Fast Group Ltd.

Standard Operating Procedure (SOP): Inventory Management: SL # 1 Particulars Product In :Inventory Receiving in : Import Chemical Materials Existing Systems Proposed System Remarks

a)

b)

Import Finished Products

MRR prepare at store, basing on physical count and packing list. Inserts in software at HO receiving the MRR from store. FC & CRAFT, MRR prepare at store and inserts in software at HO, receiving the MRR from store. Fast Tapes & Chemicals deliver (Tapes) goods to FAST Corporation through Challan,Store inserts stock in software. Subsequently HO re-check the received stock through Challan. Petroplus deliver Adhesive to FAST Corporation through Challan.Store inserts stock in software. Subsequently HO recheck the received stock through original Challan.

QC to be insured as per order

No product code or security code

QC to be insured as per order Batch no of the product can be introduced

d)

Finished Products Receive from Fast Tapes & Chemicals ltd.(Manufaturing)

e)

Finished Products Receive from Petroplus ltd

Batch no of the product can be introduced

IT department must insure the link with Factory/stor e/HO in a soonest possible time.

f.(1)) Receive Souvenirs ,Gift Items (Lap top) on free of Cost from outside vendors.

No record in place

f.(2)

Issue gift/promotional items

Last few weeks keeping record in tally system.

Person by whom the gift item is received, he will report to admn dept.Prior to approval MRR will be prepared and accordingly to be inserted in tally system. For any kind of promotional activities :Sample

Any kind of gift/promoti onal item

g)

h)

Critical Items: If defective RM/PM/FG gets in at Factory premises what are the measure are taken ,do we record in system ? Any MRR prepare ? In case of Import how it is resolve ?How we record in software system ? Return of Defective goods from Distributor, how the system generates?

If the store finds reject materials no MRR is prepared, Goods returned to suppliers. In case of IMP material or goods the defective items mentioned e in MRR as note and keeps separately the damaged items. Only good quality products are recorded in software system.

must be approved by the management. Three sample to be kept for future reference.1) Procurement department 2)Store department & 3) supplier. There should be damage goods stock report. The record to be kept at Store and they will provide a monthly statement to HO.

must be inserted in tally system and MRR/SRR to be made for receive or issue.

No damage material has destroyed yet.

All return goods to be sent to Motijheel godown initially, than A committee to be formed to quantify the defective goods, if find the good quality product it returns to distributor but if defect product is found an observation report will be prepare by the committee with value of the products. The products will be stake at motijheel godown. Under no circumstance damage goods will be sent or discharge before varification. After getting approval of the report the Accounts department adjusts the distributor accordingly. The store receives damage return Factory goods. The entry is passed to Accounts department as per approved report.The damged goods sent to factory for recycling process.

i)

Return of Adhesive: We can recycle and reproduce>>How the record keeping is done ? If 100 kg adhesives returns

j)

k)

l)

what quantities is reusable ? Return of Stationary products and Adhesive products: How the record keeps. When do we treat a product as damage goods ?Any committee form for damage goods declaration and scrap sales ? Office Stationeries :Do we have any record keeping system ,manually or in software system ? Do we have any Item code, product code or security code ? Where from the MRR initialize? Do we keep the MRR reference in system ? RAW/PM local and import materials: Petroplus ltd and Fast tapes & Chemicals ltd.

A committee is formed and if find the good quality product it returns to distributor but if defect product is found a observation report is prepare by the committee with value of the products. The products stake at 6 # godown. After getting approval the report the Accounts department adjust the distributor accordingly.

Some damage adhesive stock is kept in store which does not have any record

At present there is no record keeps in software. Ho maintains a issue register.

Accounts at HO with the support of Admin can keep the record.

No item code is in place

Could be introducing in system.

No records keeps in tally

m)

Product imported for Mfg purpose but RM sales as chemical materials through chemicals department, how the record is kept ?

When materials receive at Factory no entry is passed in tally software.Thats why when products are sold through sales invoice the software stock balance shows negative balance.

To be kept in tally and linked with HO. Preparation of MRR , entry will be passed .Only Qty entry will be given at factory part. The store department has to keep the record in software which will be liked with HO software for record and adequate control.

This must be insured for maintaining perpetual inventory management system Store will issue a requisition than the chemicals will be issued from Factory.Recei ving the chemicals

n)

o)

Adhesive is produce in Fast Chemicals and Petropls ltd , how the FG is transferred to Fast corporation ltd. What recoding procedure is kept ? Fixed Assets Register: Any fixed asset list or register ?

Factory produce the FG and transfer to Store through Challan. Store keeps record to software, HO recheck the entries in software.

All factory report: Stock, Mfg and report to be send at HO monthly.

from factory store will record in tally by GRN. To keep the record in system properly

No

A list of FA to be prepared by the Internal audit along with Admin dept at the first stage.

