Readig Materials- C&P

8/9/2019 Readig Materials- C&P

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THREE DAYS PROGRAM ON ENHANCING CONTRACT& PROCUREMENT

SKILLS

FOR UPRVUNL EXECUTIVES / ENGINEERS

Program organized byPower Management Institute,

NTPC Ltd., Noida- 201301 (UP)

NTPC


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PROGRAMME TITLE Enhancing Contract & Procurement SkillsDURATION 22- 2 !anuar", 2013 #N$ 2%-2& 'e ruar",2013PARTICIPANTS UP *UNL + e uti es / +ngineersVENUE UP *UNL, Pan i, an ur

PROGRAM SCHEDULE

DA TESession SESSION TOPIC METH.

Day I

I-IIIn egra ed Ma eria! Managemen "IMM# e" Termino4ogies in IMM, $e5inition 'un tions 6 7 8e ti es o5 Pur 9asing( ig9t :ua4it", ig9t Pri e, ig9t ;our e, ig9t :uantit", ig9t Time 6 P4a e)

P$r%&asing Pro%ess *arious ;tages o5 Pur 9asing, ;to 6 Non-sto items, e ognition 75 Need,$es ri tion o5 needs, P#C, # ro a4 o5 re


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THREE DA/S PROGRAM ON ENHANCING CONTRACT 0 PROCUREMENT S1ILLS2OR UPRVUNL E3ECUTIVES, ENGINEERS

Reading Ma eria!s

1. Integrated Materia4s Management2. $e5ining Con e t o5 Pur 9asing, Pro urement, su 4" Management, ;u 4" C9ain

Management Materia4s Management3. es onsi i4ities, 'un tions 6 7 8e ti es o5 Pur 9asing

. Pur 9asing Pro ess>. =u"ing at ig9t Pri e%. ig9t Time 6 Lead-time #na4"sis?. T9e ig9t :uantit"&. ig9t ;our ing 6 ;u 4iers $e e4o ment@ *endor +n4istment

10. ;u 4iers + a4uation11. =u"er ;e44er e4ation12. Negotiation- #n +55e ti e Too4 o5 Pur 9asing13. T9e ig9t :ua4it"1 . ; e i5i ation1> !ust in Time Pur 9asing 6 In entor" Management1% Pro5essiona4 +t9i s o5 Pur 9asing1? =udgetar" Contro4 in Pur 9asing1&. + a4uation o5 Pur 9ase 'un tions1@ *a4ue #na4"sis/+ngineering20 P+ T 6 Its o4e in Materia4s Management

21. Ma e 6 =u" $e isions22 Pur 9asing Po4i " 6 ;trategies23. Contra t 6 Contra t Management2 , Lega4 #s e ts o5 Pur 9asing

Com*i!ed by;.C. ;e9ga4,Materia4s Management Consu4tantA ama4 *i44aB >> +.C. oad, $e9radun-2 & 001(U# #P9one (013>) 2?101 3Mo i4e @ 120>% %3/@@@@0&&111

E'Mai!- [email protected]

3


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In egra ed Ma eria!s Managemen -

De4ini ion-

Materia4s management is a 5un tion res onsi 4e 5or t9e o-ordination o5 4anning, sour ing,

ur 9asing, mo ing, storing and ontro44ing materia4s in an o timum manner so as to ro ide

a re- de ided ser i e to t9e ustomers at a minimum ost.

)road 2$n% ions-

Materia4s P4anning and Programming

Pur 9asing

In entor" Contro4

e ei ing

;tore- ee ing #nd Materia4s and4ing

; ra 6 sur 4us $is osa4

Ob5e% i+es o4 Ma eria!s Managemen -

Primary ob5e% i+es Se%ondary ob5e% i+es

1. ig9t ri e 1. New materia4s and rodu ts

2. ig9 turno er 2. Ma e 6 =u" $e isions

3. Low Pro urement and ;torage ost 3. ;tandardiDation

. Continuit" o5 su 4" . Produ t Im ro ements

>. Consisten " in :ua4it" >. Interde artmenta4 armon"

%. Eood ;u 4ier e4ations %. 'ore asting?. $e e4o ment o5 Personne4

&. In5ormation ;"stem

Organiza iona! S r$% $re-

P!a%emen o4 Ma eria!s Managemen in organiza iona! s r$% $re-


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T9ere are asi a44" two a roa 9es to 4a e materia4s management 5un tions in an

organiDationFs stru ture.

1. Materia4s Management 'un tion as su -ordinate 5un tions re orting to an" ot9er

5un tiona4 9ead

C&ie4

E6e%$ i+e

Prod$% ionManager

P$r%&asingManager

Sa!esManager

O &erManager

Produ tion Contro4 ;to Contro4 Trans ortation;tores Pur 9asing

2. Materia4s Management 5un tion as integrated and inde endent management 5un tionat ar wit9 an" ot9er management 5un tions.

C&ie4E6e%$ i+e

Prod$% ionManager

Ma eria!sManager

Sa!esManager

O &erManager

Pur 9asing;tores;to Contro4Trans ort

G9i 9 o5 t9e two organiDationa4 stru tures are to e ado ted de ends on man" 5a tors iD.

ow im ortant are materia4s management a ti ities to t9e unit and 5or t9at matter to

t9e organiDation as a w9o4eH

Gi44 t9e unit su55er su stantia44" i5 Materia4s Management does not er5orm

e55e ti e4", as it mig9t eH

>


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ow mu 9 5unds are 4o ed in in entor" and onstraints o5 wor ing a ita4H

ow im ortant it is t9at materia4s management a ti it" e 4ose4" o- oordinated wit9

o eration, maintenan e and a ounts de artmentH

Is it essentia4 t9at materia4 ost e ontro44ed tig9t4"H

G9at is a so4ute a4ue o5 ur 9asesH

G9at are range and arieties o5 materia4s ur 9asedH

G9at is t9e er entage o5 materia4s ost in tota4 rodu tion ostH

G9at are t9e mar et onditionsH

#nd 4ast ut not t9e 4east, do we intend to de e4o a ro5ession team o5 Materia4s ersonne4 to

e55e ti e4" ontri ute in o era44 organiDationa4 o 8e ti esH 7rganiDation wi44 ertain4" e

ene5ited 5rom a 9ig9er a4i er, reati e materia4s management de artment, s9ou4d it e

treated as a ro5it- ma ing entre, w9i 9 re ei es 4ose attention o5 genera4 management. It is,

9owe er, rea4iDed t9at # ounts, Produ tion, +ngineering or Maintenan e $e artments 9a e

t9eir own riorities, w9i 9 are in on54i t wit9 asi o 8e ti es o5 sound Materia4

Management. Modern tenden ies as su 9 are to de-4in materia4s 5un tions 5rom t9ese

de artments. Integrated materia4s management 5un tion is re ogniDed as to management

5un tion and ead o5 Materia4s Management $e artment re orts dire t4" to 9ead o5 unit or

organiDation.

+ en i5 t9e Materia4 is rimari4" treated as ser i e a ti it", it s9ou4d re ort to t9at 5un tiona4

9ead t9at it ser es most.

In egra ed Ma eria!s Managemen A**roa%&-

T9is is essentia44" an organiDationa4 on e t t9at rings toget9er, under one organiDationa4om onent i.e. Materia4s Management $e artment, t9e res onsi i4it" 5or 4anning,

ur 9asing, trans ortation, storing, dis ursing and ontro44ing materia4s.

T9e 5o44owing are some o5 t9e ad antages o5 integration o5 materia4s management 5un tions

%


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=etter oordination and redu tion o5 inter-de artmenta4 on54i ts. T9is is a om 4is9ed

" e4iminating u assing etween su -5un tions and ro iding a Centra4 'igure

( ead o5 Materia4s Management $e artment) to a4an e on54i ting o 8e ti es. T9is

a4so esta 4is9es etter a ounta i4it" 5or materia4s 5un tions

edu tion o5 in entor" 4e e4 and greater assuran e o5 materia4s a ai4a i4it" " etter

oordination and ommuni ation wit9 user de artments and among di55erent se tions

o5 Materia4s Management $e artment

Im ro ed su 4ier re4ations resu4ts 5rom esta 4is9ing de4i er" s 9edu4e on t9e asis o5

4atest in entor" osition and rodu tion re


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Eeogra 9i a4 dis ersion o5 4ants T9e 4osure t9e 5irmFs 4ant is 4o ated

geogra 9i a44", t9e 5easi 4e entra4iDation e omes.

