Yarn / Fabric Centralized

Accessories for Stutching (Cartons, Threads) Centralized

Dyes & Chemicals LTM-4
Chemicals for Weaving Centralized
General Items (Machinery Parts, House Keeping Materials) Centralized
navediqbal@luckytextilemills.biz
Concerned Perople Payment 100 crore Accessories 10 crore
Najeeb-ullah Qureshi
Riaz Dadha (Purchase Head) Noman Baway (PO Approval Authority)
Yarn/Fabric 90 crore
Lucky Textile Mills
Scope Wise Policy Document
Procurement to Payment Process
Category : Yarn / Fabric and Yarn Conversion Procurement
Audit Period : March 2016 - Feb 2017

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 Textile Mills
e Wise Policy Document
urement to Payment Process
ory : Yarn / Fabric and Yarn Conversion Procurement
Period : March 2016 - Feb 2017

List of Data required - LTM

Annual procurement plan/Budget for the audit period

Re-Order Inventory Levels

Quotations and Comparitive Statement

Lead Time of Yarn Procurement

Criteria List for Agent Evaluation (initial and periodically)

Contracts / Service Agreements with Agents

Procedure of Agents Performance Evaluation

Quality receiving inspection report during our audit period

Criteria List for Supplier Evaluation (New Suppliers)

Criteria List for Supplier Evaluation (Subsequent Evaluations)

Yarn Supplier Master File

Edit / Exception report in Supplier Master File

Elimination of Supplier from Approved Supplier List as a result of subsequent evaluation

Addition of new Supplier in Supplier Master File

GRN Reports

PO Reports

Contracts / Service Agreements with Suppliers

Single Source Supplies / Monoploized Suppliers

Contracts / Service Agreements with Suppliers

Emergency Purchases

Yarn Conversion for Weaving (Agreement with Weavers)

Yarn Conversion for Weaving (Agreement with Weavers)

Pricing of Yarn Conversion for Weaving (Agreement with Weavers)

Evaluation of Yarn Conversion Suppliers (Weavers Evaluation)

Quotations for Yarn Procurement

Comparitive Statement for Yarn Procurement

Purchase Order for Yarn Procurement

Yarn and Fabric Purchase / connversion (Decision for in-house and out-source Weaving)

Planning of Quantity of Yarn / Fabric to be purchased by Yarn Procurement

Raising Yarn Requisition for meeting requirement of Sales Contract (Confirmed Orders)

Quotations against Yarn / Fabric requistions

Compartive Statement against Yarn / Fabric Procurement Quotations

Negotiation of Prices with Suppliers for Yarn / Fabric Procurement

Preparation of Purchase Order (PO) for Yarn / Fabric procurement

Open Puchase Orders (PO)

Details mentioned in Yarn / Fabric Requisition

Raising Yarn Requisition for Fabric Purchase / Out-sourcing

Execution of same order through in-house and out-source weaving simultaneously

IMPORT PROCUREMENT

Requisition of Yarn / Fabric for Import

Quotations for Yarn Procurement

Contract / Agreements wih International Suppliers

Preparation of Purchase Order (PO) for Yarn / Fabric procurement

Opening of LC for Import Purchases

Insurance of Goods in Transit (Insuring Imports)

Clearence of goods by forwarding agent

Receipt of Imported Goods

Processing of Payment to Foreign Suppliers

Quality inspection of goods

Physical Inspection of Yarn received from Supplier

Quality Testing of Yarn received from Supplier

Quality Testing of Yarn received from Supplier

Procedure to be performed by Procurement dept upon receipt of goods from Supplier

Procedure to be performed by Stores dept upon receipt of goods from Supplier

Quality Testing of Yarn received from Supplier

Quality Testing of Yarn received from Supplier

Quality Testing of Yarn during Weaving Process

Controls over Supplier Complaint Management

Controls over Supplier Complaint Management

Quality Inspection of fabric received from Supplier

Quality Inspection of fabric received from Supplier

PAYMENTS

Recording of Liability

Invoice Processing and Payment to Vendors

Advance Payments made to Suppliers

Supplier Ageing Report (Long Outstanding Payments)

Posting and Payment of Invoices

Payment made to Supplier in Advance Prior to the Receipt of Yarn

Payment Approval and Authority Matrix

Settlement of Advances given to Vendors

Long outstanding un-settled advances

Transportation Expenses
 Yarn Procurement

Once, the customer forecast is received from the Merchandiser, Weaving department shall co-ordinate with the Yarn /
Fabric Procurement fabric forecast (feedback from Marketing) for the coming year. Forecast received from Marketing dep
is bifurcated in to the following requirement:
i) Fabric requirements which are predictable
ii) Fabric requirements and specifications that is not easily foreseeable.

