIES THAT THE PROJECT WORK ENTITLED “PURCHASE
PROCEDURE OF MANUFACTURING COMPANY.
IN AN ORIGINAL ONE AND HAS NOT BEEN SUBMITTED EARLIER TO THE UNIVERSITY OF PUNE
OR TO ANY OTHER INSTITUTION FOR FULFILLMENT OF THE REQUIREMENT OF THE DEGREE
OF MASTER OF BUSINESS ADMINISTRATION (MBA)
DATE:
PLACE:
MOHAN PANDEY
3

4. ACKNOWLEDGMENT
THIS IS THE GOLDEN OPPORTUNITY FOR THE MANAGEMENT STUDENTS DOING RESEARCH
METHODOLOGY AND PROJECT WORK IN MANAGEMENT FIELD.
I WOULD LIKE TO EXPRESS MY GRATITUDE AND THANKS TO WARDS ASM’S IIBR
COLLEGE FOR GIVING ME AN OPPORTUNITY TO UNDERTAKE THIS PROJECT UNDER THE
GUIDANCE OF PROF SHIVANAND SAMNATH FOR HIS WHOLE HEARTED CO-OPERATION AND
TIMELY GUIDENCE IN SUCCESSFUL COMPLETION OF THIS PROJECT .
I WOULD LIKE TO TAKE ALL THOSE WHO HAVE GIVEN ME VALUABLE
SUGGESTIONS, SUPPORT AND INSTRUCTIONS IN MAKING THIS PROJECT SUCCESSFUL.
SPECIAL THANKS TO MR DEVDAR SIR (PURCHASE MANAGER AND NILESH SIR FINANCE
MANAGER, PATSONS METALLICS PVT.LTD) FOR HIS GUIDENE AND SUPPORT.
LAST BUT NOT LEAST I WOULD LIKE TO THANK ALL MY FRIENDS AND ESPECIALLY MY
FAMILY FOR HELPING ME IN THE COMPLETION OF THIS PROJECT.
THE COMMENTS AND OPINION SUGGESTING ANY FURTHER IMPROVEMENT IN THE PROJECT
WILL BE HIGHLY APPRECIATED.
MOHAN PANDEY
MBA II (FINANCE)
4

5. TABLE OF CONTENTS
Serial No Particulars Page No
1 EXECUTIVE SUMMARY 6
2 SCOPE AND NEEDS OF THE PROJECT 7
3 OBJECTIVE OF THE PROJECT 8
4 INTRODUCTION 9-13
5 ORGANIZATION PROFILE 14-30
6 RESEARCH METHODLOGY 31-33
7 PURCHASE PROCEDURE & RELATED TOPIC 34-43
8 FINANCIAL ANALYSIS 44-55
 THEROTICAL OBSERVATION
 PRACTICAL OBSERVATION
9 DATA INTERPRETATION AND ANALYSIS PURCHASE PROCEDURE 56-73
10 CONCLUSION 74-75
11 FINDINGS 76-78
12 LIMITATIONS 79-80
13 RECOMMENDATION 81-83
14 BIBLOGRAPHY 84-85
5

6. EXECUTIVE SUMMARY
The Company being established as PATSONS METALLICS PVT.LTD. (PMPL) Incorporated in
2011, PMPL is the flagship company of the PATSONS group. The company has a sizable presence in
Domestics markets.
Today PMPL is an acknowledged leader in the manufacturing of Metallic’s
product CI and SGI Castings, Valves and Specials and Fittings for Water Works.
. My Project is The Purchase Procedure of Manufacturing Company. The study was conducted at
the head office of Patson Metallic’s Pvt.Ltd. (PMPL), LATUR
The project was of two months duration. During the project I interviewed the executives &
staff to collect the data, & also made use of company records & annual reports. The data collected were
then compiled, tabulated and analyzed. Purchase Procedure is the very important part in the
manufacturing company. Management due to Investments in current assets represents a substantial
portion of Total investment.
 Some the points to be studied under this topic are:-
 How to purchase of raw material at a right time.
 What should be the firm’s purchase policy?
 How to & when to pay the creditors of the firm?
 How much to invest in Raw materials?
By studying about the company’s different areas I came to know certain things like
Financial Analysis is more than one but it does not mean that Company has excessive control.
6

7.  Scope and Need of Study:-
Purchase procedure is widely used in the entire organization. The scope of this
is limited to the study of purchase procedure and different types of Assets of Patsons Ltd. The study
of includes the comparisons of raw material requirements for the period of under review.
The study was conducted at “PATSON LTD.LATUR”. The duration of
the study was confined to about 60 days. In this duration of the study is based in the data collected
and the financial for last 2 years financial year and role of purchase manager when finished the
material in the company. So some points are included.
1) It covers study of records maintained by the purchase department of the (PMPL).
2) It includes examination of forms reports used by the factory.
3) It covers study of various techniques of purchase procedure applied in the PMPL
organization
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8.  Objective of the project:-
1) To identify the financial strengths & weakness of the company.
2) Through the Purchase procedure and understand the profitability of the company.
3) Evaluating company s performance relating to financial Analysis.
4) To know the purchase procedure positions of the company with the help of purchase to the right
material in the company.
5) To find out the utility of financial position and observation to determining the financial capacity
of the firm.
6) To understand the concept of Purchase procedure of the Manufacturing company.
7) The Study of Purchase Procedure manufacturing company and the Patsons metallic’s it is a
analyzing the nature of the market. The regulations and the governing factors of the Patsons group.
8) The project is on Purchase Procedure of company and the project is undertaken to study of the
purchase procedure of manufacturing company. Adopted by Patsons Metallic’s Pvt.Ltd. (PMPL).
8

9. INTRODUCTION
CONTENTS
 History of PATSONS Group
 History of Manufacturing Company
9

10. HISTORY OF PATSONS GROUP:-
The Patsons Group commenced operations in the year 1980 at Latur in Marathwada region of
Maharashtra. The history is the story of human spirit and exceptional efforts to realize an appreciated
dream of building a full- fledged industry starting from virtually nothing. The group was founded by Shri
Annasaheb Patankar, young, dynamic and talented technologist coming from upright middle class
family of freedom fighters. Annasaheb after completing his technical education could have easily opted
for a prestigious government post, but instead, he decided to start a new business to help the
economically backward farmers to get gainful and respectable employment opportunity. His dream was
to build a strong technology based industrial unit to serve the interests of poor farmers and landless
laborers to make available gainful employment, in the industry sector.
By complete hard work, total integrity, respect for the individual,
keen business acumen, technical expertise, innovative approach and outstanding team building magic,
there was no wonder that the sapling he planted, very soon became a striving industrial group. Later his
worthy bright sons Kamlesh and Mangesh joined him in 1995 and in the short period of less than 15
years the father - sons team has made what Patsons Group is today. A grand shining success
admired by one and all. A benchmark of excellence and business leadership.
 PATSONS METAL UDYOG:-
Patsons Metal Udyog had its beginning in the form of a small C.I. foundry basically manufacturing CI
castings for sister company Patsons Valves & Engineering Industries. The foundry was shifted to MIDC
area Latur in the year 1985 and bigger size Cupola, Balancing Equipment and Comprehensive Test
and Inspection Facility was added to make it a full size foundry unit for making CI Castings in the range
of 1 Kg. to 1000 Kgs.
In the year 2007 the Patsons Group decided to expand and modernize the foundry business and enter
the Automobile Casting area to meet the exacting and demanding need of the Automobile Castings
business. This was done to meet the needs of fast expanding Automobile business in India.
With this in view Patson Metallic’s Pvt. Ltd. easy formed. The unit is now operational since March 2011.
Patsons Metallic’s Pvt. Ltd is a modern state of the art 10,000 Tons per annum capacity Induction
Furnace based foundry unit, having automatic sand plant of 100 Tons per day capacity, molding line,
semi automatic pouring line, 500 Kg. capacity dual track induction furnace, efficient and high productive
fettling facility, pattern shop and integrated test and inspection facility.
The plant is capable to produce C.I .and S.G.I. castings in the weight range of 1 Kg. to 1000 Kgs. The
entire facility is housed in the first class construction factory buildings with total area of 3000 square
meters. The manufacturing team includes highly experienced foundry professionals with vast
experience in similar foundries.
10

