Most
companies have no format for purchasing stone.
Considerations must be given by all companies
to establish proper purchasing techniques and
order forms if they are to be successful and
control the suppliers. All businesses require
proper communication skills. A company which
gives proper thought and details to order procedures
and forms is well on its way to avoid long term
problems. Problems occur in ordering when details
are not given and the supplier is left to guess
at what the client demands. These assumptions
usually end up costing the supplier time, money,
and "miss fabricated" goods with no outlet to
resolve the problems easily. It is always better
to see the needs of the suppliers and in turn
fulfill your (the purchaser's) demands in writing.
Thus a proper purchase order is required.
In
this article are blank formats for a typical
purchase order and terms and conditions of a
purchase order. You can use this as a guideline
to establishing your own ordering formats and
procedures. Each company will have its own needs
or demands. Perhaps your company will require
bar codes, markings on the packages unique to
your firm, disclaimers printed on the boxes,
private labels for your company, computer codes,
piece and mark numbers. These are all things
to be considered and possibly added to the purchase
order.
Before
ordering it must be understood that certain
prerequisites have been met:
-You
have a selected a reputable supplier whom you
trust to ship or fabricate your goods.
-You
have negotiated the price and terms of payment.
-You
have an understanding as to the selection of
the goods being ordered and the range of color
acceptable to your company or architect.
Given
that all these prerequisites have been met you
are now wanting to issue the supplier a purchase
order. We will for sake the of having a complex
order assume that this order is an imported
one. However, you can adjust this format for
any order even it is a local one from a distributor
or fabricator. The basic concepts still apply
regardless.
A
purchase order should always contain in the
beginning the buyers: Company Name, address,
phone, and fax number, the buyers name. Many
times the supplier may have some of this information
or it may change each time you order. Perhaps
the buyer will vary within the company depending
on the order. Smaller firms may only have one
buyer in which case the name can be preprinted
on your purchase order. Any time you can preprint
established guidelines, do so. It saves from
having to fill in the form repetitiously. In
fact, if you have a computer, many times you
can have forms made thus making it easier to
fill out and correct.
The
next part of the form is to have the same information
on the supplier. It is most important to keep
these records clear and allow other employees
to follow up your purchase order easily if required.
You will be amazed at how many times suppliers
are called and the buyer or person requesting
information does not know who the buyer had
talked to at the suppliers office. Make it easy
for all parties to know who are the parties
in each firm. This also allows a more legal
binding engagement in case of problems, should
any occur.
Note
on your purchase order the number of pages that
will comprise it. This is also a legal point.
All purchase orders should have an order number
which you should require on all documents between
the two firms whenever their is any discussion
or correspondence. Further, this purchase order
number should appear on all documents and even
packages when shipped. Keeping a reference and
an order folder will help everyone keep organized.
Try also to keep your file in date sequence.
It is easy to have so many papers in the file
and in turn get lost.
Once
this heading portion of your purchase order
is done we move to the body of the order to
fill in the blanks. If you have a freight forwarder
than specify with whom you want your supplier
to use when shipping your cargo. If you do not
have one, negotiate with one. This can cost
of save you money. It is easy to find freight
forwarders but also very necessary. Just like
suppliers, select a freight forwarder for price
and quality of service. Not all are reputable
nor charge the same prices. Specify to the supplier
which port you want the goods shipped.
Inform
the supplier with the date of the order, and
the date which you want the goods shipped by,
as well as how you want the goods shipped, and
the terms of payment. You will be amazed at
how many suppliers change the terms of payment
after receiving the order thinking that the
terms are different than what the buyer understood.
In
the main body of the order you should note the
item number or piece number; the quantity; the
currency you are buying in; the unit of measurement;
the description of the item, including labor
items on the stone if required (such as polished
edges, quirk miters, etc.); unit price; and
total value. When ordering labor items remember
to specify the dimensions and finish where applicable.
At the bottom of the main body you should give
totals of pieces and prices extended out. Also
in the body if room allows give special instructions.
Special
instructions can be:
-How
you want the paper work sent, or how many forms
you want e.g.. 3 original copies of the packing
list, invoice, bills of lading etc. In some
cases you will require Certificate Form "A",
which will allow your firm to bring some goods
into the country duty free.
-Call
24 hours in advance of shipping, or notify by
fax when goods are ready, or advise the freight
forwarder one week before to arrange shipment
and schedule and vessel.
-What
type of container do you want the supplier to
use, open top of closed, 20 foot or 40 footer?
-Packing
instructions, and or packing labels applied
to each case.
-Perhaps
you want to inform him of your broker's name
and address.
Always
remember that all orders and changes must be
done in writing. Many times verbal comments
or changes are made and they are not in writing
and later on this becomes a problem. Try to
get into the habit of putting important matters
in writing and always use the reference order
number in all correspondence.
Attached
to every purchase order should be the bread
and butter of the order. It is the Terms
and Conditions of the order. The numbering
of your pages must allow sequentially for this
and for it to become a legal document. The terms
and conditions are basically broken down into
11 areas. You can again amend this to suit your
needs.
Terms
and Conditions:
Following
are brief explanations and you should study
the example format of the terms and conditions
to see more details. Determine what may apply
to your company.
1.
Production: Advise your supplier what you
expect him to make and follow. It is important
that the supplier know the color, or finish
etc. You could also state the date of the samples
or submit a sample as part of the written order
and mark it with the order reference number
as a control sample and note it under special
instructions. Never assume what is a honed finish
or a polished finish. Not all suppliers have
the same machinery or does every stone polish
the same as others.