Yarn / Fabric Procurement department shall calculate the maximum, minimum and re-order inventory levels
Multiple suppliers for different yarn qualities are available to the Company to avoid any shortage of yarn and the stoppage
in the Production Process.
Yarn demand raised by the Planning Department and Marketing Department is settled by purchasing the said yarn timely,
depending upon the lead-time available for yarn procurement.

Whenever the Company is willing to use the services of an Agent in the Yarn / Fabric Procurement process; the market
reputation of the agent shall be evaluated by considering the following factors:
a) Duration of the existence of the business of the agent,
b) Financial status and by evaluating its current customers.

If the Yarn / Fabric Procurement department is satisfied with the agent evaluation, then a formal contract / Service
Agreement shall be entered into with the Agent. This contract/Service Agreement shall specify in the detail the terms and
conditions of the business and the evaluation criteria which shall be used in future evaluations, and procedures for future
amendments. The contract / Service Agreement shall be signed by the Agent authority and the GM Yarn / Fabric
Procurement.

Agent’s service performance evaluation shall be done through an Agent Performance Evaluation Report- R /7.4 A/03. 4.4
The Agents shall be evaluated for their service / performance on the basis of following parameters:
a) Adherence to Quality standards
b) Delivery time
c) Prices offered
d) Technical Support provided after goods sold
e) Market Intelligence
f) Level of response to inquiries and complaints
g) Timely submission of sales documents
h) Inspection procedures and standards followed in yarn testing
The Agent who is involved in the purchase process of Yarn shall carry out the inspection on the supplier site. This inspectio
shall not only include checking the quality of the yarn but it may also cover the production facility, testing equipment,
manufacturing process and storage facilities.
Following are some of the important factors that shall be checked regularly by agents during production runs at supplier
facilities:
a) Imperfections
b) Unevenness
c) Yarn Strength
d) Count Variation etc.
The above results shall be summarized by the Agent in a Yarn Inspection Report and this report shall be forwarded to the
Yarn / Fabric Procurement Department.

The New supplier shall be passed broadly through the detailed screening process which shall comprise the following
parameters. This evaluation shall be conducted through the Supplier Selection and Qualification Form R /7.4 A/01.
a) Reference Checks – Market standing and clientele
b) Financial Status Checks
c) Capacity to deliver the increased quantities
d) Adherence to the Quality Standards
e) Satisfaction of the Internal Customer
Based on the above criteria, and further evaluations, if any supplier fails to meet the minimum performance standards, the
supplier shall not be awarded the status of an Approved Supplier. Authority for the approval or rejection is with GM Y&F
Procurement.

The subsequent Supplier Performance Evaluation activity shall be conducted on a quarterly basis. This will be initiated
through Supplier Performance Evaluation Report R /7.4 A/06, which shall include the following parameters:
a) Timely Delivery
b) Quality of material
c) Price
d) No. of Complaints in last quarter
Based on above, the points (rating) shall be allotted to the supplier and decision of continuity / discontinuity shall be taken

Yarn / Fabric Procurement Department shall maintain a list of approved yarn supplier master file specifying the following
details:
a) Name of Supplier
b) NTN
c) Description of their product line
d) and any other relevant details if needed

• The System shall be upgraded in such a manner that supplier master file edit report is available and generated on a
monthly basis. Manager Procurement shall review the supplier master file edit report to check that only authorized change
are made in the master file during the period.
• The master file shall be reviewed on an annual basis by the Procurement Department to ensure its completeness and
accuracy.
• The elimination of any supplier from the Approved Supplier List R / 7.4 A / 02 shall be documented as Unapproved
Supplier List and justified by the MANAGER Procurement and GM Yarn / Fabric Procurement shall approve the elimination
• The GM Procurement shall review when needed, frequent complaints observed in the yarn quality or late deliveries of a
particular supplier and decision of continuity / discontinuity shall be done accordingly.