11.  PATSONS GROUP OF INDUSTRIES:-
1980 :- GROUP FOUNDED
1985 :- START OF VALVE MANUFACTURE.
1995 :- PATSON VALVES PVT LTD & ENGG.INDUSTRIES.
1998 :- PATSON METAL UDYOG.
2002 :- BIS CERTIFICATION FOR VALVES.
2004 :- ISO 9001-2000 CERTIFICATION.
2005 :- FOUNDED ANKIT MARKETING.
2009 :- FOUNDED PATSON PRESERVED VEG.PVT.LTD
2010 :- FOUNDED PATSONS METALLICS PVT. LTD.
2010 :- PATSONS AGRO EXPORT PVT LTD.
 PATSONS INVESTMENT HAS INVESTED THE RS IN A PLANTS:-
YEAR RS IN LAKHS
2007-2008 153
2008-2009 105
2009-2010 117
2010-2011 319
2011-2012 324
11

12.  About us
The US $ 2 Million Patsons Group is one of the India’s fast growing business groups. The group has
business interests in diverse areas including Preserved Vegetables. CI and SGI Castings, Valves and
Specials and Fittings for Water Works, Infrastructure Development and Higher Education.
 Group companies include
FOOD PROCESSING
PATSON PRESERVED VEGETABLES PRIVATE LIMITED
PATSON AGRO EXPORT PRIVATE LIMITED
CASTINGS
PATSONS METALLICS PRIVATE LIMITED
PATSONS METAL UDYOG
VALVES & FITTINGS
PATSONS VALVE & ENGINEERING INDUSTREIS
PATSONS VALVES
PROJECT & INFRASTRUCTURE
NATIONAL COMMUNICATION NETWORK
MARKETING
ANKIT MARKETING SERVIC ES
EDUCATIONAL
VISHWABHARATI ACADEMY’S COLLEGE OF ENGINEERING
As a part of the major expansion and modernization program, the group has expanded the operations
in India and also developed a global foot print.
Across the Patsons Group social responsibility sharing is a valued objective with keen and significant
involvement in environment development and community enrichment activities.
Ably led by managing director Mr. Kamlesh Patankar Group emerges as a focused organization
building on its strengths to enhance value for the stake holders.
 Chairman and Chief Executive Officer
Kamlesh Patankar is CEO of Patsons Group Kamlesh began his
education at the prestigious Shri Bankatlal English School at Latur. Imbibed a liberal secular education
based on the ideas of equality and freedom. After graduating in Metallurgical Engineering from Pune
University in 1992, he received valuable work experience at Cummins India, well known Multinational
Corporation based in Pune. He joined the business founded by his father Shri Annasaheb Patankar
in the year 1995. He learnt the intricacies of business operations under the watchful and encouraging
12

13. guidance of his father. Very soon, he mastered the working of the business and by the age of 41 today,
steered the group to commanding heights of glory and growth.
By virtue of his grand vision, insistence on quality, hard work, inspiring
leadership and integrated approach, he led the group from success to success. Today, thanks to his
contribution, Patsons Group has developed in to a multi product, multi division organization having a
significant foot print in the International market for Preserved Food Products and domestic area
Patsons Metallic’s pvt ltd.
His enterprising spirit, innovative ideas, friendly nature, democratic
principles and positive, proactive approach coupled with people centric management style has won him
a place in the hearts of his customers, employees, friends and associates. He is a great team builder
and believes that what the organization today is the work of his employees and acknowledges this fact
very candidly at every opportunity. His greatest ability and strength lies in his relentless insistence on
continuous improvement, facing any difficulty with total courage and rational problem solving
approach and working with ease and warmth with people who are senior in age, experience and
knowledge. He is a keen observer with a phenomenal photographic memory and computer like recall.
Many times it is acknowledged by his associates and employees that even before a problem is fully
explained to him; he comes out with a perfect wonderful solution. Definitely, legendary sixth sense is
active in his case.
 Patsons Group Corporate Mission Statement:-
To be responsible and ethical corporate citizen while offering best quality products and services to our
valued Indian and Overseas customers. To develop growth oriented cooperative democratic work
culture for vendors, employees and associates. To share our social responsibility to achieve healthy
growth coupled with stability and profitability
 To achieve the above
 To become one of the fast growing transnational business groups
 To become a group that is recognized as the group that values quality, relations, performance,
integrity and innovative spirit.
 In our business we will
 Continuously seek opportunities for growth, to be a leader in the domestic market
 Establish a significant global presence.
 Use technology as the tool for growth.
 We will be recognized for our people centric ethos, excellent relations with business partners,
and pleasant work culture.
 We will be respected for being a good corporate citizen.
13

14. ORGANISATION PROFILE
(PATSONS METALLICS PVT. LTD. (LATUR))
14

15.  Name of the organization : - Patsons Metallic’s Pvt.Ltd.
 Address of the factory :- B-10/2, Addl. MIDC, Harangul,
District - Latur – 413531
Maharashtra, India
 Tel & Fax : - 00-91-02382-220885 & 220886
 E-mail :- patsonslatur@gmail.com
 Web Site : - www.patsonslatur.in
 Type of Organisation : - Manufactures of casting (CI &SG IRON)
 Area of organization : - 7447 sq ft.
 Manpower :- 100
 Turnover (sales) :- 3.24 cr (above)
 Share Capital : - 2000000 shares
 Banker : - Bank of Maharashtra ( latur branch)
15

16.  Patsons Metallic’s Pvt. Ltd:-
 History:-
 PATSONS METALLICS PVT.LTD.:-.
The Patson Metallics Pvt. Ltd. it is a easy formed company. The unit is now
operational since March 2011. Patsons Metallics Pvt. Ltd is a modern state of the art 10,000 Tons per
annum capacity Induction Furnace based foundry unit, having automatic sand plant of 100 Tons per
day capacity, molding line, semi automatic pouring line, 500 Kg. capacity dual track induction furnace,
efficient and high productive fettling facility, pattern shop and integrated test and inspection facility.
The plant is capable to produce C.I .and S.G.I. castings in the weight
range of 1 Kg. to 1000 Kgs. The entire facility is housed in the first class construction factory buildings
with total area of 3000 square meters. The manufacturing team includes highly experienced foundry
professionals with vast experience in similar foundries.
16

17.  COMPANY PROFILE:-
 INTRODUCTION:-
The Patsons Metallics Pvt Ltd., promoted with advancement of
technology, will be one of the India’s largest industrial groups, engaged primarily in manufacture of
various CI & SG Grade Castings to meet the domestic and international markets. Adding on new
ventures, expanding capacity and diversifying products, the unit total production of Castings will be
around 5000 metric tons per annum.
Patsons Metallics Pvt Ltd. Are putting up a state of the Art Foundry to cater to
the need of OEM’s and replenish market. We also strive to conduct continuous up gradation in line with
latest technological development.
 Location and Infrastructure:-
The unit is situated at Latur Addl MIDC Area, Latur District Latur just 2 Kms
away from Latur Airport. All vital modes of communication namely, Telephone, Facsimile, E-Mail,
Intranet, Satellite Communication etc., are easily accessible from the city of Latur. Other facilities like
Banking, Transport etc.
 Quality Assurance:-
The Quality is synonymous to products. In fact, we cast quality and
confidence to its valued customers. The Quality Assurance Department with separate heads for each
sphere of activity such as Chemical Analysis, Physical Testing, Visual and Dimensional Inspection,
Non-destructive testing, Packing and Dispatch.
 Exports:-
A wide range of items are likely to be exported regularly world-wide to
USA, UK, Germany, Italy, Denmark, South Africa, Japan, Singapore and Middle East Countries.
 Marketing Network:-
Marketing operations are to be carried out across the country, by a wide network of
marketing offices, to cater the needs of domestic and upcountry market in major towns and cities of
India.
17

18.  Manufacturing and Design Unit:
Patsons Metallics Pvt Ltd Is fully equipped manufacturing unit and design unit and has an
appreciable production capacity. This unit is fully equipped with latest machines, equipments, and tools
to manufacture our product range. Different machines are installed in our production unit which
includes:
A) Medium Frequency Induction Melting Furnace.
B) Sand Reclamation and preparation plant.
C) Pneumatic Squeeze Jolting Pin Lift Moulding Machines.
D) Pouring Ladles.
E) Shot Blasting Machine.
F) Compressor.
G) EOT Crane.
H) Workshop Machine.
I) CNC Vertical Machining Center.
J) Spectrometer.
K) Physical Quality Testing Machines.
L) Metallurgical Microscopes.
This unit is fully supported by an in-house design unit. It develops the designs for
company products based on market as well as company customer’s requirements. After the finalization
from our design unit, the product designs are used to produce the products.
The Patsons Metallic’s Pvt Ltd. offers full-service capability in casting design
assistance for new products from concept through prototype and final production phases and company
team of experts in metallurgy, production, pattern design and quality control assures quality castings.
Computerized customer service and production scheduling provide current order status and prompt
deliveries and focused on responsiveness to your needs through short cycle times, on-time deliveries
and consistent quality.
 500 KVA High Tension line installed with Express Feeder
18

