## Material Procurement Procedure

The 8-step purchase procedure from need identification to payment:

### Step 1 — Bill of Materials (BOM)

Prepared by the Planning Department; sent to Stores, Cost Accounting, and Production Control departments.
Shows description of all materials required for a job along with required quantities.
Also known as: Materials Specification List (MSL) / Material List (SML).
Can replace MRN (Material Requisition Note) because it covers all items.

Uses of BOM by Department:

Dept	Use
Stores	Prepare purchase requisition; acts as authorisation for issuing material
Cost Accounting	Prepare material budget; prevent cost variances
Production Control	Control material usage; eliminates separate MRN

### Step 2 — Material Requisition Note (MRN)

Prepared by the Production Department.
Used when only single or few items (not all items) of materials are needed.
Also known as Material Requisition Slip.

### Step 3 — Purchase Requisition (PR)

Written request to the Purchasing Department to buy materials.
Filled by the store keeper for regular materials; by the departmental head for special materials.
Uses EOQ, maximum/minimum/reorder level techniques.

### Step 4 — Inviting Tender / Request for Proposal (RFP)

Purchase dept. gathers information on rate, quantity, and quality from selected vendors.
Key purchase questions: What? When? How much? From where? At what price?

### Step 5 — Selection of Quotation/Proposal

Vendors submit price quotations; a comparative statement is prepared.
Selection factors: Price, Quantity, Quality, Delivery time, Transport mode, Payment terms, Supplier reputation.

### Step 6 — Purchase Order

Formal written request to supplier to supply materials at specified rates within a specified period.
Issued by the Purchase Manager after selecting the best quotation.

### Step 7 — Receipt and Inspection

Material received and inspected after placing order.
Satisfactory inspection → Goods Received Note (GRN) (Goods Inward Note) issued.
Unsatisfactory material → Returned to vendor with Material Returned Note (Material Outward Return Note).

### Step 8 — Checking & Passing Bills for Payment

Invoice from supplier is sent to accounting section.
Accounting checks: quantity vs GRN, price vs Purchase Order.
After verification, invoice is passed for payment.

Worked example

### Example 1

Scenario: Production dept. needs only timber (one item) out of 20 materials listed in the BOM. Which document do they use?

Answer: Material Requisition Note (MRN), because only a few items are needed. Had all materials been required at once, BOM itself could serve as the authorisation.

### Example 2

Scenario: Store keeper finds that timber stock has hit reorder level. What happens next?

Answer: Store keeper raises a Purchase Requisition (PR) → Purchase dept. invites tenders (RFP) → evaluates quotations → issues Purchase Order to best vendor.

⚠️ Common exam mistakes

Confusing BOM (prepared by Planning Dept.) with MRN (prepared by Production Dept.) — remember BOM is planned upfront for the whole job; MRN is raised on-demand for partial needs.
Treating GRN and Material Returned Note as opposites of each other — GRN is for accepted material; Material Returned Note is for material sent back to the vendor.
Thinking Purchase Requisition is raised by the Purchase Dept. — it is raised by the store keeper (for regular items) or departmental head (for special items) and sent TO the Purchase Dept.

Reference:

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