In the case where goods are purchased from the new supplier then a request of opening a new supplier account shall be
sent to the Accountant through email from Procurement Executive.
The Accountant shall verify the completeness and appropriateness of the filled form and accordingly open a new vendor
account in the ERP system.
Every GRN could be evaluated on basis of quality and delivery and a report can be generated from system GRN Evaluation
Report R / 7.4 A / 17.
In the same way every purchase order could be evaluated on basis of quality, delivery and price and report can be
generated from system Purchase Order Evaluation Report R / 7.4 A / 18.

• There shall be legal binding contracts agreed and formalized with the suppliers and agents from whom yarn is to be
procured.
• No yarn shall be procured even in the emergency case, without formalizing the purchase process by making a formal
contract with the suppliers and agents.
• The supplier and Agent contract shall also include the provision of potential supplier evaluations (both initial and
subsequent) to be carried out which may include the site visits. The agent shall perform the supplier visits.

In the case of single source suppliers, i.e. the items, which are purchased from only one supplier at all times, the Manager
Yarn / Fabric Procurement shall document the reason / justification to purchase such materials from single source supplier
The GM Yarn / Fabric Procurement shall approve this justification.

In the formal contract with Supplier, following (but not limited to) terms and conditions shall be agreed:
a) Contract Period
b) Rate
c) Quality and description of Yarn / Fabric
d) Advance settlement procedures
e) Price change notification (Mutually consent)
f) Advance notification of shortage of certain materials agreed in the contract
g) Payment terms
h) Disciplinary actions in the event of contraventions of the terms and conditions of the contract
i) Contract re-new / amendment procedures
j) Delivery terms
The renewal of agreements with the suppliers and agents shall be subject to the results of performance evaluations.
In case of an emergency purchase, the Yarn / Fabric Procurement department shall find an appropriate source and then
direct the vendor to proceed. This does not relieve the department from seeking competition to the extent practicable,
negotiating a fair and reasonable price, and documenting the procurement action. The department shall check the
following data of the vendor in the case of emergency procurement
a) Name,
b) Vendor qualifications,
c) Accurate prices,
d) Payment terms,
e) Method of receipt of stock (Ship Via),
f) Delivery date and
g) Accurate F.O.B. point

After placing the order, the Yarn / Fabric Procurement department shall assign the requisition of the yarn and PO shall be
made, approved and email to the supplier / agent.

In case of any urgent requirement of yarn as specific yarn shall be with the approval of the GM Yarn / Fabric Procurement.

After mutual agreement supplier shall sign contract before further action. The terms and conditions such as Rate / unit of
conversion, delivery time, conversion specifications, weight, sizing rate etc. shall be formally agreed in the contracts. After
receiving signed contract GM Y&F Procurement reviews and approves the contract.

The Yarn / Fabric Procurement Department shall make a monthly conversion supplier wise reconciliation reconciling the
yarn provided and weaved cloth received highlighting consumption and liability. This reconciliation shall be reviewed and
signed off by the GM Yarn / Fabric Procurement on a monthly basis.

In the case where contracts for yarn conversion are done for a particular time period, then only rate of the contract is fixed
and quantity is subject to variations. GM Y&F Procurement reviews and approves the contract.

The yarn conversion service providers shall also be evaluated on a semi-annual basis. The following parameters shall be
used in the evaluation of yarn conversion service providers:
a) Results of site visits
b) Quality of the machinery used
c) Timely shipment
d) No. of rejections
e) Quality of the cloth
f) Price

The quotations shall be obtained from different suppliers for the specific quality of the yarn / fabric to be purchased. Base
on the quotations received, the MANAGER Yarn / Fabric Procurement shall negotiate the yarn rates with different supplier
to identify the right price for the needed yarn quality.

• A comparative statement shall be prepared by MANAGER Yarn / Fabric Procurement highlighting the rates offered by
different suppliers and the description of yarn quality along with other necessary details.
• Manager Yarn / Fabric Procurement based on the comparative statement shall approve the rate and forward it to the GM
Procurement for the approval.

