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New Post 12/20/2007 11:51 AM
User is offline Chris Adams
323 posts
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Advice on: Purchase Orders to Vendors Example 
Modified By Chris Adams  on 12/20/2007 2:52:13 PM)

All,

Frank mentioned he would like to work through another example together.  I think it's a great idea!

Frank, before you jump directly into modeling the process, let's get a brief discussion going about what you already know about it, the people involved, and some of the obvious problems that exist.

Everyone, feel free to join in on this excercise.

Chris


Chris Adams
Core Member – ModernAnalyst.com
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New Post 1/3/2008 11:50 AM
User is offline Frank19
20 posts
9th Level Poster


Re: Advice on: Purchase Orders to Vendors Example 

Thanks Chris.  I'll start off by stating the basics of what I know of the process and the problems that I know that exist.  None of these details have yet been confirmed with our purchasing staff.  I will do that when I have a chance.  This is just a basic overview of the process.  The problem that we need to solve are the discrepancies that come in when we are invoiced for the material we puchase and the delays that exist when a vendor tells us they never received our purchase order.  Both of which we are attempting to resolve though confirming our PO's which has had some success but has not completely solved the problem. 

As far as the process itself goes here is a rough overview:

First one of our purchasing clerks will get price quotes from a number of different vendors.  This is a process in and of itself that can be detailed out at another time.  Once we have our pricing information from all the different vendors a purchasing manager will then decide which vendor to purchase from based on the price, availability and freight that was quoted to us.  The purchase order is then entered into our accounting software by the purchasing clerk and the system will generate a puchase order number.  This PO is printed out and then is either faxed or called into the vendor by the purchasing clerk.  Regardless of whether it is faxed or called in we always ask that the vendor confirm the reciept and pricing on the PO.  The purchasing clerk then logs the PO into their purchase order log book.  At the end of the day that log is given to one of our two administrative assistants who will go through the list of POs and call each vendor the following day to confirm that the PO was received.  If the PO was not recieved by the vendor we will resend it, if the PO was recieved by the vendor the administrative assistant will make a note of this in the system.  Very often a vendor will then either fax over an acknowledgement of the PO or will give us a verbal acknowledgement.  During this time the purchasing clerk will confirm the pricing, delivery and freight on the order to make sure it matches what we were originally quoted.  If everything matches a note is made in the system.  If there is a discrepancy in the information the purchasing clerk will address it with the vendor at this time. 

That is a basic overview of the process.  Additionally, its important that I mention that it is also policy here that any purchase order exceeding $500 must be confirmed in writing by the vendor.  We follow this process as closely as possible and yet we still have a number of pricing, quantity and freight errors when the shipments and invoices actually come in from the vendors.  This is what we are looking to cut down on. 

I must also say that all of this process information is strictly an overview which all comes right off the top of my head.  I may have missed a step or two.  I will get a more detailed overview of the process as I interview those involved.  Please let me know what you think.  Thanks again!

 
New Post 1/7/2008 12:25 PM
User is offline Chris Adams
323 posts
5th Level Poster






Re: Advice on: Purchase Orders to Vendors Example 
Modified By Chris Adams  on 3/3/2008 6:07:58 PM)
Hi Frank,
 
Sorry it took me a bit to get back to you on this post. I’m still trying to catch up with everything going on at work since the holiday break.
 
So it appears that you have identified two possible problems, Discrepancies and Delays. Please clarify, are the discrepancies:
1.       A difference between the material received and the material on the original PO?
2.       A difference in price from what you should have been charged, but the material is accurate?
3.       Or both?
 
You also mentioned that a current confirmation process is in place. I’m a little unsure of what this process is. Here are a few questions I have:
1.       Is the confirmation process automated? If so, type of automation is in place?
2.       When purchase orders are called in or faxed to the vendor (the two methods you listed), how does the vendor confirm the receipt and pricing on the PO?
3.       Why are the admin assistants calling to confirm the next day if the vendor has somehow already confirmed that they have received the PO? (maybe I didn’t understand you post entirely)
4.       When you state that any order over $500 is confirmed in writing, what does it mean to confirm in writing? It is electronically confirmed via email?
 
Some other general questions are:
1.       Why are some POs to vendors faxed while others are called in?
2.       Do the vendors NOT have some kind of online system to enter a PO, track a PO, etc. that could be used to see vital information about it’s status?
 
I think once we nail down some of this process in more detail we will have a better idea of what’s going on and then can proceed forward.

Chris Adams
Core Member – ModernAnalyst.com
LinkedIn Profile
 
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