Eskom Procurement Book 2015

THE PROCUREMENT PROCESS

release, which is often accomplished electronically. This process makes the sourcing process easier and reduces purchase transaction costs. Blanket POs are typically applied where items are used on a regular basis, including, for example, maintenance items. When using this type of PO, the buyer and supplier will together evaluate the anticipated demand for an item, or family of items, over a given period of time and will agree on the terms of the agreement. This will include, for example, quality levels, quantity required and any quantity discounts that will apply, delivery lead times, terms and conditions of payment, etc. Buyers will also typically reserve the right to cancel a blanket PO in the case of non- or poor performance on the part of the supplier. Buyers will use material releases to order items covered by a blanket PO. This material release typically specifies the required part number, quantity required, and unit and quantity price, required receipt date, ship to address and method of shipment. Material releases are often used to provide visibility to the supplier ahead of time of forecast material requirements for the buyer as well as actual requirements. For example, a firm may provide a supplier with a 12-month forecast for items required of which the first four months are for actual orders, with quantities required against these orders, and the remaining eight months represent forecast requirements. This in turn helps suppliers to plan their production and/or shipment schedules accordingly [1]. In this step, POs are released and orders are received. Many organisations accomplish the transmittal of orders electronically through, for example, Electronic Data Interchange (EDI) or the Internet. In some firms, once a contract is negotiated and signed, the internal end user may be responsible for releasing orders/materials requirements covered in the contract and the procurement group does not become directly involved in these day-to-day transactions. Procurement is, however, still responsible for monitoring the status of open POs, expediting orders and so on. The shipping and receiving process involves the use of several documents, typically including a material packing slip, bill of lading, and discrepancy report as outlined below: • Material packing slip: The material packing slip travels with the goods and is a document used to describe the contents of the shipment. It will reference a specific PO and release number for tracking purposes as well as for auditing purposes. The packing slip is used by the user organisation to check the actual quantity received against the quantity listed on the packing slip and against the ordered quantity on the order/order release to ensure that these match. This step is carried out to determine whether suppliers have over or under delivered items and to ensure that the items received are the items that were ordered. • Bill of lading: Transportation carriers will issue a bill of lading, which records

2.3.5 RELEASE PURCHASE ORDERS AND RECEIVE GOODS

35 CHAPTER 2