Num er and siDe o5 4ants I5 t9ere are 4arge num er o5 4ants o5 5air4" ig siDe,

entra4iDation wi44 e ome di55i u4t and reate more ro 4ems in a ai4a i4it" o5

materia4s t9an an" gains.

Ad+an ages o4 M$! i'*!an Cen ra!iza ion-

; o e o5 greater s e ia4iDation.

Conso4idation o5 materia4s re


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De4ining Con%e* o4 P$r%&asing7 Pro%$remen 7 s$**!y Managemen 7 S$**!y C&ainManagemen Ma eria!s Managemen

DE2INITION O2 PURCHASING

Pur 9asing is a 5un tion o5 ro uring goods and ser i es 5rom sour es e terna4 to t9e

organiDation

In t9e words o5 #45ord and =eat"

P$r%&asing is &e *ro%$ring o4 ma eria!s7 s$**!ies7 ma%&ine oo!s 0 ser+i%es re8$ired

4or e8$i*men 7 main enan%e 0 o*era ion o4 a man$4a% $ring *!an (

# ording to "et anot9er aut9orit"

9P$r%&asing is *ro%$ring o4 ma eria!s7 oo!s7 s ores "or s$**!ies# and ser+i%es

re8$ired 4or man$4a% $ring o4 a *rod$% 7 main enan%e o4 ma%&ines 0

$nin err$* ed r$nning o4 man$4a% $ring *!an in a manner &a g$aran ees

mar:e ing o4 %om*any;s *rod$% s in 8$an i ies desired a &e ime *romised 0

%om*e i i+e *ri%e %onsis en


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9Pro%ess by


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Dob!er 0 )$r in &eir boo: P$r%&asing 0 s$**!y Managemen &a+e di44eren ia ed

&ese erms as $nder

Pur 9asing 5un tions om rises essentia4 a ti ities asso iated wit9 a


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2. Condu t o5 materia4s studies 6 management o5 a4ue ana4"sis a ti ities.

3. Condu t o5 more e tensi e materia4 mar et studies.

. Condu t o5 a44 ur 9asing 5un tions

>. Management o5 su 4ier


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2. Condu t o5 a44 ur 9asing 5un tions 6 ro urement ro ess a ti ities.

3. ea " use o5 ross- 5un tiona4 teams in su 4ier . Continuous identi5i ation o5 t9reats and o ortunities in 5irmFs su 4" en ironment

%. $e e4o ment o5 strategi , 4ong term a


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;CM an e om ared wit9 we44 a4an ed and ra ti ed re4a" team. ;u 9 a team is moreom etiti e 6 o9esi e w9en ea 9 4a"er nows 9ow to e ositioned 5or 9and-o55-

re4ations9i s are stronger etween w9o dire t4" ass-on t9e aton ut entire team needs toma e oordinated e55orts to win t9e ra e.

;CM an a4so e de5ined as

9A ne


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> In- 4ant materia4s 9and4ing

% Tra55i 6 Trans ortation

Res*onsibi!i ies 2$n% ions 0 Ob5e% i+es o4 P$r%&asing-

De4ini ion o4 P$r%&asing-

7rganiDationa4 ur 9asing ma" e de5ined as

9T&a 4$n% ion res*onsib!e 4or ob aining by *$r%&ase7 !ease or o &er !ega! means7

e8$i*men 7 ma eria!s7 s$**!ies and ser+i%es re8$ired by an $nder a:ing 4or $se in

*rod$% ion( In &is de4ini ion erm *rod$% ion is $sed in e%onomi% sense o4 %rea ing

$ i!i ies i(e( goods and ser+i%es &a sa is4y needs=(

7rganiDationa4 ur 9asing an e de5ined as Jt9e ro ess " w9i 9 organiDations de5ine andom are su 4ies and su 4iers a ai4a 4e to t9em, negotiate wit9 sour es o5 su 4" or in some

ot9er wa" arri e at agreed terms o5 trading, ma e ontra ts and 4a e orders and 5ina44"

re ei e, a e t and a" 5or t9e goods and ser i es re


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#re t9ose u"ers o5 goods and ser i es 5or t9e s e i5i ur ose o5 industria4 or agri u4tura4

rodu tion or 5or use in t9e o eration or ondu t o5 4ant, usiness, institution, ro5ession or

ser i e.

Ind$s ria! )$yers

#re t9ose u"ers o5 goods and ser i es in some tangi 4" rodu ti e and ommer ia44"

signi5i ant ur oses e.g. manu5a turers, rimar" (e tra ti e) rodu ers, agri u4tura4, 5orestr"

5is9er" et .

Ins i $ iona! )$yers-

#re t9ose u"ing goods and ser i es 5or institutions (in t9e sense o5 ro iding a ser i e,

w9i 9 is o5ten intangi 4e) and not ne essari4" ommer ia44" signi5i ant ur ose e.g. s 9oo4s,9os ita4s, armed 5or es, entra4 and 4o a4 go ernments.

In ermedia e )$yers-

#re t9ose u"ing goods and ser i es 5or re-sa4e or 5or 5a i4itating t9e resa4e o5 ot9er goods in

t9e industria4 or u4timate onsumer mar et e.g. distri utors, dea4ers, w9o4esa4ers, retai4ers

ser i e traders.

Res*onsibi!i ies o4 P$r%&asing-

Pro ide a44 materia4s and ser i es t9at organiDation de ides not to ro ide interna44".

T9is in o4 es

a) ;e4e t and de e4o as re


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Pro ide in5ormation to and arti i ate in management 4anning sessions on su 8e t

re4ated to ur 9ase o5 materia4s.

e iew ur 9ase s e i5i ations and assist o erating de artments in se4e tion o5

re


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To redu e 4ead- time o5 ro urement and enter 4ong- term rate ontra t 5or items o5

regu4ar onsum tion.

To de e4o good and ontinuing usiness re4ations wit9 su 4iers, ensure 5aster

a"ment and treat t9em as artners in t9e usiness.

To riti a44" e a4uate t9e er5orman e o5 su 4iers so as to weed out t9ose w9ose

er5orman e is not u to t9e mar .

Integrating ur 9asing 5un tions wit9 ot9er de artments to attain organiDationa4 goa4s.

To de e4o o4i ies and ro edures, w9i 9 ermit eas", a om 4is9ment o5 ur 9asing

5un tions at o timum o erating osts.

To train and de e4o a ro5essiona44" om etent team o5 ur 9asing ersonne4 to

er5orm a o e 5un tions and ma e ur 9asing a ro5it enter.

Ob5e% i+es o4 Ind$s ria! P$r%&asing-

Pur 9asing o 8e ti es are to u" materia4s and ser i es at rig9t ri e, o5 rig9t ig9ts o5

ur 9asing w9i 9 are rie54" e 4ained as under

Rig& >$a!i y-

$i tionar" meaning o5


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:ua4it" in ur 9asing, t9ere5ore, is determined " two ma8or onsiderations.

1. Te 9ni a4 onsideration o5 suita i4it" o5 rodu ts ur 9ased.

2. + onomi onsideration o5 ri e and a ai4a i4it" o5 rodu ts ur 9ased.

Some o &er as*e% s o4 8$a!i y are-

:ua4it" 9as to e asi a44" determined " te 9ni a4 de artment ut ur 9aser need to

ensure t9at re


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ig9t ri e 5or one su 4ier ma" not e t9e rig9t ri e 5or anot9er.

