Material Procurement Procedure

# Material Procurement Procedure

The procurement of materials in a manufacturing organisation follows a structured sequence of steps. Understanding this flow is essential because each document generated during the process has a specific costing and control purpose.

## Sequence of Steps

### 1. Bill of Materials (BOM)

The Engineering Department prepares a complete specification of:

• Shape of the material
• Size of the material
• Quality required
• Quantity required

This acts as the master list of materials needed for a job/product.

### 2. Material Requisition Note (MRN — requisition)

Whenever the Production Department needs materials, it sends a list of required materials to the Stores Department (Godown).

• Issued by: Production Dept
• Sent to: Stores Dept
• Purpose: Internal indent of material

### 3. Purchase Requisition

If materials are about to finish in stores, the Stores Manager informs the Purchase Department to buy the material.

• Issued by: Stores Dept
• Sent to: Purchase Dept
• Purpose: Trigger for outside procurement

### 4. Inviting Tenders / Quotations

The Purchase Department invites quotations from different suppliers of the material.

### 5. Selection of the Best Tender

All tenders are analysed on the basis of:

• Quality
• Price
• Other terms (delivery, credit, etc.)

The best tender is selected and finalised.

### 6. Purchase Order Placed

After the tender is finalised, the Purchase Department places the order for the material with the selected supplier.

### 7. Receipt & Inspection of Material

Once material arrives, proper inspection is done to check whether the materials match the description, quality and quantity ordered.

### 8. Goods Received Note (GRN)

After inspection, defective units are returned and for the good quantity, a GRN is issued.

### 9. Material Return Note (MRN — return)

If defects are discovered after receipt and entry into stores, the defective goods are returned using a Material Return Note.

• Note the contrast: GRN is at inspection; Material Return Note is post-storage discovery of defect.

### 10. Payment

After all adjustments (returns, rejections, discounts), payment is made to the supplier.

## Quick Summary Table