After the approval of Comparitive Statement by GM Procurement, a formal Purchase Order R /7.4 A/04 shall be prepared
and the P.O shall be forwarded to the Supplier via email.
The decision of producing in-house weaving or getting it weaved from outside weavers depends on factors such as:
a) Need by date received from Merchandizer
b) in-house capacity of the weaving department
c) costing
d) market conditions
e) terms agreed with the customer
f) opportunity cost of stopping current order

Identifying the requirement of quantity of yarn to be puchased execute through following Stages:

a) Sales Contract received from Merchandizer by Production Planning Manager throug email specifying details (i.e.
required quantity, quality of fabric, rate (as per the calculation done by the Merchandiser on the basis of yarn rates
provided by Yarn department) and the need by date.

b) The Production Planning department on the basis of received email, shall calculate (in in-house and outside weaving
both) the required quantity (Warp/Weft) and quality of the Yarn to meet the target fabric needed

• After calculating total yarn/fabric required for meeting sales contract, Production Planning Manager shall raise Yarn
Requisition Report R/751 A/01B in VB and Oracle system for in-house weaving.
• The Yarn requisition shall be signed by the Production Planning Manager.
• The requisition shall be forwarded to the Yarn / Fabric Procurement department for the review and approval purposes.
• The Manager or MANAGER Yarn / Fabric Procurement shall review the requisition received from the Planning departmen
and shall forward it to the GM Procurement for the approval.

After the approval of Yarn / Fabric requisition, Yarn / Fabric Procurement department shall call the quotations from
different approved vendors.
Based on the quotations received from different suppliers, a comparative statement shall be prepared by the Manager Yar
/ Fabric Procurement, which will specify and summarize the rates, quality and other relevant details received from the
suppliers.

The MANAGER Procurement shall negotiate with the supplier to further take mid-way stand on the yarn / fabric price and
quality. After the necessary negotiations, MANAGER Yarn / Fabric Procurement shall recommend the rate and quality on
which purchase is to be made and Yarn / Fabric

• Procurement Executive shall prepare the Purchase Order (P.O) for Yarn / Fabric Procurement.
• P.O shall be signed and approved by MANAGER and GM Yarn / Fabric Procurement and shall be sent to the supplier via a
email.
• In case of any amendment in purchase order a Purchase Order Amendment Form R / 7.4 A / 05 shall be filled and
attached.

• It is the responsibility of Manager Yarn / Fabric Procurement to review the open Purchase Orders on quarterly basis and
to take follow-up with suppliers for the appropriate course of action.
• The Manager Yarn / Fabric Procurement shall run a requisition report and a P.O Status Report R / 7.4 A / 07 on daily ba
to review and check open requests and shall follow-up with the supplier accordingly before providing intimation to
concerned departments.
 The yarn / fabric requisition shall comprise of all or some of following elements:
i) Item Description
ii) Need by date
iii) Price
iv) Quantity
v) Need
vi) Unit of measurement
vii) Location
viii) Other information
ix) Summary
x) Wastage (Only for yarn requisition)
xi) Category
xii) Use for (Warp / Weft) (Only for yarn requisition)

In case of fabric purchase/outsourcing marketing personnel will raise the requisition.

In the case where in-house capacity is not sufficient enough to entertain the particular sales order, then a Costing Sheet
shall be prepared by the Purchase Officer in Fabric Division which shall compare the cost of the outright fabric purchase
and the out-side yarn conversion. The final decision shall be at the discretion of MANAGER and GM Procurement.

IMPORT PROCUREMENT

• The Planning department shall forward the requisition (Yarn / Fabric) based on the information received by th
Merchandiser.
• The Manager Procurement shall review the requisition and shall forward it to the GM Procurement for the approval.

After the approval of requisition by GM Procurement, the procurement department shall call for the quotations fro
Agent / International Suppliers and recommend the appropriate rate and quality on the Quotations Comparati
Statement R /7.4 A/20 and forward it to the GM Procurement for the rate approval.

• After the GM approval of quotation, a formal contract shall be made with the International Supplier and this contract sh
be signed by the MANAGER / GM Procurement and the Supplier, or the Supplier will send a Performa Invoice.
• After the contract finalization, the Supplier shall send the shipment schedule and shall communicate the same throug
the Agent. Any changes in the schedule may be made later as per the discussions between the Procurement departme
and the Agent / supplier.

The Performa Invoice along with the relevant yarn / fabric requisitions will be forward to Audit department for aud
purpose. After the verification by the Audit department, PO will be made.