T9e


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a ai4a 4e


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'or riti a4 items ur 9aser i5ur ate t9e orders so t9at 5ai4ure o5 one su 4ier do not sto

o erations o5 u"erFs organiDation. !a anese 9i4oso 9", 9owe er, is di55erent. T9e" e4ie e

t9at one s9ou4d 4oo 5or a est su 4ier and de e4o t9us one sour e o5 su 4". T9is im 4ies

t9at one does not it su 4iers against ea 9 ot9erK rat9er de e4o a er5e t re4ations9i wit9 a

sing4e sour e.

T&is a**roa%& &as 4o!!o


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- + a4uation o5 er5orman e o5 e isting su 4ier on ontinuous asis.

Rig& >$an i y-

Pur 9aser must ensure to u" rig9t


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!ust- in- Time is ased on t9e 9i4oso 9" o5 de4i er" at rig9t time and 4a e.

# art 5rom t9e a o e 'i e ig9ts, ig9t terms and onditions o5 order/ ontra t a4so 4a" an

im ortant ro4e in satis5a tor" e e ution o5 su 4ies. T9e 5o44owing are some o5 t9e

onsideration to e e t in mind

# ur 9ase order/ ontra t must e dra5ted er" are5u44" e ause it is a 4ega4

do ument, in t9e e ent o5 an" dis ute.

Language o5 t9e order s9a44 not e am iguous

Pur 9aser s9a44 e we44 on ersant wit9 Contra t # t and ;a4es o5 Eoods # t.

Terms and onditions, go erning ur 9ases s9a44 e made won to su 4ier 5rom t9e

er" eginning i.e. at t9e time o5 Noti e o5 In iting Tender.

;u 4ier a4so norma44"


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STAGES STEPS DOCUMENTS USED

1. e ogniDing need Pur 9ase re


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- Materia4s and arts 5or rodu tion.

- Maintenan e, re air and o erating (M 7) su 4ies.

- Ca ita4, 4ant and e


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ur 9asing t9e re


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In order to o timiDe sto -9o4ding 4e e4,


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time ro urement on sing4e tender asis is re ommended to u" a arti u4ar rodu t

on4" to meet t9e s e i5i needs o5 user de artment, a4t9oug9 t9ere mig9t o5 a num er

o5 ot9er simi4ar ma e in t9e mar et. ;imi4ar4" a erti5i ate o5 standardiDation 9as to e

ro ided " use de artment i5 materia4s are re


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#5ter re ei t o5 ur 9ase re


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+ en i5, t9ere is no annua4 ontra t, t9ere ma" e esta 4is9ed su 4ier and a om etent u"er

does not 9ange t9e su 4iers unti4 t9ere are a4id reasons. T9e u"er ma" 4a e t9e order on

t9e 4ast su 4ier or ma" 9e t9e mar et again " re


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resorted to on4" w9en t9e a4ue o5 ur 9ases is a o e ertain 5inan ia4 4imits. Tender

do uments are so4d to ros e ti e idders on a"ment o5 s e i5ied 9arges. Norma44" two-

art idding is done. Pros e ti e idders are ad ised to 5urnis9 te 9ni a4 id a4ong wit9 id

guarantee amount (earnest mone") in t9e 5irst en e4o and ommer ia4 id in t9e se ond

en e4o . In t9e 5ist en e4o e su 4iers are a4so ad ised to 5urnis9 ne essar" do uments in

su ort o5 t9eir 9a ing met


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#t t9e 4osing date and time, a44 t9e o55ers re ei ed 5rom t9e ros e ti e su 4iers are o ened.

Man" organiDations a44ow t9e idder to de ute t9eir re resentati e to witness t9e tender

o ening, i5 t9e" so desire. 755ers re ei ed a5ter t9e due date and time are not entertained and

returned a to idders uno ened. #4t9oug9 4ate o55ers are not onsidered, in some

organiDations de4a"ed o55ers (o55ers osted at 4east one da" e5ore s 9edu4ed o ening date

t9roug9 egistered ost o er ut de4a"ed due to osta4 time.)

#s a norma4 ra ti e, t9e e" data 5rom su 4ierFs o55er are re orded on to a id summar"

s9eet (a4so nown as om arati e statement). T9is is on enient ot9 5or om arison and

su se


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E6%ise D$ y-

I5 t9e idder is si4ent a out e ise dut" or


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on art a"ment. Loading towards de iation in a"ment terms is on asi ri e O P6'

O +$ O ;T

Pri%e Varia ion C!a$se-

Norma44" as er terms o5 tender en


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;ometime, one o5 t9e se era4 o55ers is 5ound mu 9 4ower and a ur 9aser must 5ind out t9e

reasons 5or t9is. I5 t9e 4owest o55er is more t9an 2> e4ow t9e ot9er o55ers, t9e u"er s9a44

4ari5" wit9 t9e su 4ier e5ore 5ina4iDing t9e order to a oid non-e e ution o5 order at 4ater

stage. ;ometime t9e su 4ier ma" e s9ort o5 orders and ma"


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too4s, t9e 5uture re


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200000=rea -e en

oint # and =

100000

>0 100 1>0 200

:uantit" (Units)

Dis%o$n s and Reba es-

# dis ount norma44" is t9e dedu tion 5rom 4ist ri e,


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; e ia4 dis ounts are sometime a ai4a 4e to u"er, w9o ta es t9e goods during o55- season

su 9 as re5rigerator during winter season. T9e ad antage to su 4ier is t9at t9e rodu tion an

e smoot9ed and ost o5 9o4ding t9e sto is redu ed. Manu5a turers a4so announ e s e ia4

dis ounts as sa4e romotion during 5esti a4 times or a4so dis ount on return o5 worn out/o4d

items against ur 9ase o5 new oneFs.

>$an i y Dis%o$n s-

:uantit" dis ounts are o55ered on 4arge orders or to 4arge ustomers. T9e se44er is ene5ited

5rom ig orders, w9i 9 ena 4e t9em to redu e dire t and indire t osts. =e5ore a ai4ing as9

dis ount, t9e u"er needs to weig9 t9e ad antage o5 4ower ur 9ase ost against additiona4

in entor" 9o4ding ost. T9is an e


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# ur 9ase order is a ontra t and an e used as a 4ega4 do ument in t9e e ent o5 an"

dis ute. It is t9ere5ore im erati e t9at agreed terms o5 ur 9ase s9ou4d e 4ear4"

s e44ed out in t9e we44-do umented 5orm o5 ur 9ase order.

#n organiDation em 4o"ing 4arge num er o5 eo 4e and ro essing t9ousand o5

in oi es e er" mont9, needs standard ro edure to ensure t9at a"ments are not made

5or t9e goods w9i 9 9a e not een ordered or 9a e wrong4" een roug9t in 5or

ri ate use on om an"Fs a ount.

To ensure t9at non- ur 9asing em 4o"ees do not ma e an" ommitment to t9e

su 4ier on e9a45 o5 t9e organiDation. # 4arge num er o5 sa4esmen ee on meeting

t9e non ur 9asing em 4o"ees o5 t9e organiDation to o55er t9em materia4s to meet t9eir

needs. T9e" ma" ressuriDe t9em to sign t9eir order 5orm or o tain t9eir er a4

onsent 5or su 4" o5 unwanted materia4s or materia4s at e essi e ri es or e essi e


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it e omes di55i u4t to get signed o " a . ;ometime su 4iers sign a5ter rossing

t9e onditions, w9i 9 are not a e ta 4e to t9em, or atta 9 t9eir own order- a e tan e

5orm wit9


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=4an et orders or eriod ontra ts are not usua44" instru tion to de4i er t9e materia4s. T9e" are

rat9er agreement as to tota4


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Potentia4 sa ings in se44ing osts, w9i 9 are a4most e4iminated on e, t9e order is

5ina4iDed.

#ssuran e o5 s e i5ied estimated o4ume o5 sa4es, w9i 9 ena 4es t9e su 4ier to 4an

9is rodu tion and in entor" more a urate4".

Disad+an ages o S$**!iers-

T9e 5igures o5 anti i ated usage are o5ten unrea4isti and in54ated.