19.  Quality Policy:-
This unit is fully supported by an in-house design unit. It develops the designs for our
products based on market as well as our client’s requirements. We are committed to furnish only the
quality products to our clients. We implement prescribed quality strategy in our organization. The
strategy is fully in conformity with established cutting edge technology. It is implemented exhaustively
through every stage of our products, production and delivery.
 It is ISO 9001-2008 Certified Unit for manufacture and supply of castings, automotive parts.
 Laboratory and Testing facilities:
 Spectrometer –State Of the Art 26 Element Germen make Spectrometer.
 Traceability:
The Quality Team supervises the Quality Assurance and Quality Control aspects
along with the entire process system by identifying and associating with quality circles. We ensure
100% tractability for the products.
 Occupational Health and Safety:
The organization committed to Occupational Health and Safety of the workers and shop
floor staff ensure strict adherence to body protective wears and covers for moving parts. The workers
are constantly educated upon the important of health and safety through displays and safety tips.
 Environmental Protection:
As an environmentally responsible company, we comply with the environmental regulations
advocated by the Government. As a result we have been provided with necessary Pollution Clearance
Certificate.
19

20.  FINANCIAL GROWTH PATSONS METALLICS PVT.LTD.
COMPANY SALES, WHEN COMPANY STARTED:-
MONTHS APRIL MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB
RS IN LAKHS 45 48 50 52 60 65 50 65 80 85 88
Sales( in lakhs)
90
80
70
60
50
RS
40
30
20
10
0
April May June July Aug Sep Oct Nov Dec Jan Feb
MONTHS
20

21. Manpower distribution in the company:-
production finance marketing Die M/C logistics
maint Maint
30% 20% 5% 15% 10% 20%
Manpower distrubution
production finance marketing die maint M/C Maint logistics
20%
30%
10%
15%
20%
5%
21

22.  Company ISO Certification:-
22

23. Organizational chart. (Role and Responsibilities):-
M.D.
(Mr.Kamlesh Patankar)
Director
(Mr.Anil Kulkarni)
Manufactured Head Quality Sales Purchase Finance HR Development
(D.J.Bhagat) (R.K.Kulkarni) (shrikant) (Deodhar) (Gujar) (Lakade) (Kulkarni)
Produ.Incharge Maintenance ( store)
(R.K.Kulkarni) (D.R.Kulkarni) Quality sys.
(Melshetti) (Khatade)
(Chavan) (Gujar)
Mould+ Melt Core Fetling
Sand plant + (Randive) (Waghmare)
(Deshpande) Dispatch
(Navgire)
23

24.  COMPANY PRODUCT:-
 Bajaj Break Drum:-
The bajaj break drum it is manufacture product and this product
manufactured patsons metallics, and this product used to bajaj motor cycle.
 50 – Gate:-
50- gate it is a motor product means use to agriculture unit.
Standard:
1. Design and Manufacture: DIN, ANSI, BS, JIS etc.
2. Face to Face: DIN, ANSI, BS, JIS etc.
3. End Flange Dimensions: DIN, ANSI, BS, JIS etc.
4. Nominal Pressure: Class 125lb, 250lb, 1.0Mpa, 1.6Mpa
5. Pressure test : API 598 ISO5208
24

25.  150 – Gate:-
A) Comprehensive Service
B) Model Number: Class 150
 200 – Gate:-
Features:
* Rust resistant
* High performance
* Rugged construction
25

26.  280 Motor Frame:-
Motor frame it is a mention that motor structure this motor structure used to all
manufacturing company and this product make to this company. The process
about this material firstly used to casting and infection about the material.
Standard Features
1. Output: 11 up to 280kW
2. Multivoltage – (220-240/380-415//440-460V or 380-415/660-690//440-460V)
3. Open Drip Proof (ODP)
4. EFF2 Improved Efficiency
5. Cast iron frames (160M up to 280S/M)
6. Mounting: B3R
7. Degree of Protection: IP23
8. Squirrel cage rotor/Aluminum die cast
9. Stainless steel nameplate AISI 316
10. Class F insulation
11. Continuous duty - S1
12. Ambient temperature: 40°C, 1000 m.a.s.l.
13. Regreasing system from frame 225 and above
14. Thermistors (1 per phase)
15. Metric thread cable entries in terminal box
16. Suitable for Inverter Duty applications*
17. Paint color: RAL 7022
26

27.  COMPANY VALUED CUSTOMERS:-
Company supply castings to the valued customers in the
automobile, machinery, machine tools, general engineering, and
valves industry throughout the country.
 Some of the company Major customers are
• Mayur Valves
• Indian Valves Company
• Alfa Hydrotech
27

28.  The Company Business relations for the following customers are under
process:-
Mahindra Ashok Leyland
Eicher Premium Transmission
TACO Boston Gear
Thermax LHP
Rieter Cummins
Atlas Copco Piaggio
28

29.  HISTORY OF MANUFACTURING COMPANY:-
In its earliest form, manufacturing was usually carried out by
a single skilled artisan with assistants. Training was by apprenticeship. In much of the pre-industrial
world the guild system protected the privileges and trade secrets of urban artisans.
Before the Industrial Revolution, most manufacturing
occurred in rural areas, where household-based manufacturing served as a supplemental
subsistence strategy to agriculture (and continues to do so in places). Entrepreneurs organized a
number of manufacturing households into a single enterprise through the putting-out system.
Toll manufacturing is an arrangement whereby a first firm with
specialized equipment processes raw materials or semi-finished goods for a second firm.
Manufacturing started during 5000 – 4000 BC. Wood work, ceramics, stone and metal work. The Steel
Production 600-800 AD. The Industrial Revolution 1750 AD: Machine tools run by invention of steam
engine and the Mass Production and Interchangeable Parts in the system of computer controlled
machines 1965.
29

30.  INTRODUCTION OF MANUFACTURING:-
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may
refer to a range of human activity, from handicraft to high tech, but is most commonly applied
to industrial production, in which raw materials are transformed into finished goods on a large scale.
Such finished goods may be used for manufacturing other, more complex products, such
as aircraft, household appliances or automobiles, or sold to wholesalers, who in turn sell them
to retailers, who then sell them to end users – the "consumers".
Manufacturing takes turns under all types of economic systems. In a free market economy,
manufacturing is usually directed toward the mass production of products for sale to consumers at a
profit. In a collectivist economy, manufacturing is more frequently directed by the state to supply a
centrally planned economy. In mixed market economies, manufacturing occurs under some degree of
government regulation.
Modern manufacturing includes all intermediate processes required for the production and integration of
a product's components. Some industries, such as semiconductor and steel manufacturers use the
term fabrication instead.
The manufacturing sector is closely connected with engineering and industrial design. Examples of
major manufacturers in North America include Corporation, General, and Pfizer. Examples in Europe
include Volkswagen Group, Siemens, and Michelin. Examples in Asia include Toyota, Samsung,
and Bridgestone.
30

31. RESEARCH METHODOLOGY
 Data Sources
 Research Instruments
 Data Analysis
31

32. RESEARCH & METHODOLOGY
Research as a process involves evaluating data, deriving inference and conclusions after
careful testing; a good research design is flexible, relevant, efficient, economical and focused. The
Research and Methodology consists of following methods:
1 Data Sources
2 Research Instruments
3 Data Analysis
1. Data Sources:
Almost to be taken during collecting data. The results obtained from the analysis would
then be properly interpreted and policy decisions were to be taken. Hence if data was in accurate and
inadequate, the whole analysis could be faulty and the decisions taken would be misleading. Hence to
avoid this data must be collected accurately. The data can be collected from primary as well as
secondary sources. Primary sources in simple term can be stated as, the one that itself collects the
data. While Secondary sources is one that makes data available through some other agencies.
 Primary Data :-
The Different methods of collecting Primary data are
 Direct Personal Interview
 Information from correspondents related to Company
 Discussion with the concerned persons related to objective of company
 By referring the books in support to theory
 Secondary Data:-
 Secondary Data was useful for Findings and Analysis of the Project Collected from
the Annual Report.
 I also had to refer various magazines and newspapers related to Purchase
Procedure of Manufacturing Company.
32