2.
Prices: If the order is based on unit prices
or lump-sum it must be spelled out clearly.
Many times suppliers will add for items you
had not counted on paying for or thought it
was part of the original order. Be clear and
avoid problems. If you are buying in a foreign
currency than you must pay in that currency
and arrange in advance with your bank to do
so. Some buyers will not want to take the risk
on the exchange rate while others will. Most
suppliers if forced will sell you in whatever
currency you specify. However, once done, you
must pay in that currency agreed upon. Do not
allow the supplier to raise prices on you once
you have an agreed upon written and signed order.
3.
Payment: Make an agreement as to how the
supplier will be paid and stay within those
terms. One of the best instruments for paying
is Letter of Credits, even though most buyers
and banks do not understand it and find it a
problem. However, it is truly the best mode
of payment which protects you and the supplier
and in most cases puts added pressure on the
supplier to perform with in the time frame of
the L.C. How to deal with letter of credits
and make them work in your behalf will have
to be another article.
4.
Packing: Always tell your supplier how you
expect to receive your goods packed. Packing
is one of the most important parts of having
goods arrive in good order. You also want to
note on the packing what marks you want on the
crates or bundles. Make the supplier he is responsible
for poor packing. If you ever filed a claim
for damages and had the insurance company reply
"Sorry, improper packing or bracing, we are
not responsible!" You will than know the importance
of this problem.
5.
Inspection: If possible, always inspect
goods during production or higher someone to
inspect it for you. In some cases, you may be
able to force the supplier to allow inspection
on arrival of goods. However, this is usually
wrong and who wants to find problems with goods
after they arrive? Always hold the supplier
responsible for the quality of the goods regardless
of inspection or not.
6.
Delivery: Impress upon the supplier the
importance of meeting ship dates. Here you could
add a cancellation clause as well. Thus allowing
your company to cancel the order without penalty
to your company, if the supplier does not perform.
This also allows you an area to penalize the
supplier should he be late with a shipment.
(Note: that in some cases you must foresee delays
in shipping due to international holidays or
vacations. In Italy the month of August is very
difficult to get goods shipped; as in Spain
it runs from about July 18th to August 15th
each year.)
7.
Changes: Allow for changes or add ON's or
deletions to the order. Things always change.
You may find you want to order extras. Tie in
the price of these items to the order unit prices.
If you do not do this you may find the supplier
loves the opportunity to take advantage and
charge you higher prices for these add ON's.
Many companies whether suppliers or contractors
make their profit from change orders.
8.
Defect and Warranties: Tell the supplier
what will happen to problems with the shipment
should any occur. Get him to agree to this point
before finalizing the order. It is important
to have these points clear in advance as all
policies of suppliers are different.
9.
Force Majeure: This is a polite way of saying
that than either company, supplier or buyer,
has a change of heart or problem not in their
control, they will work mutually to resolve
it. This problem could be quarry conditions
have changed, or a snow storm hit the factory,
or their is a strike. Be prepared to have communications
and look at alternatives of what both parties
can do to fulfill the contract of the order.
10.
Termination: What if you want to cancel
the order? What if the supplier can not perform?
What should you do? This area allows for an
agreement between both parties to understand
what will happen. It should be clear what are
the liabilities and responsibilities of both
parties.
11.
Quality Control: This is one of the most
important parts missed by buyers in their purchase
orders. You must somehow communicate with the
supplier what standards of quality and control
you expect. I have found by stating M.I.A. it
at least makes the supplier do some homework.
Not all standards are set in the M.I.A. but
many are. If you have your own standards than
attach them to the order. Also stipulate now
to the supplier how you will arbitrate disputes
or settle problems with the company.
Finally:
Make sure the purchase order is signed and
dated by both the supplier and the buyer or
it is not a binding legal agreement. Note that
all these remarks are suggestions or guidelines
to questions the supplier in your negotiation
of the purchase order. Not all are necessary
nor will all be acceptable by every supplier.
In some cases, you may want to add or amend
the terms and conditions to suit the needs of
the order or satisfy both parties.
Note,
however, you are the buyer. Before giving the
order, let the supplier know what you expect
and make him work for your order. Once you have
given an order to the supplier, it becomes more
difficult to negotiate any terms or conditions
as the supplier knows you are committed to proceed.
By setting standards for your company and the
supplier, you will improve the quality of the
market. Bad suppliers will not like signing
a purchase order with so many clauses and details.
The Japanese have a more complicated order form.
Other
considerations you should think about when ordering
is:
-Who
is handling the insurance on the shipment?
-Is
this an opportunity to request free samples
for promotion or other stones to see what the
supplier can do for you in the future?
-Some
customers take this opportunity to order some
wine, drill bits, saw blades, or something personally
needed?
-Do
you want the slabs packed such that one polished
face slab is exposed on each bundle?
You
do not need to be a lawyer to have proper ordering
procedures. It would not hurt to talk with a
lawyer about such things. It is most important
to have some procedure and organization. It
is up to all of us to set standards and abide
by them. I hope that this will help you find
some direction for your firm.
The
purpose of this guideline is to help buyers
improve their skills and organize the purchases
being made. This article is not meant to be
100% complete or required by all firms. In fact,
I personally am interested in any suggestions
that would improve this format. If you have
any, let me know. We are all looking to better
our ordering skills.