We have to locate the Assets.

a)

Product Out Product sales to Distributor

b)

Product sales to person

c)

Corporate Sales

d)

Chemicals Sales

Chemicals Loan/return

Requisition receives from the distributor along with DD/PO.Distributor dept checks the balance of the party and confirms the availability of the item.Accordingly distribution dept prepare the Sale order/delivery challan. Accounts dept prepare the invoice and pass the entry in the system. Only HO persons are eligible for Personl sales.The sales is done on COD basis.Other process are as same as product sales to distributor. Distribution department prepares the Sales order/delivery challan, Accounts department prepare the invoice and pass the entry in the system. Requisition receives prepare Sales order ,delivery challan,than invoice is made.Store delivers goods on basis of delivery challan through software. If chemicals give as loan :The entry pass to software in Loan

Accounts department may

No approval takes from

e)

f)

Gift item (Textile mills,Distributors etc) Offer Items

chemical option. If loan takes , a purchase account is create in system. No gift item for Textile mills is recorded. MRR is prepared and entry is passed in system, Products delivered through invoice No MRR is prepared and no record is kept. In case of local materials defective goods return to vendor in case of imported materials a committee is formed for damaged goods according accounts dept records after approval. Committee is formed accordingly scrap sales from factory through challan. No scrap stock maintains.

create a loan ledger of specific vendor.

MD when chemicals issues as loan

g)

Printing and stationeries Return Defective imported/local material.

h)

Sales of Scrap stock

i)

BIN CARD

No BIN Card uses

j)

In case of repacking

Not in practice in Tally software

Factory/Stor e will maintain the scrap stock report manually and they will send a scrap stock report at the end of every month. Before physical Store verification demands ,location wise all additional BIN CARDS to be man power. tagged with product. Brand will initialize an approved requisition slip to store. Store will transfer the goods to Factory through Challan accordingly factory will receive the goods.A recipient signature will be on the challan, similarly when the goods

will be retransfer to factory: Factory will issue a challan and store will receive the goods.In Tally software:A copy of the delivery challan will be sent to HO accordingly HO will transfer the goods to factory by stock journal. Similarly while factory transfer the goods to store after repacking a delivery challan will be sent to HO and HO will transfer the goods to Factory to Store by stock journal. k) Preservation of MRR 3 copies MRR will be prepared original to be retained, one to procurement dept and another to accounts department. For improving internal control: any kind of receiving Items (RM/PM/FG/Spares/stationeries, MRR must be Prepared, similarly SRR or DO must be prepared and to be insert in software. In case of missing records nominated persons will be liable or charged for it.

j)

MRR/SRR

Materials control: Materials control is accomplished through functional organization, assignment of responsibility, and documentary evidence obtained at various types of operations. These stages begin with the approval of sales and production budgets and with the completion of products which are ready for sale to customers. Material management : 1.Procedure for materials procurement and use. 2. Materials costing methods 3. Inventory valuation at cost or market, whichever is lower 4.Inventory pricing and interim financial reporting 5. Costing procedures for scrap , spoiled goods, and defective work.

Procedure for Materials Procurement and Use:

The production processes and materials requirements vary according to size and type of industry, the cycle of procurement and uses of materials usually involves the following steps: 1.Engineering, planning,and routing determine the design of the product, the materials specifications, and requirements at each stage of operations. Engineering and planning not only determine the maximum and minimum quantities to run and the bill of materials given products are quantities, but also cooperate in developing standard where applicable. 2.The production budget provides the master plan from which details concerning materials are eventually developed. 3.The purchase requisition informs the purchasing agent concerning the quantity and type of materials needed. 4.The purchase order contracts for appropriate quantities to be delivered at specified dates to insure the uninterrupted operations. 5.The receiving report certifies quantities received and may report result of information and testing for quality. 6.The materials requisition notifies the storeroom or warehouse to deliver specified types of quantities or materials to a given department at a specified time or is the authorization of the storeroom issue materials to departments. Notifies the receipt and issuance of each class materials and provide a perpetual inventory method.

7.The materials ledger cards record the receipt and the receipt of each class of materials and provide a perpetual method.

Purchase Requisition:
The principal forms required in purchasing are the purchase requisition and the purchase order. Purchase Requisition: The purchase requisition originates with (1) a stores or warehouse clerk, who observes that the quantity on hand is at a set ordering minimum, (2) a material ledger clerk, who may be responsible for notifying for purchasing agent when to buy, (3) a works manager, who foresees the need for special the special materials or unusual quantities, (4) a research, engineering,or department employee or supervisor, who needs materials or supplies of a special nature, or (5) a computer that has been programmed to replenishment advice for the purchasing department. One copy remains with the originator, and the original is sent to the purchasing department for execution of the request. For standard materials, the requisition may indicate only the stock number of an item, and the purchase agent uses judgments and other establishment policy concerning where to buy and quantity to order.For other purchase request , it may be necessary to give meticulous descriptions ,weights,standards,brand names,exact quantities to order, and suggested prices.