33. 2. Research Instrument:-
 The research instruments were the annual reports of the company of various years.
 The analysis was done by comparing the figures of expenditures of the year in
consideration.
 The previous year so as to observe purchase procedure of the company.
3. Data Analysis:-
Having gathered all the data or information from all sources both primary and secondary,
we analyze this data carefully proceed to draw conclusion from all this we need to correctly. While
analyzing the data we may need to use certain statistical tool.
33

34. Purchase Procedure and Related Topics
 Introduction
 Purchase of Materials
 Purchase Requisition
 Selection of Suppliers
 Preparation & Execution of Purchase Order
 Receipt & Inspection of Material
34

35.  Purchase Procedure and reelected topics:-
 Introduction:-
Purchasing refers to a business or organization attempting for acquiring
goods or services to accomplish the goals of the enterprise. Though there are several organizations
that attempt to set standards in the purchasing process, processes can vary greatly between
organizations. Typically the word “purchasing” is not used interchangeably with the word “procurement”,
since procurement typically includes Expediting, Supplier Quality, and Traffic and Logistics (T&L) in
addition to Purchasing.
If a concern can afford it, there should be a separate Purchase Department for all
purchases to be made on behalf of all other departments. Purchasing should be centralized i.e. All
purchases should be done by the purchasing department except for small purchases which may be
done by users departments.
However, there is no advantage in centralized purchasing. If materials and stores required
by different plants.
 Materials Purchase Department in a business house is confronted with the following
issues :-
a) What to Purchase?
b) When to Purchase?
c) How much to purchase?
d) From where to purchase?
e) At what price to Purchase?
35

36.  MATERIALS: -
Materials are the real resources and basic inputs used for manufacturing a product.
Usually the term ‘Materials’ means and includes all raw materials, fabricated parts and subassemblies.
Raw materials are materials that are in their original, crude unprocessed and raw form.
Material control relates to both direct and indirect materials.
 Direct materials are these, which enter into and form part of the product &
include:-
A) All materials specially purchased for a job order or a process.
B) All materials issued from the stores against a particular job order, number or process.
C) All components or assembly parts purchased for use in the jobs and process directly
D) All materials or processed materials transferred from one process or operation to the
other.
E) All primary packing materials such as Poly Bag, Gunny Bag, Cardboard Box etc.
 Indirect materials are those, which cannot be traced as a part of the product, such
as : -
A) Consumable store used in the operation.
B) Lubricating Oil, Grease, and Fuel Oil etc.
C) Tools, Jigs & Fixtures etc.
D) Sundry Stores of small value like cotton waste. Broom Stick etc.
36

37.  Purchase of Materials :-
Materials constitute a very significant proportion of total cost of finished product in most of the
manufacturing industries so, there should be proper separable department i.e. purchase department for
purchase of materials in proper manner.
Purchase of Material Include:-
a) Purchase of Material at right quantity.
b) Purchase of Material at right quality.
c) Purchase of Material from right source.
d) Purchase of Material at right time.
Purchase Department follows purchase procedure in proper manner and kept cost of purchase
to minimum.
Purchase Department should take into consideration following points regarding control of
materials cost and total cost:-
a) The exact quality of specification of materials required should be determined according to the
required quality of the finished product. If too superior quality of material were purchased, it would
mean higher cost due to high prices, if the quality of materials is too low; the product will be inferior
quality.
b) The price paid should be the minimum possible otherwise the higher cost of the finished products
would make the product uncompetitive in the market.
c) There should be no interruption in the production process for want of materials and stores including
small in expensive items like lubricating oil for a machine.
Sometimes there out of stock situation may lead to stoppage of machine.
d) There should be no over stocking of materials because that would result in lost of interest charges,
higher godown charges, deterioration in quality and losses due to Obsolescence.
e) Purchase department & stores department should properly coordinate. Wastage & losses while
materials are in store should be avoided as for as possible.
37

38.  Objectives of System of Material Control :-
a) Ensuring that no, particularly production, suffer from interruption for want of materials and
stores. It should be noted that this requires constant availability of every item that may be
needed however small its cost may be.
b) Seeing to it that all the materials and stores are acquired at the lowest possible price considering
the quality that is required & considering other relevant factors like reliability in respect of
delivery etc.
c) Minimization of the total cost involved both for acquiring stock and for holding them.
d) Avoidance of unnecessary losses & wastages that may arise from deterioration in quality due to
defective or long storage or from Obsolescence.
e) Maintenance of proper records to ensure that reliable information is available for all items of
materials & stores that not only helps in detecting losses and pilferages but also facilitates
proper production planning.
 Purchase Department & Requirements of Material Control:-
a) Proper Co-ordination of all Departments involved Viz Purchase, Finance, Receiving Inspection,
Storage, Accounting and Payment.
b) Determining purchase procedures to see that purchase are made after making suitable
enquiries, at the most favorable terms to the firms.
c) Use of standard form for placing the order, noting receipt of goods, authorizing issue of
material etc.
d) Preparation of budgets concerning materials supplies and equipment to ensure economy in
purchasing and use of materials.
e) Operation of a system of internal check so that all transaction involving materials, supplies and
equipment purchases are properly approved & automatically checked.
f) Storage of all materials & supplies in a well designate location with proper safeguards.
g) System of perpetual Inventory & stock taking in proper manner.
h) Maintenance of all required records books, accounts in proper manner.
i) Regular reports of materials purchased issued from stock, inventory balances, absolute stock,
goods returned to vendors, defective units.
38

39.  To overcome above listed issues, the purchase department follows the procedure
involving following steps:-
a) Receiving Purchase Requisition
b) Exploring the sources of materials supply and selecting suitable material suppliers.
c) Preparation & execution of Purchase Order.
d) Acquisition Process.
e) Receipt & Inspection of Materials.
a) Receiving Purchase Requisition :-
Since the materials and stores purchased will be used by the production departments.
There should be constant Co-ordination between the purchase and production department.
Purchase Requisition is a form used for making a formal request to the purchase
department to the purchase material. This form is usually filled up the storekeeper for regular
materials and by the departmental head for special materials (not stocked as regular items).
The requisition form is duly signed by either works manager or plant superintendent, in addition
to the one originating it.
It should be gone through periodically so that necessary deletion and addition may be
made. If there is any change in the rate of consumption per week, the purchase department
should be informed about the new figures. Once a item has been include in the standard list, it
becomes the duty of purchase department to arrange for fresh supplies before existing stock
are exhausted. But if the production department requires some new material, it should make
out an indent well in time and send it to the purchase department for necessary action.
Control over buying - for control over buying of regular store material it is necessary to
determine their maximum, minimum, reorder level and economic order quantities and various
levels constitutes an adequate safeguard against improper indenting of regular materials. In
respect of special materials, required for a special order or purpose, it is desirable that the
technical department concerned should prepare material specifications list specifying the
quantity, size and order specifications of materials to be drawn from the store and those to be
specially procured.
39

40. b) Exploring the sources of materials supply and selecting suitable material suppliers:-
A source for the supply of each material may be selected after the receipt of the
Purchase Requisition. Purchase department in each business house usually maintains a list of
suppliers for each group of materials, required by tier concern. At least three quotations are
involved from such suppliers. On the receipt of these quotations a competitive quotations are
prepared. For selecting material suppliers the factors which the purchase Department keeps in
its mind are Price, Quantity, Quality, Offered, Time of Delivery, Mode of Transportations, Terms
of Payment, & Reputation of suppliers etc.
In addition to the above listed factors purchase manager obtains the
necessary information from the statement of Quotations, past records, buyer guides etc. for
finally selecting suppliers.
c) Preparation and Execution of Purchase Order:-
Having decided on the best quotations that should be accepted, the purchase manager
or concerned officer proceeds to issue the formal purchase order. It is a written a request to the
supplier to supply certain specified materials at specified rates and written a specified period.
Copies of purchase are sent to:-
1) Supplier
2) Store or the order indenting Department
3) Receiving Department and
4) Accounting Department
A copy of purchase order, along with relevant purchase requisitions, is held in the file of the
department to facilitate the follow-up, of the delivery and also for approving the invoice for payment.
Purchase order includes its number, date, party name, description of material, quantity, rate,
amount, terms of payment, mode of delivery, terms of insurance and tax authorized signature etc.
40