G9en t9e a tua4 usage is e4ow t9e estimate, t9e su 4ier is urdened wit9 need4ess

in entories at t9e end o5 t9e ontra t.

Pro isions o5 J ost 4usF ri ing ontra t re


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Mu4ti- 4ant om anies sometime resort to ur 9asing t9roug9 nation-wide ontra ts. ;u 9

t" e o5 ontra ts, nown as Nationa4 Contra ts, are negotiated and 5ina4iDed " Cor orate

Pur 9asing Erou . T9e ur ose o5 su 9 ontra t is to a 4" o era44 ur 9asing strengt9 "

onso4idating re


45/238

Ad+an ages o P$r%&aser-

;a ings in in entor" 9o4ding ost due to redu tion o5 amount o5 a ita4 tied u in

in entor".

Pa er wor is su stantia44" redu ed and ur 9ase ersonne4 ma" de ote t9is time 5or

ot9er ru ia4 areas.

;er i e 4e e4 is im ro ed and no 5ear o5 o so4es en e.

nowing a44 o5 ustomer usiness in o4 ed, t9e su 4ier ma" e in 4ined to ma e

on ession in ri es 5or etter a"ment terms.

Ad+an ages o S$**!iers-

#ssuran e o5 5u44 ustomer usiness during t9e ontra t eriod and mar eting e55ort

an e de oted to ot9er ustomers.

;igni5i ant redu tion in t9e a er wor .

I5 t9e sto s are 9e4d at u"erFs 4a e, se44erFs re


46/238

T9ere are no ro 4ems as 5ar as indi idua4 sma44 order ut sma44 orders onsidered as a w9o4e,

do onstitute a ro 4em. It is di55i u4t to anti i ate t9e need 5or sma44, non-re urring

ur 9ases, e ause situation t9at generates t9em are not usua44" re4ated to ea 9 ot9er, t9us

re 4uding t9e ossi i4ities o5 om ining orders to in rease tota4 a4ue. ;u 9 items are 5urt9er

needed rom t4" and ur 9ase annot 9o4d and a umu4ate re


47/238

su 4" t9e goods a4so and ro ide t9e su 4ier order num er w9i 9 is used to identi5"

re


48/238

time. +a 9 da" o ies o5 orders 5or t9e da" are ta en out and t9ose, w9i 9 are in

transit or 9a e een re ei ed, are 5i4ed in re ords 5i4e. est is rogressed.

Pur 9ase order 5i4e an a4so e om uteriDed and reminder an e generated, w9en

due, 5or rogressing.

outine reminders ma" e in t9e 5orm o5 standard 4etter as ing on5irmation 5rom t9e su 4ier

t9at de4i er" is on t9e wa" or wi44 e made as er s 9edu4e or order. No re 4" or unsatis5a tor"

re 4" tend to ersona4 4etter, 9one a44 or isit to su 4ier 4a e.

In riti a4 ases u"er ma" start 4oo ing 5or a4ternati e arrangements and ma" onsu4t 9ig9er

management to see t9at e tra ressure an e a 4ied.

Amending or %an%e!ing orders-

#mendments to orders are made due to man" reasons, w9i 9 9a e mutua44" een agreed u on

(amendments e tending de4i er" eriod, 9ange in a"ment terms, a"ment o5 ta es and

duties, 9anges in


49/238

G9en t9e goods are re ei ed sometime t9e" are 5ound damaged, de5e ti e, e ess/s9ort to

in oi e


50/238

T9e 4owest ri e is not a4wa"s t9e rig9t ri eK ri e 9as to e re4ated wit9 t9e 0


51/238

$ue to u 4i a ounta i4it" a Eo ernment/ Pu 4i ;e tor Underta ing u"er is

re


52/238

;u 4iers om eted inde endent4" 5or t9e award.

T9e su 4ier su mitting t9e 4owest o55er does not 9a e an un5air ad antage o er its

om etitors.

T9e 4owest e a4uated ri e is reasona 4e.

T&e 4o!!o


53/238


54/238

mone". T9ose w9o 5ai4 to 5urnis9 re


55/238

t9e 4owest tender to t9e s e i5i ation is a e ted. G9ere t9e a e tan e o5 4owest

tender is not re ommended or a4ue o5 ur 9ase is a o e t9e s e i5i 4imits, 9ig9er

aut9orit" as er t9e ro edures o5 t9e organiDation a ro es ur 9ase ro osa4s.

=u"er must in5orm a44 unsu ess5u4 idders t9at t9e ontra t 9as een awarded. It is

im ortant t9at t9e idders e to4d o5 t9eir 5ai4ure to get t9e ontra t in t9e ourteous

and o 8e ti e manner. #4t9oug9 a idder rea4iDes t9at it annot get e er" order, it is

4i e4" to e more om etiti e on 5uture 8o s, i5 it is not dissatis5ied wit9 its treatment.

It is a4so im erati e on t9e art o5 u"er to arrange 5or immediate return o5 +arnest

Mone"/ =id onds o5 unsu ess5u4 idders.

Pre'a


56/238

- ;ta55ing and su er ision

- ;ite onditions, wor ru4es, sa5et" (i5 a ro riate)

- =a ground 9e and se urit" 4earan es.

- # ident insuran e 5or t9e ersonne4

- La our ermits

- Pa"ment o5 minimum wages and statutor" ontri ution 5or t9e ersonne4.

- Possi 4e on54i t wit9 ot9er wor .

- =u"ersF res onsi i4ities. =u"ersF su 4ied items su 9 as too4s, e


57/238

wit9 4owest idder a5ter ids are o ened and e a4uated, t9en in 5uture idders wi44 tend not to

o55er t9eir est ri es initia44", e4ie ing t9e" ma" etter in an" su se?


58/238

E6%e* iona! %ases o4 Nego ia ion &


59/238

It ro ides an in enti e to t9e su 4ier to om 4ete t9e wor wit9in res ri ed time. I5

wor is de4a"ed an" in rease in t9e ost o5 in uts wi44 9a e to e orn " t9e su 4ier.

Re'de erminab!e 2i6ed Pri%e-

'irm ri e is determined at an agreed oint o5 ontra t (sa" 30 om 4etion) in t9e 4ig9t o5

a tua4 e erien e o5 rodu tion ost. T9e ri e ma" e retros e ti e to t9e ommen ement o5

ontra t and ros e ti e to om 4etion.

;u 9 t" es o5 ri es are a 4i a 4e w9ere de e4o ment and rodu tion ro eed on urrent4",

su 9 as im ort su stitution.

2i6ed Pri%e S$b5e% o Ad5$s men i(e( Pri%e r$!ing a &e da e o4 Des*a %&

In t9is ase 5i ed ri e as er o55er/order is ad8usted on agreed asis to o er es a4ation in ost

o5 4a our and materia4s.

;u 9 t" es o5 ri es are a 4i a 4e to ontra t e tending o er a eriod o5 time during w9i 9

t9e su 4ier ma" re@


60/238

'ina4 ri e is determined on t9e asis o5 a tua4 ost 4us an agreed 5ormu4a 5or determination

o5 ro5itK t9e asis ma" e (a) ost 4us a 5i ed 5ee ( ) Cost 4us an agreed er entage ( ) ost

s9aring.

;u 9 t" e o5 ri e is a 4i a 4e to onstru tion and ser i e ontra t, re air wor .

C&oi%e o4 Rig& Pri%e )asis

#not9er im ortant area to ensure t9e most e onomi a4 4anded ost o5 t9e goods ur 9ased,

es e ia44" im orts, is t9e 9oi e o5 rig9t ri e asis.

T&e 4o!!o


61/238

# rudent u"er a4wa"s re5ers 5or station o5 dis at 9 ri e asis, w9i 9 o55er to 9im

5o44owing o ortunities.

To se4e t an e55e ti e arrier ee ing in iew t9e urgen " o5 9is re


62/238

The modifications affect obligations, risk transfer, and cost sharing for the seller and buyer,

resulting in better clarification and application of the eleven '$$ Incoterms, and consistent

with the way global trade is actually conducted since the last update in "###.