Procedure of Opening of LC
a) The PO and the contract shall be forwarded to the Import department for L/C establishment.
b) LC shall be opened through the authorized bank by filling a L/C Opening Form.
c) Import Manager shall fill this form and GM Procurement and the CEO will sign it before submitting it to the Bank for L
opening.
d) LC shall be established in accordance with the contract terms and scheduled shipment agreed and transmitted throug
bank channel to the relevant supplier through the agent.
e) A letter specifying terms and conditions and documentation needed from the supplier shall also be sent to the Bank f
getting the L/C prepared.
f) The copy of L/C received from Bank shall be sent to the supplier to ensure the order and the potential payment.
For insuring the import, the Bill of Lading received by the Local Bank (Importer) from the Foreign Bank (Exporter) along wi
commercial invoice and a letter requesting the Insurance Company to insure the import shall be sent to the Insuran
Company for the preparation of the concerned policy for the import.

When LC shall be received at the Supplier’s Bank, proper follow up shall be started with the importing agent for the time
dispatch of goods from the supplier’s facility. The agent shall ensure that the inspection of goods is completed before th
dispatch. Changes in the shipment date may be adjusted if needed.

Shipment received shall be verified for the goods loaded before it leaves the shore by the Agent and the releva
forwarding agent. Moreover, the agent also verifies the shipment documents provided by the shipper.
According to the decided schedule before the goods are shipped to us, the supplier shall send the tentative shipme
advice.

Supplier shall send the final shipment advice or B/L through agent with all the concerned documents. After this, th
payment process is initiated as per LC terms.
Lead time for Quality Assurance is five days.
Physical inspection of yarn is carried through following ways:
a) Visual Inspection at Unloading
b) Quality Control Lab Testing

In visual inspection, the following checks shall be performed before un-loading the goods:
a) Yarn bags shall be checked for damaged packaging and yarn
b) Cone size and dimensions shall inspected
c) Container conditions shall be again checked here for Quality Assurance purpose
d) Supplier Name, Brand Name, Count, Lot number or Production date shall be observed as mentioned on cartons.
e) Yarn weight will be checked of random bags and recorded in Yarn weight Report R / 7.4 A / 16A and Tare weight Repo
R / 7.4 A / 16B.
f) If the yarn delivered fails this inspection then container may not un-loaded and further communication is made with th
agent for necessary measures. The goods may be replaced or even returned.
In Quality Control Lab Testing, at Q.C Lab a number of different tests shall be carried out in accordance with the LT
standards. The following tests are done at the Q.C Lab:
a) Yarn Physical Test:
A random sample of two or three cones shall be taken from the un-loaded yarn and checked for the below mentione
quality characteristics:
1. Count Variation,
2. Strength checking and
3. IPI (Neps, Thin Places, Thick Places)
After the physical test, the results of the tests are documented in Physical Test Certificate R /7.4 A/11B and grading
allotted to the yarn received.
MANAGER Yarn / Fabric Procurement shall review the Yarn Complete Testing report R / 7.4 A / 15 for different suppliers
fortnightly or monthly basis and shall consider the purchase from a particular supplier accordingly.
b) Yarn Grading Test:
In the grading tests, the MANAGER Yarn / Fabric Procurement shall define certain parameters against which the quality
the yarn shall be assessed. These parameters shall be periodically reviewed by the MANAGER Yarn / Fabric Procureme
and approved by the GM Yarn / Fabric Procurement and stated in the Yarn Quality Standards R /7.4 A/19.
Following is the criteria for grading:
Grade Points
Grade A 9.0 and above
Grade B 8.0 to 8.9
Grade C 7.0 to 7.9
Fail Below 7.0
c) Yarn Chemical test
In this phase, blend ratio of the yarn received shall be checked to ensure the precise blend composition. A sample of one
two cones shall be selected from the un-loaded yarn and checked for the accurate blend composition. The results of th
test shall be summarized in the Chemical test Certificate R /7.4 A/09B.

• A comparison of invoice received from the supplier and PO shall be made by the Procurement Executive. A
discrepancies found shall be communicated to the supplier timely.
• It is the responsibility of the Manager Yarn/Fabric Procurement to intimate the Quality Control Department about th
expected time of the receipt of yarn from supplier.

