BSc Supply Chain Management

Module Title: Introduction to Procurement

Code: SCM102

Tutor:
 Chapter 6

Sir my question is in regard to question 1 Mo Unit 5 so Mo

stage 2 let's say an organisation is in need of new
computers so tlabo o buwa ka conformance le performance
spec ka gore ke utule lere not all examples can fit in regards
to those types so potso yame ke gore fa potso ere use an
example o disscuss that stage o dirisa only one type kana o
kgona go Di dirisa thotlhe
 Chapter 6

Documentation in Procurement
• Procurement documentation refers to all the
written materials, records, and files that are
generated and maintained throughout the
procurement process. These documents are
essential for ensuring transparency,
accountability, and compliance in purchasing
goods or services. They help to formalize the
procurement steps and protect both the
buyer and supplier by clearly defining
expectations, deliverables, and terms.
 OVERVIEW

 Most business transactions are made on credit

though some organizations make sale on cash,
e.g. retail organizations (spar,choppies).

 Cash transactions do not involve much

documentation(cash, slip/receipt) whereas
Credit sales and purchases involve a lot of
documentation(purchase order, contract).
 OVERVIEW
 Procurement documents are essentially a
document that outlines the process of acquiring
something.

 This document can be used by both the supplier

and purchaser in order to ensure that the
transaction goes smoothly and with as little
confusion/dispute as possible.
OVERVIEW
 Benefits of Procurement Documentation

 Essential for issuing and managing contracts.

-legally binding agreement between buyer & seller

 They can provide a clear overview of the project, help to

avoid misunderstandings, and ensure that all parties involved
are aware of their obligations(roles & responsibilities).

 procurement documents can also help to optimize the

allocation of resources, as well as prevent fraud and
corruption.
 Benefits of Procurement Documentation

 Outlining the specifications and requirements of the items

or services that a business is looking to purchase.

 indicate the timeline and conditions under which

Goods/services will be available.

 By properly preparing and filing procurement documents,

businesses can ensure that their purchases are made in a
timely and cost-effective manner while ensuring
compliance with all applicable laws and regulations.
 The Purchases Process and Documents used

1. A purchase requisition:

 Purchase Requisition: This is an internal document used to request

goods or services. It typically includes details like item descriptions,
quantities, and preferred suppliers.
 form is an internal (within the organisation) document used by an
employee to purchase goods or services on behalf of their company
(such as office supplies, inventory, or manufacturing inputs.
 Sent by user dept. to purchasing dept.
User dept: Finance, production, marketing, admin.
 The Purchases Process and Documents used

2. A specification document:
-A specification document in procurement is a detailed description of
the requirements for the goods, services, or works being procured. It
outlines the expectations and criteria that suppliers must meet to
fulfill the buyer's needs. This document ensures that both parties
have a mutual understanding of the required deliverables and
provides a basis for evaluating bids and proposals.
-Often referred to as a product “spec” is the document that
shows/tells what the outcomes or deliverables will be.
-What the intend product should do/be like
-Detailed description of good/service/ what we want.
-Statement of requirements!
• Solicitation Documents:
• Request for Proposal (RFP): Used when seeking
detailed proposals from suppliers. It outlines
project needs and evaluation criteria.
• Request for Quotation (RFQ): Sent to suppliers
asking for price quotes on specific items or
services.
• Request for Information (RFI): Used to gather
general information from potential suppliers
about products or services.
 The Purchases Process and Documents used

3. Request for information: Document sent to supplier by

purchasing dept.
when looking for information or you’re not sure what
solution might solve your problem.

4. Purchase enquiry/Purchase request form/ Request for

quotation (RFQ)
A purchase enquiry is a letter sent by purchasing dept. to a supplier
requesting for a quotation.
• A Purchase Enquiry or Purchase Request Form is
an internal document used within an
organization to formally request the
procurement of goods or services. It serves as
the starting point in the procurement process,
allowing departments or individuals to
communicate their needs to the purchasing or
procurement team. This document is crucial for
maintaining control, tracking, and organizing
procurement activities.
4. Purchase enquiry/Purchase request form/ Request for
quotation (RFQ)