In any sales transaction, it is important for the seller and buyer to agree on the terms of sale

and know precisely what is included in the sale price. *xporters should choose the Incoterm

that works best for their company, but also be prepared to !uote on other terms.

ee 1*(0 &ast &acts2 3esponding to In!uiries

Inexperienced exporters may want to use the Incoterm “*x 4orks” '*54 , because this

term carries the least burden for them. -nder *54, an exporter6s responsibility ends at their

facility6s loading dock, which includes making the goods available for pick up and providing

any product information needed for filing the *lectronic *xport Information '**I . The

importer6s agent 'i.e. their designated -. . freight forwarder will arrange and pay for thepre2carriage, shipping, insurance and any additional costs from the exporter6s door. ) sale

based on the Incoterm “CI&”, on the other hand, re!uires the exporter to arrange and pay for

the pre2carriage, shipping, and insurance to a named port. In this case, the sale price

'invoice includes not only the 'C ost of goods, but also 'I nsurance and '& reight costs that

the importing buyer pays the exporting seller.

4hen designating the Incoterm on a commercial invoice or a !uotation to the buyer, the

term should be followed by the city or port of load discharge, such as “*54 &actory,

3ichmond, 1)” or “CI& 3otterdam”. -sing the actual address is better to avoid any

confusion or misinterpretation. Communication throughout the entire process is crucial. &or

example, under *x 4orks, the shipper should notify the importer when the goods are ready

and after they have been picked up by the importer6s selected carrier. The exporter6s freight

forwarder often provides the vessel and sail date, or air cargo service used, and any ocean

bill of lading or airway bill number to keep the parties informed of the arrangements and

status of the shipment 'even though technically under *x 4orks the exporter6s responsibility

ends at their loading dock .

The most burdensome Incoterm for the exporter is (elivered (uty 0aid '((0 , because all

arrangements and costs are borne by the exporter, usually with the assistance of agents

'freight forwarders and customs house brokers . 4ith ((0, the exporter bears all risks and

costs of transportation, including duties and tariffs, until the goods are received by the

%2


63/238

importer, usually at the importer6s factory or warehouse. ince ((0 represents the

maximum obligation to the seller, it is not recommended for companies that are new2to2

export.

%3


64/238

DDP Example: Four palletized drums of chemicals at US$ 40,000, DDP 1 ! "ain St#, Santia o,

%hile#

In the ((0 example, for 78#,### total, the exporter arranges and pays for all transit costs,

including delivery to a designated facility at $"9 :ain treet, antiago, including any insurance

coverage and duties tariff charges. 4hile these costs are added to the product6s price and are

sometimes itemi;ed on the commercial invoice, the exporter takes full responsibility for the

added logistics costs and potential headaches, such as delays at customs, demurrage or

detention, or changes in inland or ocean transportation costs. hipping ((0 should only be

used by the most experienced exporters. :any details must be considered, such as trade

barriers, duties, currency exchange, reputability of service providers, and delivery to the final

destination. &or example, if your product is a large, custom2made piece of machinery for a

factory/ )re there local out2of2gauge, heavy lift service providers<

(oes the road to the factory allow access by an oversi;ed truck<

4hat are the dimensions and capability of the buyer6s receiving dock<

=ow will you repair any damage that may occur during transit<

INCOTERM DEFINITIONS/CHANGES

The $$ Incoterms consist of two groups and are listed below in order of increasing risk liability to

the exporter. -nder the revised terms, buyers and sellers are being urged to contract precisely

where delivery is made and what charges are covered. This should avoid double2billing of

terminal handling charges at the port of discharge. 3eferences to “ship6s rail” were taken out to

clarify that delivery means “on2board” the vessel. Insurance, electronic documentation, and

supply chain security are addressed in more detail, and gender2neutral language is now used.

Rules for Sea and Inland Waterwa Trans!ort"

FAS 2 &ree )longside hip/ 3isk passes to buyer, including payment of all transportation and

insurance costs, once delivered alongside the ship 'realistically at named port terminal by the

seller. The export clearance obligation rests with the seller. FO# 2 &ree >n ?oard/ 3isk passes

to buyer, including payment of all transportation and insurance costs, once delivered on board

the ship by the seller. ) step further than &) .

%


65/238

CFR 2 Cost and &reight/ eller delivers goods and risk passes to buyer when on board the

vessel. eller arranges and pays cost and freight to the named destination port. ) step further

than &>?.

CIF 2 Cost, Insurance and &reight/ 3isk passes to buyer when delivered on board the ship.

eller arranges and pays cost, freight and insurance to destination port. )dds insurance costs

to C&3.

Rules for An Mode or Modes of Trans!ortat$on"

EXW 2 *x 4orks/ eller delivers 'without loading the goods at disposal of buyer at seller6s

premises. @ong held as the most preferable term for those new2to2export because it represents

the minimum liability to the seller. >n these routed transactions, the buyer has limited

obligation to provide export information to the seller.

FCA 2 &ree Carrier/ eller delivers the goods to the carrier and may be responsible for clearingthe goods for export 'filing the **I . :ore realistic than *54 because it includes loading at

pick2up, which is commonly expected, and sellers are more concerned about export violations.

%>


66/238

CPT 2 Carriage 0aid To/ eller delivers goods to the carrier at an agreed place, shifting risk to

the buyer, but seller must pay cost of carriage to the named place of destination.

CIP 2 Carriage and Insurance 0aid To/ eller delivers goods to the carrier at an agreed place,

shifting risk to the buyer, but seller pays carriage and insurance to the named place of

destination.

DAT 2 (elivered at Terminal/ eller bears cost, risk and responsibility until goods are unloaded

'delivered at named !uay, warehouse, yard, or terminal at destination. (emurrage or detention

charges may apply to seller. eller clears goods for export, not import. ()T replaces (*+,

(* .

DAP 2 (elivered at 0lace/ eller bears cost, risk and responsibility for goods until made

available to buyer at named place of destination. eller clears goods for export, not import. ()0

replaces ()&, ((-.DDP 2 (elivered (uty 0aid/ eller bears cost, risk and responsibility for cleared goods at named

place of destination at buyers disposal. ?uyer is responsible for unloading. eller is responsible

for import clearance, duties and taxes so buyer is not “importer of record”.

INCOTERMS DO NOT%

Aeither determines ownership or transfer title to the goods, nor evoke payment terms.

)pply to service contracts, nor define contractual rights or obligations 'except for delivery or

breach of contract remedies.

0rotect parties from their own risk or loss, nor cover the goods before or after delivery.

pecify details of the transfer, transport, and delivery of the goods. Container loading is A>T

considered packaging, and must be addressed in the sales contract.

&emem'er, (ncoterms are not la) and there is *+ default (ncoterm

-. . (epartment of Commerce/ www.export.gov logistics egBmainB#$ $$8.asp

4ikipedia >nline (ictionary. Incoterms/ http/ en.wikipedia.org wiki Incoterm

-(nformation pro.ided '/ EDP Fast Facts is intended as ad.ice and uidance onl/# he

information is in no )a/ exhausti.e and the EDP is not a licensed 'ro2er, 'an2er, shipper or

customs a enc/# EDP shall not 'e lia'le for an/ dama es or costs of an/ t/pe arisin out of,

or in an/ )a/ connected )ith the use of, these Fast Facts

%%


67/238

In%o erms

'rom Gi i edia, t9e 5ree en " 4o edia

Nationa4 In oterms 9am ers

T9e In%o erms ru4es or In erna iona! Commer%ia! erms are a series o5 re-de5ined ommer ia4

terms u 4is9ed " t9e Internationa4 C9am er o5 Commer e (ICC) wide4" used in internationa4

ommer ia4 transa tions. # series o5 t9ree-4etter trade terms re4ated to ommon sa4es ra ti es, t9e

In oterms ru4es are intended rimari4" to 4ear4" ommuni ate t9e tas s, osts and ris s asso iated

wit9 t9e trans ortation and de4i er" o5 goods. T9e In oterms ru4es are a e ted " go ernments,

4ega4 aut9orities and ra titioners wor4dwide 5or t9e inter retation o5 most ommon4" used terms in

internationa4 trade. T9e" are intended to redu e or remo e a4toget9er un ertainties arising 5rom

di55erent inter retation o5 t9e ru4es in di55erent ountries. 'irst u 4is9ed in 1@3%, t9e In oterms

ru4es 9a e een eriodi a44" u dated, wit9 t9e eig9t9 ersionR Incoterms 2010 R9a ing een

u 4is9ed on !anuar" 1, 2011. SIn otermsS is a registered trademar o5 t9e ICC.