41. D) Acquisition Process:-
The revised acquisition process for major systems in industry and defense is shown in the next figure.
Then the purchase has to clear all the materials. The process is defined by a series of phases during
which technology is defined and matured into viable concepts, which are subsequently developed and
readied for production, after which the systems produced are supported in the field.
The process allows for a given system to enter the process at any of the development phases. For
example, a system using unproven technology would enter at the beginning stages of the process and
would proceed through a lengthy period of technology maturation, while a system based on mature and
proven technologies might enter directly into engineering development or, conceivably, even
production. The process itself includes four phases of development.
e) Receipt and Inspection of Materials:-
Under every system of stores organization a distinction of made between the function of
receiving and storing, so that each acts as a check on the order.
The receiving department or section is responsible for taking charge of the incoming
materials, checking and verifying their quantities, inspecting them as regards their grade,
quantity or other technical specifications and if found acceptable, passing them on to the
stores. In large organization a special inspection wing is often attached to the receiving
41

42. department and where it is not so technical appraisal of the incoming supplies is carried out by
the general inspecting staff.
In case the quality is not the same as ordered, the goods are not accepted. If everything
is in order and the supply is considered suitable for acceptance, the receiving departments
prepare a receiving reports and materials inward note or goods received note. It is prepare in
quadruplicate, the copies being distributed as under:
a) First copy is sent to purchase Department for varying supplier bill for payment.
b) Second copy is sent to the Stores Department or the department indents the material.
c) Third copy is sent to the Stores Ledger Clerk in the cost department.
d) Fourth and last copy is retained for use by the receiving department.
A good plan would be that the receiving clerk sends all the three copies (meant for others) along with
the materials to the materials to the Stores or Department that placed the order. The materials are
physically inspected and the particulars therefore as recorded in the receiving reports are verified. If the
quantity and the Quality are in order, the delivery of same is accepted and copies of the reports are
signed, two copies of reports are forwarded to the purchase department and the third is kept on the file
as documentary evidence of the quantities of received for storage or use, as the case may be. The
Purchase Department in turn, enters the purchase price and forwards one copy to the Account
Department and the second to the Cost Department.
Goods received include its Number, Date, Party Name, Order No., Quantity, Code,
Description, Amount, and Charges if any, Authorized Signature of Inspector, Receiver &
Store Keeper etc.
 Material Outward Return Note :-
Sometimes materials have to be returned to supplier after these have been received in the
factory. Such returns may occur before or after the preparation of the receiving reports. If the return
takes place before the preparation of receiving report, such materials obviously would not be included
in the account books would be necessary. But if the material is return after is entry in the receiving
report, a suitable document must be drawn up in the support of the credit entry so as to exclude from
the stores of the material amount the value of the materials returned back. This document usually takes
the form of a material outward return note.
The Material Outward Return Note is drawn up by the stores or the dispatch
department. Five copies of it are usually prepared, two copies for the supplier (one of which is to be
sent back by the supplier after he has signed the same). One for Store, one for Cost (Store) Ledger &
one copy to be retained in the Material Outward Return Book.
Material Outward Return contains its number, date, item description, quantity, reason for return of
material etc.
42

43. Sometimes material it is transferred from one department to another, the surplus material arising on a
job or other units of production may sometimes may be unsuitable for transferable to stores because of
its bulk, heavy weight , brittleness or some such reason. It may however be possible to find some
alternative for some other job instead of returning it to the storeroom.
It must be stressed that generally transfer of material from one job to another is irregular, if not
improper; in so far it is not conductive to correct allocation and control of material cost of jobs or other
units a production it is only in the circumstances envisaged above that such direct transfer should be
made, at the time of materials transfer a material transfer should be made, at the time of material
transfer. A material transfer note should be made in duplicate, in the position of the copies of this note
being are follows:-
One copy for the cost department & one copy for the department making the transfer.
No copy is required for the store as no entry in the store records would be call for the Cost Department
would use its copy for the purpose for making necessary entries in the Cost Ledger Account for the jobs
effectively.
Material Transfer Note contains its number, date, transfer department, transferee department, item
number, particulars, rates, authorized signature etc
43

44. FINANCIAL ANALYSIS
 Theoretical Background
 Practical Background
44

45.  As per International Accounting System (IAS)1, a complete set of financial
statement includes the following components:-
a) A Balance – Sheet which is prepared on a particular day, shows the financial position on that
date.
b) An Income statement or Profit and Loss Account, which shows the amount of profit or loss for a
particular accounting period.
c) A statement showing either, (a) all changes in equity or,(b) changes in equity other than those
arising from capital transactions with owners and distributions to owners. Equity represents the
amount contributed by owners.
d) A cash flow statement and
e) Accounting policies and explanatory notes.
Explanatory notes provide clarification and additional information which
facilitates analysis of the financial statements In India, financial statements do not include a separate
statement showing changes in equity.
The following concepts of conventions are followed in the preparation of financial statement
 Concepts
 Separate Entity concept
 Double Entry
 Going concern
 Monetary value concept
 Matching concepts
 Accounting period concept
 Conventions:
 Conservation
 Consistency
 Disclosure
45

46.  FINANCIAL ANALYSIS:-
Financial analysis (also referred to as financial statement analysis or accounting analysis or Analysis of
finance) refers to an assessment of the viability, stability and profitability of business, sub-business or
project
It is performed by professionals who prepare reports using ratios that make use of information taken
from financial statement and other reports. These reports are usually presented to top management as
one of their bases in making business decisions.
 Continue or discontinue its main operation or part of its business;
 Make or purchase certain materials in the manufacture of its product;
 Acquire or rent/lease certain machineries and equipment in the production of its goods;
 Issue stocks or negotiate for a bank loan to increase its working capital;
 Make decisions regarding investing or lending capital;
 Other decisions that allow management to make an informed selection on various alternatives
in the conduct of its business.
46

47.  FINAL ACCOUNT:-
a) TRADING ACCOUNT
b) PROFIT & LOSS
c) BALANCE SHEET
a) TRADING ACCOUNT:-
Trading Account is prepared to find out the gross profit and in turn the percentage of gross
profit is the excess of sales price over cost or purchase price of goods. Here cost/purchase price does
not mean the price paid for goods to the supplier of goods but it also considers all incidental expenses
incurred till the goods are received and made saleable, such as carriage/freight on purchases, wages
paid to workers, customs duty, and octroi, packing and forwarding charges. However, expenses
incurred on sale are not taken in the Trading A/c.It is already seen that the goods account is split up
into four separate accounts.
1) Purchases account to record both cash and credit purchases of goods.
2) Sales account to record cash as well as credit sales of goods.
3) Purchases returns or returns outwards account to record the goods returned
out of the goods purchases.
4) Sales returns or returns inwards account to record the goods returned by the
customers out of the goods sold to them. Similarly for the goods remained
unsold i.e. the goods on hand at the end of the trading year a separate ‘stock
account’ is opened. The Stock at the end of the year is termed as ‘closing
stock’. As this stock is on hand at the beginning of the next year it becomes
the ‘Opening Stock’ it means closing stock of the last year forms the opening
stock of the current year. A trader prepares a trading account to ascertain the
result of buying and selling of goods i.e. Gross Profit or Gross Loss. gross
profit Is the excess of selling price over the cost price of the goods sold i.e.
b) PROFIT& LOSS ACCOUNT:-
Trading a/c shows only Gross Profit. It does not take into
consideration expenses incurred to conduct the business, such as administrative or management
expenses, ( like staff salaries, office expenses, rent, rates, taxes, insurance, telephone, lighting, repairs
of building, furniture, machinery etc, depreciation) selling and Distributions expenses ( like carriage
outwards, salesman’s salaries, advertisement, discount allowed, bad debts, delivery van expenses
etc.) and financial expenses ( like interest paid, legal charges etc.)
Net Profit: All incomes and gains, such as interest, commission, discount etc. received, profit on sale
of asset etc. are added to the Gross Profit: from this total income, all administrative
47