Purchase Order: The purchase order ,signed by the purchasing agent or other officials, is a written authorization to a vendor to supply specified quantities of described goods at agreed terms and at designated time and place. As a convenience, the vendor orders order forms may be used. When a purchase commitment is made by telephone,or a sales representative, the purchase order serves as confirmation to the vendor and places the required documents in the hands of those concerned in purchasing company. The purchase order gives the vendor a complete description of the goods and services desired, the terms ,the prices,and the delivery instructions (Truck or ship).When necessary, the description may refer to attached specification pages.The original and acknowledgement copy are sent to the vendors.Other copies are distributed to Accounts, Store, and commercial department aswell.The vendor is asked to signed and return the acknowledgement copy to the purchaser, indicating that the order was received and will be delivered according to the specifications enumerated in the purchase order.

Receiving: The function of the receiving department is to unload and upload and unpack incoming materials; check quantities received against the shippers packing list ,identify goods received with description on the

purchase order; prepare a receiving report; notify the purchasing department of discrepancies discovered; arrange for inspection when necessary; notify the traffic department and the purchasing department of any damage in transit; and route accepted materials to the appropriate factory location. The receiving report shows the purchase order no, the account number to be charged, the name of the vendor, details relating to transportation, and the quantity and types of goods received. If inspection does not take place immediately after receipt of materials, the receiving report is distributed as (1) the receiving department keeps one copy and sends another copy to purchasing department as notice of arrival of the goods; (2) all other copies go to the inspection department and are distributed when inspection is completed. After inspection, one copy of the receiving report, with the inspection noted thereon, is sent to the accounting department , where it is matched with the purchase order and the vendors invoice and then paid. Other copies go various departments such as materials and production planning. One copy accompanies the materials, so that the store keeper knows the quantity and the kind of materials received.

Invoice Approval and DATA Processing: By the time materials reach the receiving department, the company usually will have received the invoice from the vendor.This invoice and copy of the purchase order are filled in the accounting department. When the receiving report with its inspection report arrives, the receiving report and invoice are compared to see that materials received meet purchase order specifications as to items, quantities , prices, price extension , discount and credit terms, shipping instructions, and other possible conditions.If the invoice is found to be correct or has been adjusted because of rejects as noted by the inspection department, the invoice clerk approves it, attaches it to the purchase order and the receiving report, and sends these papers to another clerk for preparation of the voucher. Invoice approval is an important step in material control procedure, since it verifies that the goods have been received as ordered and that payment can be made. The verification procedure is jandled by responsible invoice clerks, thus assuring systematic examination and handling of the paper work necessary for adequate control materials purchase. The preparation of a voucher is based on an approval invoice.The voucher data entered first in the purchase journal and are posted to the subsidiary records.They are then entered in the cash payments journal according to the due date for payment.The original voucher and two copies are sent to the treasurer for issuance of the check. The treasurer mails the check with the original voucher to the vendor, files one copy of the voucher, and returns another copy to the accounting department for the vendors file.Purchase transactions entered in the purchases journal affect the control accounts and the subsidiary records.

Correcting Invoices:

When the purchase order, receiving report , and invoice are compared, various adjustments may be needed as a result of the following circumstances; 1.Some materials ordered are not received and not entered on the invoice.> In this case no adjustment is necessary.On the purchase order the invoice clerk will make a notification received in place of the quantity ordered. If the vendor is out of stock or otherwise unable to deliver specified merchandiser an immediate ordering from other sources may be necessary. 2.Items ordered are not received but are entered on the invoice>In this situation the shortage is noted on the invoice and is deducted from the total before the payment is approved. A letter to vendor explaining the shortage are usually in order. 3.The seller ships a quantity larger than called for on the purchase may keep the entire shipment add the excess to the invoice or the excess may be returned or held, pending instructions from the seller . some companies issue a supplementary purchase order that authorizes the invoice check to pay the over shipment. 4.Materials of a wrong size or quality, defective parts, and damaged items are received. If the items are returned, a correction on invoice should be made before payment is approved.It may be advantageous to keep danaged or detective shipments if the seller makes adequate price concessions or the items may be field subject to the sellers instruction. 5.It may be expedite for a purchaser to pay transportation charges,even though delivered prices are quoted and purchases are not made on this basis.The amount paid by the purchaser is deducted on the invoice and paid fright bills is attached to the invoice as evidence of payment.