•

His ory

T9e In oterms ru4es egan de e4o ment in 1@21 wit9 t9e 5orming o5 t9e idea " t9e Internationa4

C9am er o5 Commer e. 1 In 1@3%, t9e 5irst set o5 t9e In oterms ru4es was u 4is9ed. 2 T9e 5irst set

remained in use 5or a4most 20 "ears e5ore t9e se ond u 4i ation in 1@>3. #dditiona4 amendments

and e ansions 5o44owed in 1@%?, 1@?%, 1@&0, 1@@0 and 2000. T9e eig9t9 and urrent ersion o5 t9e

In oterms ru4esR Incoterms 2010 Rwas u 4is9ed on !anuar" 1,

Incoterms 20 0

T9e eig9t9 u 4is9ed set o5 re-de5ined terms, Incoterms 2010 de5ines 11 ru4es, redu ing t9e 13

used in In oterms 2000 " introdu ing two new ru4es (S$e4i ered at Termina4S, $#TK S$e4i ered at

P4a eS, $#P) t9at re 4a e 5our ru4es o5 t9e rior ersion (S$e4i ered at 'rontierS, $#'K S$e4i ered

+ ;9i S, $+;K S$e4i ered + :ua"S, $+:K S$e4i ered $ut" Un aidS, $$U). % In t9e rior

%?

http://en.wikipedia.org/wiki/International_Chamber_of_Commercehttp://en.wikipedia.org/wiki/International_Chamber_of_Commercehttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/Incoterms#cite_note-0http://en.wikipedia.org/wiki/Incoterms#cite_note-MorrisseyGraves2008-1http://en.wikipedia.org/wiki/Incoterms#cite_note-5http://en.wikipedia.org/wiki/File:Incoterms_map.pnghttp://en.wikipedia.org/wiki/File:Incoterms_map.pnghttp://en.wikipedia.org/wiki/International_Chamber_of_Commercehttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/Incoterms#cite_note-0http://en.wikipedia.org/wiki/Incoterms#cite_note-MorrisseyGraves2008-1http://en.wikipedia.org/wiki/Incoterms#cite_note-5


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ersion, t9e ru4es were di ided into 5our ategories, ut t9e 11 re-de5ined terms o5 Incoterms 2010

are su di ided into two ategories ased on4" on met9od o5 de4i er". T9e 4arger grou o5 se en

ru4es a 4ies regard4ess o5 t9e met9od o5 trans ort, wit9 t9e sma44er grou o5 5our eing a 4i a 4e

on4" to sa4es t9at so4e4" in o4 e trans ortation o er water.

R$!es 4or Any Mode"s# o4 Trans*or

T9e se en ru4es de5ined " Incoterms 2010 5or an" mode(s) o5 trans ortation are

+VG Q + Gor s (named 4a e o5 de4i er")

T9e se44er ma es t9e goods a ai4a 4e at its remises. T9is term 4a es t9e ma imum

o 4igation on t9e u"er and minimum o 4igations on t9e se44er. T9e + Gor s term is o5ten

used w9en ma ing an initia4


69/238

$#P Q $e4i ered at P4a e (named 4a e o5 destination)

;e44er a"s 5or arriage to t9e named 4a e, e e t 5or osts re4ated to im ort 4earan e, and

assumes a44 ris s rior to t9e oint t9at t9e goods are read" 5or un4oading " t9e u"er.

$$P Q $e4i ered $ut" Paid (named 4a e o5 destination)

;e44er is res onsi 4e 5or de4i ering t9e goods to t9e named 4a e in t9e ountr" o5 t9e u"er,

and a"s a44 osts in ringing t9e goods to t9e destination in 4uding im ort duties and ta es.

T9is term 4a es t9e ma imum o 4igations on t9e se44er and minimum o 4igations on t9e

u"er.

R$!es 4or Sea and In!and .a er) T9is term is t" i a44"

used 5or 9ea "-4i5t or u4 argo.

'7= Q 'ree on =oard (named ort o5 s9i ment)

T9e se44er must 4oad t9e goods on oard t9e esse4 nominated " t9e u"er. Cost and ris are

di ided w9en t9e goods are a tua44" on oard o5 t9e esse4 (t9is ru4e is newX). T9e se44er

must 4ear t9e goods 5or e ort. T9e term is a 4i a 4e 5or maritime and in4and waterwa"

trans ort on4" ut NOT 5or mu4timoda4 sea trans ort in ontainers(see Incoterms 2010 , ICC

u 4i ation ?1>). T9e u"er must instru t t9e se44er t9e detai4s o5 t9e esse4 and t9e ort

w9ere t9e goods are to e 4oaded, and t9ere is no re5eren e to, or ro ision 5or, t9e use o5 a

arrier or 5orwarder. T9is term 9as een great4" misused o er t9e 4ast t9ree de ades e er

sin e Incoterms 1980 e 4ained t9at 'C# s9ou4d e used 5or ontainer s9i ments.

C' Q Cost and 'reig9t (named ort o5 destination)

;e44er must a" t9e osts and 5reig9t to ring t9e goods to t9e ort o5 destination. owe er,

ris is trans5erred to t9e u"er on e t9e goods are 4oaded on t9e esse4 (t9is ru4e is newX).

%@

http://en.wikipedia.org/wiki/Delivered_at_Placehttp://en.wikipedia.org/wiki/Delivered_at_Placehttp://en.wikipedia.org/wiki/Delivered_Duty_Paidhttp://en.wikipedia.org/wiki/Delivered_Duty_Paidhttp://en.wikipedia.org/wiki/Delivered_Duty_Paidhttp://en.wikipedia.org/wiki/Free_Alongside_Shiphttp://en.wikipedia.org/wiki/Intermodal_containerhttp://en.wikipedia.org/wiki/Free_on_Boardhttp://en.wikipedia.org/wiki/Cost_and_Freighthttp://en.wikipedia.org/wiki/Delivered_at_Placehttp://en.wikipedia.org/wiki/Delivered_Duty_Paidhttp://en.wikipedia.org/wiki/Free_Alongside_Shiphttp://en.wikipedia.org/wiki/Intermodal_containerhttp://en.wikipedia.org/wiki/Free_on_Boardhttp://en.wikipedia.org/wiki/Cost_and_Freight


70/238

Maritime trans ort on4" and Insuran e 5or t9e goods is NOT in 4uded. T9is term is 5ormer4"

nown as CN' (C6').

CI' Q Cost, Insuran e and 'reig9t (named ort o5 destination)

+ a t4" t9e same as C' e e t t9at t9e se44er must in addition ro ure and a" 5or t9e

insuran e. Maritime trans ort on4"

D$ ies o4 A!banian C&rome se!!er a%%ording o In%o erms ? @ %orre% ed by 2!ag A%%o$n ing

Loadin

g on

tru

( arrier

)

+ ort-

Customs

de 4aratio

n

Carriag

e to

ort o5

e ort

Un4oadin

g o5 tru

in ort o5

e ort

Loadin

g

9arges

in ort

o5 e ort

Carriag

e to

ort o5

im ort

Un4oadin

g 9arges

in ort o5

im ort

Loadin

g on

tru in

ort o5

im ort

Carriage

to 4a e

o5

destinatio

n

Insuran

e

Im ort

ustoms

4earan

e

Im o

rt

ta es

+VGNo No No No No No No No No No No No'C# es es es No No No No No No No No No'#; es es es es No No No No No No No No'7= es es es es es No No No No No No NoC' es es es es es es No No No No No NoCI' es es es es es es No No No es No No$#T es es es es es es es No No No No No$#P es es es es es es es es es No No NoCPT es es es es es es es es es No No NoCIP es es es es es es es es es es No No$$P es es es es es es es es es No es es

Pre+io$s erms e!imina ed 4rom Incoterms 2000

$#' Q $e4i ered #t 'rontier (named 4a e o5 de4i er")

T9is term an e used w9en t9e goods are trans orted " rai4 and road. T9e se44er a"s 5or

trans ortation to t9e named 4a e o5 de4i er" at t9e 5rontier. T9e u"er arranges 5or ustoms

4earan e and a"s 5or trans ortation 5rom t9e 5rontier to 9is 5a tor". T9e assing o5 ris

o urs at t9e 5rontier.