48. c) BALANCE SHEET:-
All nominal accounts are closed by transferring their
balances to the Trading and profit and loss account. But real accounts and personal accounts are
closed by carrying forward balance for next year. These balances are grouped in a separate statement
called Balance Sheet. Thus, Balance Sheet is a statement of the Ledger balances remaining after
having the Nominal accounts closed by transferring them to the Trading and Profit and Loss Account.
The balance sheet has also two sides; but they are not headed
as ‘Dr’ and ‘Cr.’ Sides because the balance sheet is a statement and not an account. The Left-hand
side is headed as ‘Liabilities’ and the right-hand side is headed as asset. All real accounts and the
personal accounts with debit balances are shown on the ‘ assets’ side, where as the personal accounts
having credit balances , including capital a/c, are shown on the ‘ Liabilities’ side. The balance sheet is,
therefore, defined as a statement of assets and liabilities. Since the balance sheet is not an account,
there is no ‘To’ or ‘By’ proceeding the names of the Accounts recorded in the Balance sheet.
Real accounts and personal accounts are closed by carrying forward
balances as shown below & these balances are shown in the balance sheet as stated above.
48

49.  PRACTICAL OBSERVATIONS:-
 FINANCE DEPARTMENT:-
Finance Department of (PATSONS METALLICS PVT.LTD). Is a composite
department catering of the following functions:-
a) FINANCE: -
Procurement, Management and Utilization of Finance.
b) ACCOUNTS: -
Accounting of Income, Expenditure and Assets and Liabilities of the company.
c) COST BUDGETS-MIS: -
Costing of products, purchase procedure and profitability Improvements.
Finance Department of PATSONS METALLICS PVT.LTD Comprises of the following sections
to distribute the total workload:-
 BILL SECTIONS
 ESTABLISHMENT SECTION
 MISCELLANEOUS WORKS SECTION
 PURCHASE SECTION
 CASH SECTION
 ASSET/ PROJECT ACCOUNT SECTION
 FINANCE SECTION
 MIS-BUDGET SECTION
 STORES ACCOUNTING SECTIONS
 BOOKING SECTIONS
 AUDIT SECTION
 COSTING SECTIONS
49

50. PATSONS METALLICS PVT.LID
INCOME AND EXPENDITURE ACCOUNT
For the year ended 31st march 2012
Particulars Rs. Ps. Rs. Ps.
31/03/2011 31/03/2012
A) INCOME:
Sales 83750.00 43540180.67
Other income 0.00 37471.00
Total 83750.00 43577651.67
B) EXPENDITURE:
Materials Consumed 79726.17 28938675.90
Expenditure on personnel 0.00 1580680.00
Operating & admin. Expenses 0.00 1906288.92
Finance expenses 0.00 6287974.94
Statutory expenses 0.00 85900.00
Depreciation 0.00 4193692.00
Total 79726.17 42993211.76
Net profit for the year 4023.83 584439.91
Less: provision for Taxation – Deferred Tax 0.00 0.00
Loss after Tax Carried to Balance sheet 4023.83 584439.91
50

51. PATSONS METALLICS PVT.LTD
BALANCE SHEET
As on 31st march 2012
Particulars Rs Ps Rs Ps
Schedule A – Share Capital
Authorized:
2000000 Equity Shares of Rs 10.00 each 20000000.00 30000000.00
Issued subscribed and paid Up Capital
2469793 Equity Shares of Rs 10.00 each 0.00 24697930.00
Issued Application Money Received
1499000 Equity shares of Rs.10.00 each 14990000.00 0.00
14990000.00 24697930.00
Schedule B – Loans & Advances
a) Secured loans 35442967.00 47860430.10
-from a bank
-Term Loan-Bank of Maharashtra,Latur 27277504.00 31926601.65
Cash credit- bank of Maharashtra, latur 8165463.00 15933828.45
b) Unsecured loans 3451314.00 1430000.00
- from Directors 2951314.00 0.00
- from shareholders 500000.00 1430000.00
Total 38894281.00 49290430.10
51

52. Particulars Rs Ps Rs Ps
SCHEDULE:- CURRENT ASSETS:
Inventories 3580817.83 18444861.00
(At Lower of Cost or Market Value)
- Finished Goods 0.00 0.00
- Raw Materials 3580817.83 18444861.00
Deposits 367961.00 342961.00
Vat Tax MVAT Deposit 25000.00 0.00
Water Deposit MIDC 6750.00 6750.00
MSEB Deposit 336211.00 336211.00
Sundry Debtors (Unsecured Considered Good) 96996.00 9314484.71
Due for under Six Months 96996.00 9314484.71
Due for under Six Months 0.00 0.00
Cash and Bank Balances:
Balances with Nationalized Banks-
- In Current Accounts
- Canara Bank, Camp, pune 0.00 5000.00
- Bank of Maharashtra, latur 54477.00 -28779.48
Balances with Non –Scheduled Banks
- In Current Accounts
Poornwadi Nagrik Sah.Bank Ltd. 2377.00 - 11016.00
Cash on Hand 116941.00 35872.00
173795.00 1076.52
Total 4219569.83 28103383.23
52

53. Particulars Rs Ps Rs Ps
31/03/2011 31/03/2012
SCHEDULE:E- LOANS AND ADVANCES: 4863928.00 3307515.00
(Unsecured , Considered Good)
Advances recoverable in cash-
- or in kind for value to be received 4863928.00 3307515.00
SCHEDULE:F – C.L &PROVISIONS
CURRENT LIABILITIES 1518069.00 4144677.00
Sundry Creditors –Capital Goods 1293274.00 218341.00
Sundry Creditors- Raw Material 180578.00 3713577.00
Sundry Creditors – Services 44217.00 212759.00
PROVISIONS
TDS Payable 155932.00 78213.00
Excise Duty 0.00 93596.00
Light Bill Payable 0.00 711310.00
PF Payable 0.00 130640.00
Water Bill Payable 0.00 3703.00
Vat Payable 0.00 522126.15
Total 1674001.00 5684265.39
SCHEDULE:G – MISCELLANEUS ASSETS
Preliminary Expenses 250000.00 200000.00
During this period 250000.00 250000.00
Less-Amortised in this year 0.00 0.00
53

54. Duties and Taxes 1938470.00 1938470.00
Vat on Capital Goods 1100930.00 110930.00
Vat on Raw Material 78070.00 78070.00
Excise Duty on Capital Goods 615228.00 615228.00
Excise Duty on Raw Material 144242.00 144242.00
Total 2188470.00 2138470.00
SCHEDULE OF FIXED ASSET
Particulars Cost Mar 11 Additions sale/ Cost mar 12 Acc Dep Opg net
Deletion mar11 Block
Land 10113400.00 10000.00 0.00 10123400.00 0.00 10113400.00
Building 13000000.00 0.00 0.00 13000000.00 0.00 13000000.00
Plant &Machinery 20160148.00 6416990.00 0.00 26577138.00 0.00 20160148.00
Computer Systems 0.00 20477.00 0.00 20477.00 0.00 0.00
Electrical Fittings 974009.00 122608.00 0.00 1096617.00 0.00 974009.00
Furniture & Fixture 42781.00 0.00 0.00 42781.00 0.00 42781.00
Software 0.00 45000.00 0.00 45000.00 0.00 0.00
Total 44290338.00 6615075.00 0.00 50905413.00 0.00 44290338.00
54

55. Interpretation:
This table shows the Income and expenditure and balance sheet for the last 1 years i.e. for
years 2011-2012.The income and expenditure show the expenses and income last one year. The
company balance sheet show the reputation in the market and the fixed share devoted that income.
 ANALYSIS OF THE BALANCE SHEET YEARLY GROWTH:-
year year
Particulars 2011 2012
sales 83750 43540180
income 0.00 37471
79726 42993211
expenditure
38894281 49290430
fixed asset
1674001 5684265
fixed liabilities
4023 584439
net profit
55

56. DATA INTERPRETATION AND
ANALYSIS OF PURCHASE PROCEDURE
56

57.  Data interpretation
Mr. Devadar a purchase manager of (Patsons metallic’s pvt.ltd. has
given me following information relating to purchase procedure of the company.
Companies have three important department, vendor development department, and quality Assurance
Department which are mainly responsible for purchase of material.
Purchase Department is responsible for purchase of raw material, Consumable, capital goods.
Vendor Development Department is responsible for material order by them on labour charges
payments i.e. raw material is provided by company to vendor for producing components .company
makes payments to vendor for labor charges given by Vendor Development Department.
Quality Assurance Department is responsible for quality of material purchased. This department is
responsible for selection of supplier also.
 Purchase Procedure:-
1. Purpose:-
This procedure ensures that requirement of purchase of product affecting quality are clearly
communicated to suppliers.
2. Scope:-
This procedure applicable for all units of PATSONS METALLICS PVT.LTD. This procedure
covers the generation of purchase indent/requirement from user department. Issuing of
purchase order.
3. Responsibility:-
The purchase responsibility control to the head of patsons metallic’s pvt.ltd.
4. Procedure:-
1) Purchase of General Items/ Machinery Spares.
a) Raising of purchase indent.
b) Required material shall be indented by user department through purchase indent duly
authorized by concerned departmental head.
c) The purchase indent shall be issued to purchase Department through Stores
Department.
57