- Date
- Specification/ description- statement of requirement
- Quantity
- unit price(if known)
- authorization
- RFQ number
- company details
- submission dates & format
 Request for Request for quotation Request for proposal
information – RFQ – – RFP – (ITT)
– RFI –
Used for purchase This is used for
orders tendering
Purpose: When Purpose: When you know Purpose: When you’re
you’re looking for exactly what you want and ready to shop around
information or you’re why, but need to explore and evaluate many
not sure what all of the financial details. factors before making a
solution might solve Give me your best price! choice:
your problem Price,cost,Quality,
Asks: Questions about delivery, technical skills
Asks: General what it will cost to meet etc.
questions designed the requirements
to educate and Asks: Specific, detailed
inform Style: Structured and questions about the
prescriptive service, product and
Style: Casual, asking vendor’s business
for help
Style: Formal and direct

Advantage: They’re
fast and help inform Advantage: Removes Advantage: Provides a
next steps to meet distractions and allows clear comparison of
business needs buyers to focus on price evaluation factors of
vendor offers and
capabilities.
 The Purchases Process and Documents used

Quotation:
A document originating from the supplier, showing the goods sold and their
prices. It is sent by the seller to the customer upon receipt of a purchase
enquiry/RFQ.it is a response.it is an offer.
- X -19.95
- Y – 20.05
- Z – 19.80
- Evaluation: cheaper,quality,etc
Purchase order:
If a buying organization accepts the offer made in a quotation, they send an
order for the goods. A purchase order stipulates all the requirements in terms of
the quantity required, delivery place and time. This constitutes a legal offer to
buy and if accepted by supplier, forms a legally binding agreement (contract).
• A Purchase Order (PO) is a formal document
issued by a buyer to a supplier, specifying the
details of goods or services the buyer wishes
to purchase. Once the supplier accepts the PO,
it becomes a legally binding contract between
both parties. The Purchase Order outlines the
specific products or services required, along
with terms such as prices, quantities, delivery
timelines, and payment conditions.
• Key Components of a Purchase Order:
• PO Number:
– A unique reference number assigned to the purchase order for tracking and
identification purposes.
• Buyer Information:
– Details of the buyer, including the company name, address, and contact
information.
• Supplier Information:
– The name, address, and contact details of the supplier or vendor receiving the
order.
• Item Description:
– A clear and detailed description of the goods or services being ordered,
including part numbers, model numbers, or specifications.
• Quantity:
– The specific quantity of each item to be purchased.
• Unit Price:
– The agreed-upon price per unit of the item being purchased.
• Key Components of a Purchase Order:

• Total Cost:
– The total cost of the items ordered, calculated by multiplying the unit price by the
quantity ordered.
• Delivery Terms:
– Details about the delivery schedule, location for delivery, and any shipping instructions
or conditions. This may also include Incoterms (such as FOB, CIF, etc.) which define
responsibilities for shipping, insurance, and risks.
• Payment Terms:
– The agreed-upon payment conditions, such as payment due dates (e.g., 30 days from
invoice), accepted payment methods, or advance payment terms.
• Delivery Date:
– The expected or agreed date by which the goods or services should be delivered.
• Other Terms and Conditions:
– Any additional terms, such as warranties, return policies, or penalties for late delivery.
• Approval Signatures:
– Signatures of authorized personnel from both the buyer and the supplier, indicating
acceptance of the terms.
– The agreed-upon price per unit of the item being purchased.
• An Order Acknowledgement is a document sent
by a supplier to a buyer to confirm that they have
received and accepted the purchase order (PO). It
is a formal response from the supplier, typically
after reviewing the PO details, to notify the buyer
that they agree to the terms specified and will
proceed with the fulfillment of the order. This
document ensures that both parties are aligned
on the order details before any goods or services
are delivered.
• Key Components of an Order Acknowledgement:
• Order Acknowledgement Number:
– A unique number assigned by the supplier to track the order on
their side.
• Reference to Purchase Order (PO) Number:
– The PO number provided by the buyer, used to reference the order
in the supplier’s system.
• Supplier Information:
– The supplier’s name, address, and contact information.
• Buyer Information:
– The buyer’s name, company, address, and contact details.
• Confirmation of Items:
– A detailed list of the items or services being confirmed, which may
include product descriptions, quantities, and any agreed
specifications.
• Key Components of an Order Acknowledgement:

• Pricing Confirmation:
– The prices of the items or services as agreed in the PO, including any
discounts, taxes, or additional fees (if applicable).
• Delivery Schedule:
– Confirmation of the delivery date(s), shipping method, and any shipping
details based on the terms of the PO.
• Payment Terms:
– A restatement of the payment terms that were agreed upon, including any
due dates for payment or specific payment methods.
• Terms and Conditions:
– Any relevant terms and conditions, such as warranties, return policies, or
changes to delivery terms, that the supplier wishes to highlight.
• Contact for Clarifications:
– Information on whom to contact in case of any clarifications or disputes
regarding the order.
 Order
acknowledgement
Order acknowledgement.
When the seller receives the
Purchase order, they send an
acknowledgement to the
buyer. This may be in a
written document or
verbally. The purpose of the
acknowledgement is to
confirm:
That an order has been
received.
Goods can be supplied
To indicate when goods
will be delivered.
Advice note: This document is sent to the
buyer ahead of the dispatch of the goods to
announce the impending arrival. The
purpose is to alert the buyer that the goods
are on their way so they can make
arrangements as regards the receipt of the
goods. It states the content and the mode
of transport used.
• Key Components of an Advice Note:
• Supplier Information:
– The name, address, and contact details of the supplier who is dispatching the
goods.
• Buyer Information:
– The name, company, address, and contact details of the buyer expecting the
goods.
• Reference to Purchase Order (PO) Number:
– The PO number from the original purchase order, allowing the buyer to link the
advice note to the order.
• Shipment Details:
– Information about the items being shipped, including descriptions, quantities,
and any relevant part numbers or product codes.
• Packing Information:
– Details of how the items are packed, such as the number of packages, weight,
or any special packaging instructions (e.g., fragile, hazardous materials).
• Key Components of an Advice Note:

• Carrier Information:
– The name of the shipping or logistics company responsible for the delivery,
including any tracking numbers or references.
• Delivery Date:
– The expected date or time range when the goods will arrive at the delivery
destination.
• Shipment Method:
– The mode of transportation used for the delivery, such as by road, air, sea, or
courier service.
• Special Instructions:
– Any additional instructions for the buyer regarding the receipt of the goods, such
as inspection procedures or specific handling requirements.
• Signature and Contact Information:
– The signature or name of the person preparing the advice note, along with
contact details in case of any queries.
• A Delivery Note is a document accompanying a
shipment of goods that provides detailed
information about the items being delivered. It
serves as proof of delivery and typically
includes a list of the items delivered, along
with quantities and any other relevant details.
The delivery note is important for both the
supplier and the buyer as it facilitates the
confirmation of receipt and serves as a record
for inventory management.
• Key Components of a Delivery Note:
• Supplier Information:
– The name, address, and contact details of the supplier delivering the goods.
• Buyer Information:
– The name, company, address, and contact details of the buyer receiving the goods.
• Delivery Note Number:
– A unique reference number assigned to the delivery note for tracking purposes.
• Reference to Purchase Order (PO) Number:
– The PO number associated with the order, linking the delivery to the original purchase.
• Date of Delivery:
– The date on which the goods are delivered.
• Description of Goods:
– A detailed list of the items delivered, including descriptions, quantities, unit measurements, and any relevant part
numbers or product codes.
• Condition of Goods:
– Notes regarding the condition of the goods at the time of delivery, including any damages or discrepancies noted by the
delivery personnel.
• Packaging Information:
– Information on how the goods are packaged (e.g., pallets, boxes) and any special handling instructions.
• Signature Section:
– A space for the buyer (or their representative) to sign upon receipt of the goods, indicating that they have received the
items as listed.
• Additional Notes:
– Any special instructions or additional comments relevant to the delivery, such as return policies or next steps.
 Delivery note:
Delivery note: A document sent
by the seller to the buyer giving
details of goods that are sent. It
is usually sent together with
the goods. Its purpose is to
enable the buyer check the
goods on arrival and sign if
accept the goods, and then
return it to the carrier.

Not accept:
-quantity wrong
Quality wrong
-breakages
-packaging
-late
-
• A Goods Received Note (GRN) is an essential
document used in the procurement process
that confirms the receipt of goods by a buyer. It
serves as an internal record for the buyer,
indicating that items ordered have been
delivered and received in satisfactory condition.
The GRN is critical for inventory management,
financial control, and ensuring that the
procurement process is properly documented.
• Key Components of a Goods Received Note:
• Company Information:
– The name, address, and contact details of the buyer or receiving
department.
• Supplier Information:
– The name and address of the supplier who dispatched the goods.
• GRN Number:
– A unique identifier assigned to the Goods Received Note for
tracking and reference.
• Reference to Purchase Order (PO) Number:
– The PO number related to the order, linking the GRN to the original
purchase.
• Date of Receipt:
– The date on which the goods were received by the buyer.
• Key Components of a Goods Received Note:
• Description of Goods:
– A detailed list of items received, including descriptions, quantities, unit
measurements, and any relevant part numbers or product codes.
• Condition of Goods:
– Notes regarding the condition of the goods upon receipt, including any
damages, defects, or discrepancies.
• Packaging Information:
– Details about how the goods were packaged and any special handling
instructions.
• Signature Section:
– A space for the person receiving the goods to sign and date the GRN,
indicating that they have accepted the items.
• Comments or Notes:
– Any additional notes regarding the delivery, such as return instructions or
future action needed.
Goods received note (GRN): It is created by the
warehouse upon receiving the goods. This is
completed after examining (testing,
inspection,)the goods.