$+; Q $e4i ered + ;9i (named ort o5 de4i er")

?0

http://en.wikipedia.org/wiki/Cost,_Insurance_and_Freighthttp://en.wikipedia.org/wiki/Cost,_Insurance_and_Freight


71/238

G9ere goods are de4i ered e s9i , t9e assing o5 ris does not o ur unti4 t9e s9i 9as

arri ed at t9e named ort o5 destination and t9e goods made a ai4a 4e 5or un4oading to t9e

u"er. T9e se44er a"s t9e same 5reig9t and insuran e osts as 9e wou4d under a CI'

arrangement. Un4i e C' and CI' terms, t9e se44er 9as agreed to ear not 8ust ost, ut a4so

is and Tit4e u to t9e arri a4 o5 t9e esse4 at t9e named ort. Costs 5or un4oading t9e

goods and an" duties, ta es, et are 5or t9e =u"er. # ommon4" used term in s9i ing

u4 ommodities, su 9 as oa4, grain, dr" 9emi a4s - - - and w9ere t9e se44er eit9er owns

or 9as 9artered, t9eir own esse4

$+: Q $e4i ered + :ua" (named ort o5 de4i er")

T9is is simi4ar to $+;, ut t9e assing o5 ris does not o ur unti4 t9e goods 9a e een

un4oaded at t9e ort o5 destination.

$$U Q $e4i ered $ut" Un aid (named 4a e o5 destination)

T9is term means t9at t9e se44er de4i ers t9e goods to t9e u"er to t9e named 4a e o5 destination in

t9e ontra t o5 sa4e. T9e goods are not 4eared 5or im ort or un4oaded 5rom an" 5orm o5 trans ort at

t9e 4a e o5 destination. T9e u"er is res onsi 4e 5or t9e osts and ris s 5or t9e un4oading, dut" and

an" su se


72/238

RIGHT TIME AND LEAD TIME ANAL/SIS

$e4i er" o5 goods at rig9t time is one o5 t9e most im ortant o 8e ti es o5 ur 9asing

5un tions.

Time is essen e o5 e er" u"ing order and ne essar" sti u4ations are made in e er" ontra t

as to " w9i 9 time t9e su 4iers must de4i er goods.

I5 goods arri e 4ate or wor is not om 4eted at t9e rig9t time, rodu tion ma" 9am er, sa4esma" e 4ost and 4i


73/238

T9e 5irst ste to o tain de4i er" on time is to de ide 5irm4" and re ise4" as to w9at is re


74/238

LEAD TIME

Lead time mean t9e time t9at 4a ses etween raising o5 a ur 9ase e


75/238

*a4ue o5 , w9i 9 is onstant, aries etween 1-3. @ de ending u on riti a4it" and

degree o5 sa5et" / ser i e 4e e4 re


76/238

in t9is dire tion " esta 4is9ing re4ia 4e sour es o5 su 4", se4e ting ro er mode o5

trans ortation and igorous e editing.

STEPS TO REDUCE LEAD TIME

Adminis ra i+e Lead Time 4or 4ina!izing P$r%&ase Order

+nsure t9at ur 9ase re


77/238

Prom t arrangements 5or P$I, i5 re


78/238

Tenden " to s9are res onsi i4ities Q sometimes-unne essar" onsu4tation, re5eren es

and ross-re5eren es.

7 en tendering (Noti e 5or In iting Tender) e"ond a ertain monetar" 4imits, 4onger

time 5or ur 9asing, at time un ro en su 4iers on 4ower UANTIT/

T9e rig9t


79/238

mu4ti 4ied " t9e num er or rodu ts to e manu5a tured.

(iii) Pur 9ase e#

Is t9at siDe o5 orders, w9i 9 minimiDes t9e tota4 ost o5 ordering and 9o4ding o5 sto . I5 t9e

item is ordered 5re


80/238

ost is o timum w9en ot9 t9e o osing osts are a4an ed and


81/238

arri e in time 5or t9e end rodu t to e om 4eted " t9e date s9own in t9e master

rodu tion s 9edu4e.

P$r%&asing and Rig& >$an i ies

+7: and M P are not su stitute to u"erFs 8udgement ut too4s, i5 used inte44igent4", an

assist 9im in 9is wor . $etermination o5 rig9t


82/238

iii) Lead time (su 4iers and transit 4ead-time).

i ) T9e a ai4a i4it" o5 a4ternati e sour es o5 su 4".

) :uantit" dis ounts, re ate t9at an e negotiated.

i) G9et9er su 4ier wi44 a t as sto ist.

RIGHT SOURCING AND SUPPLIER DEVELOPMENTIn an" organiDation t9ere are two o tions 5or sour ing t9e su 4ies iD.

a) Manu5a turing t9e goods and om onents wit9in t9e organiDation.

) Pur 9asing t9e goods, om onents and ser i es 5rom e terna4 sour es.

#4t9oug9 su 9 de isions are ta en u ee ing in iew t9e JMa e-or-=u"F 9i4oso 9", it is

4ogi a4 to ur 9ase t9e materia4s 5rom e terna4 sour es, i5 t9e rime usiness o5 t9eorganiDation is tota44" di55erent to t9e needs o5 t9e organiDation. In ur 9asing it is said t9at

9a45 o5 t9e att4e is won in meeting organiDationJs needs 5or materia4s, i5 t9e rig9t sour es o5

su 4" are identi5ied and maintained.

&2


83/238

;u 4ier sour ing and e a4uation an e de5ined as t9e ro esses and ro edures " w9i 9 t9e

u"er see s, sur e"s and e a4uates su 4iers and determined o4i ies re4ating to t9ose w9o

an most suita 4" meet t9e reUALIT/ PRODUCTS,SERVIES

:ua4it" means ot9 t9e


84/238

SERVICES

;er i es mean an"t9ing, w9i 9 9e4 s to strengt9en re4ations etween u"er and se44er and

5a i4itate smoot9 54ow o5 goods 5rom one end to t9e ot9er. Eood ser i es ma" in 4ude t9e

ro ision o5

te 9ni a4 assistan e and e ert ad i e, e5ore and a5ter sa4e, in5ormation a out new te 9ni a4

de e4o ment, and 9e4 in im ro ing t9e


85/238

# re4ia 4e su 4ier e e ts ontinued and 4ong 4asting usiness dea4ing wit9 t9e

ur 9aser in return 5or a reasona 4e ro5it. T9is re4ations9i annot e de e4o ed on

4owest ri e onsideration a4one.

T9e ur 9aser s9a44 e 5air, rom t and ourteous to su 4ierFs re resentati e.

T9e ur 9ase s9a44 ensure rom t a"ments to t9e su 4iers. I5 a"ments are undu4"

de4a"ed, t9eir ro5it margin s9a44 e eaten awa" " wa" o5 e tra interest urden and

ost o5 e editing a"ments. #t time t9ere ma" e genuine reasons 5or ri e in rease

and ur 9aser s9a44 tr" to suita 4" om ensate su 4ier so t9at t9e" do not su55er an"

5inan ia4 4osses.