58. 2) Calling of quotations:-
a) Purchase may call quotations from Vendors who are in the approved Vendor list. In case
of material is not available with approved vendors.
b) After receipt of quotation a for new material permission by taken shall be prepared by
purchase department with chairman/M.D/Director, which shall contain following
information as required.
 Basic Price
 Discount
 Packing & Forwarding Details
 Taxes, Duties & Freight Details
 Delivery Schedule
 Product Specification
c) By referring comparison chart, Chairman/Managing Director/Director shall be deciding the
vendors with whom the order shall be placed.
d) Purchase section shall prepare the purchase order by referring approved comparison
chart and purchase indent & purchase head review the same and forward to
chairman/M.D for his approval.
e) In case of single source suppliers urgent purchases or purchases having any specific
requirement regarding quality, make etc. purchase Head shall obtain approval of
M.D./Director for purchasing without comparison chart
B) RAW MATERIAL PURCHASE:-
a) Purchase head shall receive the monthly requirement for raw material from PPC (Production
Planning & control) department in the form of Raw Material Requirement Report.
b) The raw material required for developments items; MDT Leader (Multi Disciplinary Team)
shall raise the requirement through inter Office Memo with detail specification (e.g. grade, size, Qty etc)
through Production Planning & control Department.
c) PPC Department shall submit he requirement to purchase department for further processing.
58

59. d) By referring the stock in hand, pending purchase order etc. Purchase Head shall decide the
quantity of raw material to be ordered. Refer work out statement form and based on that the scheduling
Shall be decided & communicated to Vendors/Suppliers. The same shall be monitored by Purchase
Head for 100% on time delivery.
e) Change in Schedule:-
In case of change in schedule the purchase Head shall intimated well in advance the
same to the supplier via correspondence.
C) PLACING OF ORDER FOR RAW MATERIAL:-
a) The rates are negotiated by purchase Head and M.D. directly with raw material vendors from
time and the negotiated rates comparison chart shall be approved by Chairman.
b) Purchase Department shall refer approved comparison chart and prepare purchase order.
c) The Purchase order shall be reviewed for its adequacy of information by Purchase Head.
D) EMERGENCY PURCHASES:-
In case of urgent material requirement, Purchase Head shall purchase the required material
from other suppliers on trial order basis by verbal communication with chairman. Purchase
Head shall raise the Purchase Order as trial and same shall informed to quality assurance
head before material receipt. In these cases also the material testing shall be done as per Raw
Material Quality Plan.
E) REPEAT ORDER:-
In case the same material is required by the indenter then purchase Department refer the price
list and validity of rates quoted and if it is valid, he shall place repeat order with that supplier.
These cases take care of avoiding calling quotation again.
59

60. F) PURCHASE ORDER:-
A) Purchase Order shall indicate the following as appropriate:-
 Purchase order No./Date
 Indent Number
 Suppliers Name, Code No.etc.
 Process to be carried out.
 Part No./drawing No. with pertinent issue status
 Requirement of Certificates for the Restricted and Toxic and hazardous
Materials.
 Quantity
 Unit Price
 Place of Delivery
 Delivery schedule
 Mode of transport
 Quotation No.& date
 Discount
 Other instruction required for specific components.
 Mode of Insurance
 Payment terms
 Description of Goods Packaging & forwarding
 Excise / Sales Tax
 Freight
 Octroi
 Inspection Requirements
 Test Certificates (if required)
 Quality Plan (if required)
B) Scheduling of Vendor / Subcontractor shall consider the following parameters before placing
purchase order / schedule to the Vendor / subcontractor.
 Vendor / Subcontractor capacity with the requirement
 Cycle Time required to Produce
 Transportation
 Mode
60