The stores personnel, receiving the goods shall check the details of the delivery against the Purchase Order numb
provided by Manager Yarn / Fabric Procurement and shall communicate any discrepancies to the Yarn / Fabric Procureme
department. After the right confirmation, the store personnel shall sign the delivery note

a) Fabric Weft Testing

Sample of 100 meter of fabric is taken to check the amount of coloured contamination present in the weft yarn. The resu
of this test are summarized in the Weft Test Certificate R /7.4 A/10B.The Q.C Department shall perform these tests an
shall send the results to the Yarn / Fabric Procurement Department who will put the results in the Oracle based te
certificates as notified above.
b) Warp Breakage Testing
A random sample of bags shall be taken to check the warping performance of the yarn. The results of this test shall b
summarized in manual Warp Breakage report. The Yarn / Fabric Procurement shall formalize the results of the tests an
prepare a system based Warp Breakage Certificate R /7.4 A/08B. This test is not necessarily done for every yarn.
Failed Quality Testing
Goods that are received may fail either the initial visual inspection or testing by the Q.C Department then yarn shall be s
on HOLD till the Yarn / Fabric Procurement Department reaches an agreement with the supplier after negotiation. Aft
intimation to the agent, yarn may be either utilized or in case of un-acceptable issues, it may be returned back.
Following options can be exercised in this case:
• Reject the Delivery
• Return for Replacement
• Accept with Tolerance

Performance of the cleared yarn shall be monitored during the production runs to closely inspect the quality trend of ya
provided by each supplier. Whenever, any un-acceptable quality issues are encountered during the running of yarn
weaving, a complaint shall be lodged specifying the details such as:
• PO Number of the purchase
• Agent’s name
• Goods Received Note Number reflecting the batch or lot number.
The Agent shall be informed and a meeting is arranged in order to decide that either to run it or return it to the supplier.
second meeting may also be arranged for deciding the same.

A Supplier Complaint Log R /7.4 A/12B shall be maintained by the Manager Yarn / Fabric Procurement which shall spec
the following details:
• Name of vendor
• Any Agent involved
• Complaint Nature
• GRN No. of defected Yarn received
• Yarn Receipt Date
• Complaint date
• GRN quantity
• Details / Remarks

The GM Procurement shall review frequent complaints observed in the yarn quality or late deliveries of a particular suppli
and decision of continuity/discontinuity shall be done accordingly.

New complaint shall be lodged through an ERP based Vendor Complaint Form R /7.4 A/12A, which shall include in additi
to the above fields, the Supplier / Agent Remarks on the complaint. Supplier shall provide the remarks on the defected ya
provided. The GM / MANAGER Yarn / Fabric Procurement, Q.C Personnel and the concerned supplier shall sign th
document, or the communication can be done on email.
The Inspection In charge shall perform the inspection of fabric received and following parameters (not limited to) shall b
assessed as part of the inspection:
• Width
• Quality
• Picks
• Ends
The results of the inspection shall be bifurcated into A (Fresh) and C (Not usable) categories and summarized in th
Inspection Report and this report shall be forwarded to the Procurement Department – Fabric Section. The Purchase Offic
(Fabric Section) shall prepare the Fabric After Inspection Report in the VB system based on the inspection reports received
The fabric may be re-checked if in the case fabric division personnel is having some concerns over the inspection conducte
by the Inspection In charge.

Fabric Blend Testing

Q.C Department shall perform the blend testing of the fabric received. The blend test covers the composition of blend
the fabric. The results of the blend test shall be summarized in the Fabric Lab Test Report R / 7.4 A / 13.

PAYMENTS

Procedure of Recording Liability

a) Yarn / Fabric Procurement Department shall forward the invoice received to the Accounts Department along wi
documents such as P.O, G.R.N, and Builty. It shall be noted that liability is booked on the GRN basis not on the basis
invoice date.
b) Accounts Department after necessary verification shall create the liability by passing the Journal Voucher in ERP syste
Afterwards, Accounts Assistant shall forward the all documents along with the J.V to the Internal Audit Department f
auditing purposes.
c) The PO, PR and GRN are compared by the Yarn Procurement Executive to confirm that right material is received as p
the requirements. Any discrepancies in this analysis shall be communicated to the Manager Yarn / Fabric Procurement, wh
will discuss with the supplier accordingly.