A copy of goods received note is sent to the

purchasing and accounts departments.

Often the accounts department will want to see

the relevant GRN before paying a supplier’s
invoice.
• An Invoice is a formal document issued by a
supplier to a buyer that outlines the details
of a sale transaction, including the goods or
services provided, their quantities, prices,
and the total amount due. Invoices play a
critical role in the procurement and accounts
payable processes, serving as a request for
payment and a record of the transaction.
• Key Components of an Invoice:
• Supplier Information:
– The name, address, and contact details of the supplier issuing the invoice.
• Buyer Information:
– The name, company name, address, and contact details of the buyer receiving
the goods or services.
• Invoice Number:
– A unique identifier assigned to the invoice for tracking and reference
purposes.
• Invoice Date:
– The date the invoice is issued.
• Purchase Order (PO) Number:
– The reference number of the purchase order associated with the transaction,
linking the invoice to the original order.
• Description of Goods/Services:
– A detailed list of the items or services provided, including descriptions,
quantities, unit prices, and any applicable discounts.
• Key Components of an Invoice:
• Subtotal:
– The total amount before taxes and additional charges.
• Taxes:
– The amount of applicable taxes (e.g., sales tax, VAT) calculated based on the
subtotal.
• Total Amount Due:
– The final amount that the buyer owes, including the subtotal, taxes, and any
additional fees.
• Payment Terms:
– Terms that outline when payment is due (e.g., net 30 days), acceptable payment
methods, and any penalties for late payment.
• Bank Details:
– Information on how to make payments, including bank account details if
electronic payment is required.
• Additional Notes:
– Any relevant notes or instructions, such as return policies or warranty information.
 Invoice:
Invoice: This is a principal
document in a credit
transaction. It is sent by the
supplier to the purchaser. Its
purpose is to request for
payment for the goods sent
out to the customer. It details
how much is due and when.

Proforma invoice: It is raised

by the supplier when the
customer is required to pay
before or at the time of
delivery.
Credit note:
A Credit Note (or Credit Memo) is a document issued by a seller
to a buyer, indicating a reduction in the amount owed by the
buyer to the seller. Credit notes are typically issued in response
to returns, overbilling, or other adjustments that necessitate a
decrease in the original invoice amount.
It is a document sent out by a seller to a buyer when the buyer is
overcharged or when the buyer returns some of the goods
bought. Its purpose is to cancel a part or all of the previously
issued invoice(s).
Debit note:
-A Debit Note (or Debit Memo) is a document issued by a buyer to a
seller, indicating that the buyer is requesting an adjustment to an
invoice. This document serves as a formal request for a reduction in
the amount the seller is owed, typically due to issues such as
underbilling, goods returned for various reasons, or discrepancies in
the original invoice.
-This document is issued by a customer to a supplier as a means of
formally requesting a credit note.
-A supplier might also issue a debit note when the buyer has been
undercharged.
-Its purpose is to adjust upwards the amount of an invoice already
issued.
Stores requisition:
A Stores Requisition is a formal request made by an
employee or department within an organization to the
stores or inventory management team for the withdrawal
of goods, materials, or supplies from the inventory. This
document is crucial for managing inventory and ensuring
that the right materials are available when needed for
various operations.
-it is a warehouse stock ordering form, signed by the user
department when they need some items from the stores
or warehouse.
CONCLUSION
 Exercise
1. Discuss 2 internal documentation used in purchasing
(6 marks)

2. Differentiate between an RFI and RFQ (4 Marks)

3. Explain any 3 purchasing documents that are used mainly

by Finance dept. (6 Marks)

4. Cleanico Inc. wants to purchase its monthly refreshments

order from Tea Supplies pty ltd,Explain and show in a
diagram the documentation movements between the 2
companies (14 marks)