61.  Availing of Material to be sent to vendors in stock at PATSONS METALLICS
PVT.LTD. And at Vendors / Subcontractors end. Any other resources required,
like tooling’s, Gauges, Advance payments as per Contract etc
C) Purchase order shall be issued to the Vendors / Subcontractors by purchase Department and
copies of the same shall be distributed to Account Head and Stores Department Shall be via. Purchase
Order Intimation in case of miscellaneous items.
D) Inspection of Purchase Product:-
 In case of raw material, the material shall be inspected by Incoming Inspection engineer
as par Quality plan For Raw Material. In case of material Other than above the same a
shall be inspected by the indenter and the remark regarding acceptance or rejection
shall be put on the Goods Inward Note itself.
 Corrective Action at Subcontractors end :-
In case of any major problem / Nonconformity with respect to the raw material same shall be
communicated to the supplier. Purchase Head shall ask for corrective and preventive action from
supplier.
In case inferior quality material supplied by supplier, material is rejected by issuing goods
rejection note to the supplier and material is return to the supplier.
 After extending control over Vendors / Subcontractors, the list of approved Vendors
shall be updated immediately and the same shall be reviewed in a six month.
 In case of non-availability of indented material, Purchase Head shall consult concerned
departmental head for the alternative material before issue of purchase order to the
Vendors.
E) Confirmation of Order Conformance:-
 Purchase head shall confirm the order conformance by keeping verbal or written
communication with the vendors.
F) Purchase Order Amendment:-
 The indenter shall inform the purchase Head via interdepartmental note, the
amendments or changes as regards the specifications or quality or any other
parameters immediately so that corrective action shall be taken before material
reaches to the works.
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62. G) Open Purchase Order:-
In case the quantity required is not fixed then Purchase Head shall issue open
Purchase Order where the rate and validity remain unchanged only quantity required shall be
informed to supplier via correspondence time to time.
In case quantity required is fixed specific purchase order is issued by purchase head to
the supplier.
H) Proforma Invoice:-
 In case of certain purchases if the Vendor Insists advances payment, the
purchase head shall obtain proforma invoice Vendor.
 Proforma invoice shall be reviewed by purchase Engineer Referring to the terms
and conditions and modvat terms as mentioned in Purchase Order.
 Proforma Invoice shall be sent to Account Head for arranging the payment to the
Vendor.
 Purchase Engineer shall insure that the Original Invoice is submitted by the
Vendor after receipt of payments.
 Accounts Head shall verify and compare the contents in purchase order with
delivery challan concentrating especially on freight and weight/ quality and shall
inform action taken in relevance with debit or credit to Purchase Department
through Inter Office Note.
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63. I) Records:-
a) Purchase Indent
b) Purchase Order
c) Approved Subcontractors list
d) Approved Vendor list
e) Purchase Order Amendment
f) Purchase Order Intimation
g) Raw Material Work Out Statement
h) Vendor Assessment Form
 Quality System Procedure (Purchasing):-
1.0 Purpose :-
This procedure insures that the organizations suppliers shall have required capability
and quality to supply material and services.
2.0 Scope:-
This procedure is applicable for all units of PATSONS METALLICS PVT.LTD.
This procedure covers the assessment of Vendors and suppliers & maintaining the Records.
3.0 Responsibility:-
 Vendor Department
 Quality Assurance Head
 Purchase Head.
4.0 Procedures:-
1) Categories of Incoming Material:-
All Incoming material shall be categorized as:-
A-1 Raw Material in Metal Form
A-2 Hardware for Sub-assembly received from Vendors.
A-3 Sub-assembly components received from Sub-contractors
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64. 2) Basis of Approval of Raw Material Suppliers( Category A-1 Material):-
 The criteria for the selection of suppliers are follows:-
 Minimum third party registered to ISO 9001:2008 OR
 Customer Approved / Recommended Suppliers OR
 Traders who supplies steel of minimum ISO 9001:2008 certified
casting manufactures.
 Purchase Head and Quality Assurance Head shall visit to supplier and carry out the
assessment to verify that supplier can meet our requirements.
 The name of every newly introduced supplier shall be included in provisionally approved list,
then shall be given trial order by putting “Trial Order” stamp on purchase order. The lot size
may be preferably 10 tons and shall be supplied in minimum 3 consecutives lots viz Tons, 3
Tons and 5 Tons only. After satisfactory performance of two consecutive deliveries his name
shall be included in Approved Vendor List.
 List of provisionally and Approved Vendors Shall be Maintained and updated time to time by
purchase Head and the copy of the same shall be issued to Quality Assurance Department.
3) Basis of approval of category A-2 material Suppliers:-
 The criteria for Selection of Suppliers:-
 Minimum third party registered to ISO 9001:2008 OR
 Customer approved / recommended supplier OR
 Traders who supplies material of minimum ISO 9001:2008 certified
manufactures OR
 Traders who supplies material of renowned brand and has a good
reputation for quality and delivery of PATSONS METALLICS PVT.LTD.
 The assessment is carried out by the team, which shall include representative of
Quality Assurance and purchase Head. The details of assessment shall be
referred from Sub-contractors assessment form.
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65. 4) Basis of approval of A-3 material suppliers:-
 Minimum third party registered to ISO 9001-2008 OR
 Customer approved / recommended supplier OR
 Vendor Development head and quality Assurance Head shall visit to
supply and carry out the assessment to verify that supplier can meet
companies requirements.
5) The name of every newly introduced sub-contractor shall be included in provisionally approved
sub-contractors list, and then shall be given trial order by putting “Trial Order” stamp on purchase
order. Through the quantity in small batches. After evaluating the performance of 2/3 consecutive
lots, if found satisfactory the sub-contractor shall be informed to complete the remaining quantity.
Then his name shall be transferred from provisionally approved list to approved sub-contractor list.
6) List of provisionally & approved sub-contractor shall be maintained and updated time to time by
vendor development head and the copy of the same shall be issued to Quality Assurance Head.
7) Basis of approval of category (B) & (C) item Vendor:-
 Vendors which are reputed in market shall be directly included in approval Vendors
List without assessing them.
 Every newly introduced Vendor other than reputed shall be given a Trial Order.
After satisfactory performance of two consecutive supplies his name shall be
included in Approved Vendor List till than his name shall be included in
provisionally approved vendor list.
 In case of the items which are purchased from dealers & shopkeeper from open
market, these shall be no necessity of assessing them, but market alternative
make of the items shall be indicated in purchase Order.
 These shall be no necessity of vendor approval in case of one time procurement.
 Selection for Metallurgical Test laboratories and Calibration Agencies shall based
on ISO approved certification and the scope of certification. Their name shall be
directly added in approved vendor list without assessing them.
5.0 Periodical Rating:-
5.1 Quality Rating:-
 Monthly quality rating for approved sub-contractors like the category of A-1, A-2,
A-3 and which are performing special process shall be calculated and issued to
respective department for decision making by Quality Assurance Head.
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66.  Monthly Quality Rating shall be calculated as mentioned below:-
QR= Q1+0.5 Q2+0.3 Q3+O.5 Q4
Q × 100
Where.
QR= Quality Rating
Q1= No. of lots/Component fully accepted
Q2= No. of lots/ Component accepted under deviation and/ or rejected.
Q3= No. of lots/ Component rejected during production.
Q4= No. of lots/Component returned from customer.
Q5= Total No. of lots/Components received.
5.2 Delivery Rating:-
 Monthly delivery rating for the sub-contractors performing special process,
category A-2 and A-3 shall be calculated by Vendor Development Head for each
schedule once in a month.
 Monthly delivery rating for the category A-1 shall be calculated by Purchase
Head for each schedule once in a month.
 Delivery rating shall be calculated as mentioned below:-
D.R= No. of lots received within schedule
No. of lots Scheduled ×100
5.3 Overall Rating:-
Overall Rating shall be calculated as mentioned below:-
 For Raw Material Suppliers (By Purchase Department)
O.R. % = [Q.R. × 0.6 + D.R. × 0.3 + Price Factor × 0.1] × 100
Where,
O.R. = Overall Rating
Q.R. = Quality Rating
D.R. = Delivery Rating
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67.  Purchase shall give Price Factor as 1.0 for lowest price supplier and reduced
by 1.0 to higher & higher price supplier.
Example of Calculating Price Factor:-
Supplier A B C D
Price (in Rs.) 3000 2900 2800 2700
Higher Lower
Price Factor 0.7 0.8 0.9 1.0
SUPPLIR
3500
3000
2500
2000
PRICE
1500
1000
500
0
A B C D
PRICE 3000 2900 2800 2700
PRICE FACTOR 0.7 0.8 0.9 1
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68. 5.4 For A-3 Category Supplies ( By Vendor Development Department)
O.R= (QR × 0.6 = D.R. × O.4)
Where,
O.R.= Overall Rating
Q.R.= Quality Rating
D.R.= Delivery Rating
5.5 Grading Index for Overall Rating shall be as follows:-
Grade Points Comments Points converted to
Percent
A 96 and above Excellent 22%
B 91 to 95 Good 22%
C 86 to 90 Must Improve 20%
D 76 to 85 Poor 19%
E Below 75 Very Poor (Delist) 17%
Overall Rating
17% 22%
Excellent
19% Good
22% Must Improve
Poor
20%
Very Poor
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69. 5.6 Purchase Head / Vendor Development Head shall consolidate the Quality Rating, Delivery
Rating & overall-rating for the suppliers of categories A-1 and A-3 respectively and this data can
be submitted in management review meeting. Vendor Development Head and purchase Head
Shall inform to concerned suppliers and utilized this data for pacing of Purchase Orders and
schedule.
Suppliers having overall rating below 75% shall be informed consecutively in 3
months to improve the quality and delivery by purchase head and vendor development head
respectively even then if not improved, then shall be de listed.
5.6 Supplier’s wise rating of all above categories shall be displayed as visual control after every
revised- rating report preferably every month.
6.0 Assessment of Transporters:-
6.1 In charge dispatch shall assess a transporter by referring form no. SLS/03, transport
assessment form and update the list time to time and same shall be available within charge the
dispatch.
6.2 No need to assess the transporter if customer supplies it. But it shall be included in list of
approved transporter and clearly mentioned as ‘Customer Supplied’
6.3 Dispatch in charge shall keep periodic check by considering following point:-
 Availability of vehicles whenever required
 Protected roof for material
 Precaution above damage
 Accident and damage record etc
7.0 Periodic Re-assessment of suppliers:-
Re-assessment of suppliers shall be carried out every month to update the information at
PATSONS METALLICS PVT.LTD.
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70. 8.0 Periodic Evaluation of Suppliers:-
Vendor Development shall prepare the monthly plant for A-3 category suppliers
audit an accordingly prepare the schedule for audit. Patsons Group of Industries trained auditors
will take this audit and reports are maintained by Vendor Development Head.
Periodic evaluation of major suppliers shall be carried out as:-
a) For Special Process Suppliers: - After every three months.
b) For brought out items Suppliers:- yearly
If any non-conformance observed during this audit, auditor should ask for action plan to
supplier and submit it to Vendor Development Head along with audit report for further follow
up.
9.0 Suppliers QMS (Quality Management System) Development:-
The suppliers who are manufacturing press parts for PATSONS METALLICS will be
developed to implement QMS (QUALITY MANAGEMENT SYSYTEM) as per these technical
specifications in following stages. Suppliers are expected to comply fully with these technical
specifications within a period.
10.1 Objective of Vendor Cluster:-
 It is time bound activity for improvement of company suppliers.
 All suppliers must have at least ISO 9001-2008 Certification.
 Good Housekeeping and 5 score must be greater than 75%
 Training and Implementation Techniques like Kaizan, Poka Yoke etc. for continues
Improvement.
 Delivery Rating must be 100%
 Delivery Rating must be 75%
 Space Utilization through continues 1S, 2S activities.
 Proper Storage Material at each Stage.
 Machine up Keeping through Timely Maintenance.
 Availability and Calibration status of Instruments.
 Properly Defined Inspection Methods at all Stages.
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71. 10.2 Procedure for activities of Vendor Cluster:-
 Appoint one-trained Councilors for each supplier as a Mentor.
 The Mentor will be responsible for improvement at that supplier.
 He should visit suppliers works as and when required or at least once a week.
 He should audit supplier’s plant with above objectives and find out scope for all
improvement at that suppliers plant.
 Discrepancy if any should be highlighted and reports to concern supplier.
He should guide the suppliers to solve the discrepancies or to minimize the observed gap to
achieve the goal.
 Take corrective action plan from supplier.
 Follow up audit is taken as per plan given.
 Weekly audit reports shall be submitted to Vendor Development Head.
 Cluster members shall the improvements through monthly visit among them.
10.3 Records:-
 Road Map
 Weekly Review Reports
 Consumption Reports
 Supplier Feedback and Coordinator Assessment Form.
 Audit Check Sheet.
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