Procedure for Processing of Payment to Vendors

a) As per the payment terms agreed with the supplier by the Yarn / Fabric Procurement Department, the Yarn / Fabr
Procurement Assistant shall prepare the formal Payment Request Report R / 7.4 A / 21 which shall specify the payme
details such as P.O number against which payment is requested, Item description, and send it to the Accounts Departme
for the processing of the vendor payment.The Manager Yarn/Fabric Procurement and GM Yarn / Fabric Procurement sh
approve the Payment Request Form R / 7.4 A / 21.
b) The accounts department after necessary verification shall forward the Payment Request Document along with oth
concerned documents to the Internal Audit Department for auditing purposes.
c) The payment request shall clearly identify the nature of payment e.g. Advance, Post Payment etc.
d) After the successful audit of the payment request, the Audit department will forward it to Accounts Department, th
Accounts Assistant shall prepare the Payment Voucher in the system, which shall be reviewed by Manager Accounts, an
approved by GM Finance / CFO.
e) Upon approval, the Accounts Assistant shall prepare the cheque and intimate the Yarn / Fabric Procurement departmen
f) Accounts will deliver the cheques to Yarn / Fabric Procurement department, which will be forward to the supplier an
sign the payment voucher as the confirmation of receiving.

In the case payment needs to be made to supplier in advance, then Payment request along with the PO shall be forwarde
to the Accounts Department for cheque processing.
Manager Accounts shall on monthly basis review Supplier Ageing Report to identify the delays in the payments of certa
suppliers. Further, actions shall be taken to either reverse the unpaid liabilities or make the necessary payments.

Accounts Officer shall prepare a summary of Invoices which are posted and paid and be forward along with their vouche
to the Sales tax department.

In case of Advance payment of yarn purchased

• In the case where payment for yarn purchased is made in advance the Goods Received Note shall be prepared and invoi
received shall be settled with open advance in the Oracle system. Further, in this case where yarn did not pass the Q.C, th
yarn shall be sent back to the Supplier along with a Debit Note. Accordingly, supplier may return the payment or send th
revised goods as per the mutual consent between Yarn / Fabric Procurement and supplier. Apart from above the matt
may settle down with mutual consent of both parties.

• In the case where Q.C passed goods are partly to be returned to the supplier then debit note shall be prepared for th
part of goods which are to be returned. However, in this case G.R.N at initial stage shall be prepared in the system wi
complete received quantity of yarn.

Authority remits for PO approvals shall be properly defined and approved by the Head of Concerned Department and the
CEO. For example: up to a certain amount PO shall be approved by one official and above which the PO shall be approved
by some more senior official / Head of Department / Director.

Procedure of settlement and timely reconciliation of advances to Vendors

• In the case, payment to the supplier is made in advance a reconciliation shall be made for that contract, highlighting
advance given and value of goods received and any balance remaining.
• This reconciliation shall be reviewed and approved by the MANAGER Yarn / Fabric Procurement.
• The Manager Yarn / Fabric Procurement shall timely settle the advance given to the supplier; this may include the supply
of goods as a whole or partly basis (as per the contract) by the supplier and sending the invoice.

Long Outstanding unadjusted supplier advances

• The Accounts Officer shall prepare a Monthly unadjusted advance supplier wise summary of un-settled advances
disbursed to the yarn / fabric suppliers and send it to the Yarn / Fabric Procurement department for their action.
• The Yarn / Fabric Procurement department shall follow-up with the supplier based on this summary.
• When goods and invoice are received from the supplier against the advance made, the accounts department after
verification and audit from Internal Audit department shall post the invoice against advance and transaction shall be close
For the local and export procurement, the bearer of transportation expenses shall be decided by GM and MANAGER
Procurement in conjunction with relevant supplier.
 Supporting Documents Requisition of Data

Procurement Budget

Maximum and Minimum Re-Order Inventory Level

Contract / Service Agreement with Yarn / Fabric

Suppliers and Agents

Agent Performance Evaluation Report for Existing Agents

Agent Evaluation Report
for our audit period
 Yarn Inspection Reports documenting details of Agent
evaluation of Supplier Sites for our audit period

Supplier Selection and Qualification forms of new

Supplier Selection and Qualification Form
suppliers added

Supplier Performance Evaluation Reports (Subsequent

Supplier Performance Evaluation Report
Evaluation of Suppliers)
 Approved Supplier List

