Study of Purchase Process

&Study of Distribution

Chain of Finished Goods

By Pranav ChawlaIMT Nagpur

A Division of Berger Paints India Limited

Supervisor: Mr. R. CoomarMr. H. S. Kapoor

Faculty Guide: Prof. M. Ghosh

Group History

• Trading in paints started way back in 1898. • Rapid growth over the decades • Prominent exporter status achieved in 1987 • Acquired Berger Paints in 1991 • Public issue of Rajdoot Paints in 1995 • Merger of Rajdoot with Berger in 1999 • Re-introduction of British Paints banner in 2009

Infrastructure

• The head office is located in Delhi with 36 branch offices (depots). The manufacturing units are located in:

– Sikandrabad – Samba – Devla – Surajpur

Product Portfolio

• Enamels

• Interior Emulsions

• Exterior Emulsions

• Distempers & Primers

Study of Purchase Process

What is Purchasing..??

• In yesteryears, in a manufacturing company, purchasing stands for buying of raw materials used for manufacturing.

• In modern era, purchasing is a way of procurement of raw materials with an objective of reducing the cost of raw materials to facilitate the manufacturer’s comparative position in the market.

Objectives of the study

• To study the Purchasing Procedure of Berger Paints India Ltd.

• To understand coordination between all departments of the company.

• To understand the planning procedure of manufacturing units.

• To get knowledge of stock keeping and Inventory control in Berger Paints India Ltd.

• To analyze different strategies of inventory management.

• To understand the need of documentation.

Concepts Used

• Safety Stock – Consumption quantity during Emergency Lead Time based on Average Monthly Consumption.

• Minimum Stock – Safety Stock + Consumption quantity during Normal Lead Time.

• Reorder Level – Minimum Stock + Average Monthly Consumption. (Store to raise indent when stock reaches this level)

• Maximum Stock – Minimum Stock + Highest Consumption during the previous year during any particular month

• Indent / Order Quantity – Difference between Maximum Stock and Actual Stock.

Objectives of the Purchase Department

• To get the right material at most competitive price at the right time.

• To minimize capital investment in materials. • To maintain good vendor relations• To provide necessary expertise, advice and

information about the best quality material available globally.

• To avoid duplication waste and obsolescence. • To maintain company’s competitive position in the

market. • To maintain BPIL’s reputation and credibility into the

market by fair and ethical practices. • To know the source and availability of needed

products. • To write manuals, provide training and supervise all

departments in meeting their purchasing needs. • To inform department heads of market changes, new

products and other such factors.

Principle of Purchasing

Functions of Purchase Department

• Purchase Department here carries out the three main functions related to material procurement across both plant and corporate level

1. Planning and Procurement of Goods 2. Strategic Purchasing 3. Vendor development

1. Planning and Procurement of Goods • Purchase is the most crucial and important

function performed by the purchase department. It includes many functions, namely: – Material Planning – Scheduling – PO Generation – Activities for Payments – Coordination with Supplier – Coordination with Stores & Plant – Monitoring Coverage & Availability according to

Production Plan – Inventory Management – Supplier Payments

What is Purchase Order?

• Purchase Order (PO) is a legal commercial document which contains the following information: – Description of Material – Reference of Indent – Suppliers name for whom it is generated – Transportation Terms – Date – Discount Price (if availed) – Government levied terms

If rules are not followed as per the details mentioned in the purchase order, then any of the parties in contract can sue the other in the court.

2. Strategic Purchasing

Strategic purchasing is done basically for the following category of items: • Long delivery time items • Items whose availability is scarce • Imports

The benefits of Strategic Purchasing are:• Cost effective as mainly items are imported • To avoid stock out situation where the availability is scarce

3. Vendor Development

Purpose:• The main purpose of vendor development is to

explore the alternate sources, so that cost effective buying can be made through competition/availability of material.

• This helps in reducing lead time as vendor information is available for quick reference.

Goal:• To develop strong vendor base for new

components, alternate sources for existing components and to reach progressively a level of the following: – Efficient, effective vendors – Assured process capability and quality – Committed deliveries. – Cost effective process. – Better services based on needs from vendors. – Continuous technological improvements. – To break monopoly. – Partnerships for New ideas.

Operations• Store will in the beginning of every month after

entering the consumption figures of the previous month will check which items have touched or gone below reorder levels.

• Store will raise indent for these items. The indent quantity will be the difference between Maximum Stock level and actual stock as on the beginning of that month.

• Immediately on receipt of indents, Purchase Department will take action for placing Purchase Order.

• Purchase Department will prepare a statement every month where in following parameters will be considered and orders placed accordingly : -

Documentation

• Approved Vendor’s List• Product Information:

Technical Data Sheet Material Safety Data Sheet

• Product Development Documentation• Purchase order Supporting Documents• Strategic Purchase Documents • Planning Documentation :

– Master List– Purchase Indent– Purchase Order– MRN

Study of Distribution Chain of Finished

Goods • A channel of distribution is the route or path

along which goods move from producers to ultimate consumers.

• Channel of Distribution consists of producer, intermediaries, and consumers.

Objectives of the study

• To understand the meaning of channels of distribution.

• To identify different channels of distribution.• To minimize the cost and time of transportation

and to keep the finished goods inventory at the optimum level.

• To describe the functions of depots, warehouses and dealers.

• To understand the importance of effective distribution chain.

Terminologies

• Indent = Maximum Stock – Actual Stock• Ideal indenting =

Volume of budget of current month + Volume Budget equivalent to stock norm days – Opening stocks of current month.

• Total Stock Quantity =Free Stock + Blocked Stock + Untraceable Stock

• Non Moving Stocks – No sale at all in the last 90 days. So Indent generated will be zero.

• Slow Moving Stocks – Stocks as on date are in excess of actual sales of the SKU’s in last 60 days

• Fast Moving Stocks – Rest all SKU’s will fall in this category.

Stock Norm Quantity:It is calculated based on Stock Norm Days for the Depot. If a Stock Norm Days for the Depot is 30 days then depot will be entitled to do indenting not exceeding that month’s budget + next month’s budget.• For Stock Norm Days 30:

Stock Norm Quantity = Current Month’s Budget + Next Month’s Budget

• For Stock Norm Days 45: Stock Norm Quantity = Current Month’s Budget + Next Month’s Budget + 15 days of Next to Next month budget

Damaged Stocks

• Decantable: The goods which can be repacked and sold at full rates.

• Invoicable: That which is to be sold without repacking, but may be at some discount.

• Job Lot: That which is totally empty/jelled etc. and has to be sold on as is where basis.

• Product Complaint: That which is certified as defective as per approved HO advises

Distribution Channels of British Paints

The distribution channel of the finished goods followed by British Paints:

Benefits of Distribution

Each of the intermediaries provides value. The marketing intermediaries offer value in the form of: • Information• Promotion• Negotiation• Funding• Matching• Risk taking

Dealers

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

The dealers should be in regular touch with the customers, keep taking his feedback and ensure maximum customer satisfaction. The dealer should also try and convince the customers to try newer products of the company

Depots

They store goods in bulk that is manufactured by the producers and deliver them in relatively smaller quantities to the dealers.

Some of the functions of the depots are: • Procurement of goods• Storage of goods• Distribution• Risk taking

Support/Role of Depots

• Guiding and Motivating Project Sales Officer (PSO)

• Regular Monitoring of Working • Ensuring Output • Support w.r.t. Sampling/Complaint

Handling/Material Supply • Sharing of Market Information and Updating

them • Giving Project Information/Continuous Support

Bibliography

• Manuals and Documents of Berger Paints India Limited (British Paints Division)

Thank you