GRN Evaluation Report

Purchase Order Evaluation Report

Purchase Order
 Yarn Requisition Report

Purchase Order Ammendment Form

PO Status Report
Quotations Comparitive Statement
Yarn Weight Report

Tare Weight Report

 Physical Test Certificate

Yarn Complete Testing Report

Yarn Quality Standard

Chemical Test Certificate

Weft Test Certificate

Warp Breakage Certificate / Warp Test

Certificate
Supplier Complaint Log

Supplier Complaint Form

 Fabric Lab Test Report

Payment Request Report

S.No
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 List of Data required - LTM
Annual procurement plan/Budget for the audit period
Vendor master file edit report for the audit report
Criteria List for Supplier Evaluation (initial and periodically)
VENDOR MASTER FILE RAISED LAST TRANSACTION DATE AND LAST MODIFIED DATE
Supplier aging report as of -
List of advances given to suppliers during the audit period
List of claims lodged with suppliers ( claim receivable report) - if any
Agreement with transporters
List of all service contracts with type of service provided
Sample of supplier ledger during the audit period
PO Report for the audit period
Outstanding PO Report
List of PO closed during the audit period
Goods Receiving/GRN report during our audit period
Approved DOA matrix (PO, PR, Payment etc)
List of Payments directly paid through Petty cash vouchers\ cash imprest
Quality receiving inspection report during our audit period
Vendor wise list of payment made during our audit period
List of Urgent/Emergency purchases along with its defined policy(if any)
List of Clearing agents along with their agreements
List of LCs opened during the audit period.
LC ammendment charges register during audit period
List of purchase orders cancelled (if any)
Lucky Textile Mills Limited
List of Information
Procurement to Payment Process
Category : Yarn / Fabric / Yarn Conversion Procurement
Audit Period: April 2016 - March 2017

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tile Mills Limited

ent to Payment Process

: Yarn / Fabric / Yarn Conversion Procurement
iod: April 2016 - March 2017

List of Data required - Procurement

Annual Customer Forecast / Yarn/Fabric Procurement Budget for our audit period
Details of Confirmed Fabric Orders for our audit period
Contracts and Service Agreements with Yarn / fabric Agents procured during our audit period
Contracts and Service Agreements with Yarn Conversion Service Providers during our audit period
Agents Performance Evaluation Reports performed during our audit period
Yarn Inspection Reports received from Agents documenting results of Supplier Sites Visits during our audit period
Yarn / Fabric Supplier Selection and Qualification Forms for the new suppliers added during our audit period
Supplier Performance Evaluation Reports for Existing Yarn / Fabric Suppliers (Subsequent Evaluation) performed during our au
Approved Yarn/Fabric Supplier Lists / Supplier Master File (Specifying Last Transaction Date)
Unapproved Yarn/Fabric Supplier List
New Suppliers Opening forms for Yarn/Fabric suppliers added during our audit period
New Suppliers Opening forms for Yarn Conversion suppliers added during our audit period
GRN Evaluation Report for all GRN's of Yarn/Fabric purchased during our audit period
Purchase Order Evaluation Report for Yarn/Fabric purchased during our audit period
List of Service Agreements with Yarn / Fabric Agents and Suppliers renewed during our audit period
Supplier List of Yarn Conversion Suppliers (In-house and Out-Source)
Purchase Summary of Yarn Convesions (Supplier Wise) executed during our audit period (In-house and Out-source)
Evaluation Forms of Yarn Conversion Suppliers for our audit period
Quotations and Comparitive Statements for Yarn / Fabric Purchased during our audit period
Quotations and Comparitive Statements for Yarn Conversion services during our audit period
Purchase Orders for Yarn / Fabric Purchased during our audit period
Purchase Orders for Yarn Conversion services procured during our audit period
Purchase Requisition , Purchase Orders, GRN and Comparitive Statement Approval Authority Matrix
Yarn/Fabric Requisition reports for all purchases made during our audit period
Agents / Suppliers wise Warping and Weft Breakage Reports for our audit period
Yarn conversion requisition reports for all yarn conversion services procured durind our audit period
Sales Contracts for Yarn / Fabric purchases made during audit period (Along with computation of Yarn Requirement Sales Con
Purchase Orders Ammendment forms raised during our audit period
PO Status Report as at 30 March 2017
PR Status Report as at 30 March 2017
Outstanding QC Report as at 30 March 2017
List of Urgent/Emergency purchases made during our audit period
Supplier Complaint Log for our audit period
Vendor Complaint Forms raised during our audit period
List of Clearing agents along with their agreements for our audit period
List of LCs opened during the audit period.
List of purchase orders cancelled (if any) during our audit period
Agreement with transporters for our audit period
 List of Data required - Finance
Supplier Ageing Report as at 30 March 2017
List of Advances given to Suppliers during our audit period
Unadjusted / Unsettled advances as at 30 March 2017
Vendor wise list of payments made during our audit period
Ledger of Demurrage and Detention Charges for our audit period
Payment Approval Authority Matrix