T9e ur 9aser s9a44 treat t9e su 4ier as usiness artner and de e4o mutua4

understanding and re ognition o5 ea 9 ot9erFs re


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on4" one su 4ier. Materia4s 4anning a4so e ome easier. T9is a4so 9e4 s su 4ier to do

more 4ong term 4anning and s e ia4iDe in meeting t9e ur 9aserFs needs.

# art 5rom a o e, 5o44owing are some o5 t9e onsiderations 5or sing4e sour ing.

T9e o4ume o5 usiness is su55i ient 5or not more t9an one sour e.

T9e su 4ier 9as atents or ro esses t9at 4a es 9im in a mono o4" osition.

T9e su 4ierFs re utation ma es it desira 4e to use 9is rodu ts.

T9e ost o5 more t9an one set o5 too4ing dies et . wou4d e ro9i iti e.

SUPPLIER DEVEOPMENT

S$**!ier de+e!o*men *rogrammers are aimed o de+e!o* *o en ia! s$**!iers o mee &e

organiza ion;s ma eria!s needs and is %onsidered as one o4 &e basi% ob5e% o4 *$r%&asing

4$n% ions(

T9e ro ess o5 de e4o ment is to e tend t9e resour es o5 4arge ur 9asing organiDation to

sma44er su 4iers w9o demonstrate wi44ingness and a a i4it" to meet t9eir re


87/238

LOCAL SUPPLIERS

Lo a4 su 4iers, 4ose to usiness units, are re5erred i5 t9e" an su 4" a e ta 4e


88/238

; e ia4 5a i4ities and in-de t9 su ort in resear 9 and de e4o ment an e made

a ai4a 4e to t9e u"er.

Im ro ed


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Cost ma" in rease due to redu ed om etiti e osition o5 t9e u"er wit9out

om ensating ene5its.

;a4es must in rease su stantia44" to ro ide an e


90/238

Eenera4 usiness onditions ( u"er mar et or se44er mar et)

# ai4a i4it" o5 5oreign e 9ange

.+mergen " onditions i.e. ro4onged stri e

Po4i ies o5 om etitors.

Mar eting a ti ities o5 su 4iers.

In erna! organiza ion 4a% or

T9e stru ture o5 ur 9asing de artment.

T9e status and autonom" o5 u"er wit9in t9e organiDationFs stru ture.

G9et9er ur 9asing is re ogniDed as a ro5it entre in its own rig9t.

Prod$% 2a% or

T9e tenden " on t9e art o5 u"er to underta e a er" 4imited e 4i it sear 9 5or

ros e ti e su 4iers.

Pur 9asing is on5ined to rands a ai4a 4e in t9e mar et or t9e s e i5i ations drawn

around arti u4ar rands 5or materia4s to meet t9e needs.

Materia4 needs are ased on 4i es and dis4i es o5 users 5or arti u4ar rodu t ased

u on t9eir indi idua4 e erien e.

Ris: 2a% or

Pre5eren e gi en to we44 nown su 4iers

Pre5eren e gi en to su 4iers w9ose ad ertisement ro ides most in5ormation.

More


91/238

Vendor En!is men

In ur 9asing, it is said t9at 9a45 o5 t9e att4e is won in meeting t9e organiDationFs needs 5or

materia4s, i5 t9e rig9t sour es o5 su 4" are identi5ied and maintained. T9e o 8e ti e e9ind

ro er identi5i ation o5 sour es o5 su 4", t9eir registration wit9 7rganiDation and e a4uationo5 t9eir er5orman e is to o iate t9e need 5or sear 9ing su 4iers e er" time demand 5or

materia4s arises. ;u 4ier identi5i ation and e a4uation are t9e ro esses and ro edures "

w9i 9 ur 9aser see s, sur e"s and e a4uates su 4iers and determine o4i ies re4ating to

t9ose w9o an most suita 4" meet t9e re


92/238

(i) es onse re ei ed against 7 en Tender +n


93/238

e sent to N;IC and ;tate Industr" $e artment in iting t9eir registered arties to a 4" 5or

registration. T9e 5ee 5or registration an e de ided under 5o44owing 9eads

(a) 'ee 5or a 4i ation 5orm -

( ) egistration 5ee (Non-re5unda 4e) 5or usiness u to s. 1> 4a 9s -

( ) egistration 5ee (Non-re5unda 4e) 5or usiness u to s. > 4a 9s -

T9e a o e 5ees are 5or ea 9 ategor" o5 items. I5 a endor is interested 5or registration in more

t9an one ategor", t9e" must a 4" 5or ea 9 additiona4 ategor" se arate4"

Vendors e6em* ed 4rom regis ra ion 4ee or 4orma! a**!i%a ion 4or regis ra ion-

a) N;IC and ;;I registered arties s9a44 e e em ted 5rom su mitting a o e

5ees. # 4i ation 5orm s9a44 e ro ided u on re


94/238

T9e redentia4 o5 endors see ing registration need to e eri5ied to as ertain t9eir redi i4it"

wit9 regard to 5inan ia4 standing i.e. annua4 a ounts, a a it", re4ia i4it" ona5ides (In ome

Ta C4earan e Certi5i ate, ;a4es Ta C4earan e ;o4 en " Certi5i ate 5rom an ), ast

er5orman e,


95/238

(d) ;imi4ar4" detai4s o5 sour es identi5ied ut e em ted 5rom 5orma4 a 4i ation s9a44 e

re iewed " t9e *endor egistration Committee and re ommendation s9a44 e ut u

5or a ro a4 o5 om etent aut9orit".

A**ro+a! 4or Regis ra ion-

ead o5 ;tation/ Pro8e t/ $i ision s9a44 a ord a ro a4 5or registration

Se%$ri y De*osi ed-

T9e endors a ro ed 5or one or more ategories o5 materia4s s9a44 e re


96/238

Rene


97/238

g) egistration o5 endor is an e44ed " an" usiness unit o5 7rganiDation or "

anot9er P;U or Eo ernment de artment.

9) T9e integrit" o5 endor is sus e ted.

)anning o4 +endors 4or 4$ $re b$siness dea!ing-

T9is s9a44 e done in ase unet9i a4 usiness ra ti e is esta 4is9ed or 5urnis9ing wrong

in5ormation, 5a4se/ mani u4ated do uments or t9e endor is 9arged " C=I 5or an o55en e

against Eo ernment regu4ation and su se


98/238

Name, #ddress and arti u4ar o5 a44 t9e 3.

$ire tors s9ou4d e 5urnis9ed. .

>

In ase o5 artners9i 5irm, t9e names o5 %.

#44 t9e artners and t9eir address are to

=e 5urnis9ed. Certi5ied o ies o5 artner-

s9i deed to e 5urnis9ed,

a) In ase o5 indi idua4, 9is 5u44 name, address,

4a e and nature o5 usiness, to e 5urnis9ed.

1. . Name and address o5 asso iate/sister

Con ern, i5 an".

1.>. G9et9er egistered wit9 an" ot9er $e artment/ egistration Produ tsEo t./;emi Eo t. 7rganiDation 7rganiDation Num er

(Pre5era 4" wit9 Power uti4ities)

(#ttested o ies o5 egistration

Certi5i ate to e atta 9ed)

1.% G9et9er a4read" registered or a 4ied 5or

egistration wit9 an" ot9er unit o5 NTPC,

In an" ot9er name eit9er in indi idua4 a a it"

7r artners9i

1.? a) # so4 en " erti5i ate granted " a 'irst a) +n 4osed es/No

C4ass Magistrate or a erti5i ate 5rom t9e

=an er a out turno er o5 transa tions and

'inan ia4 a a it",

) =a4an e s9eet o5 re ious 5inan ia4 "ear ) +n 4osed es/No

75 t9e endor du4" attested " a C9artered

# ountant

1.&. In ome Ta . ;a4es Ta egistration In ome Ta egn. No.

No. (=ot9 ;;T and C;T), i5 an", and In ome ;tate ;a4es Ta egn No.

Ta C4earan e Certi5i ate. C;T egn No.

ITCC +n 4osed es/No

@&


99/238

1.@ =rie5 istor" o5 4a our re4ations in

T9e organiDation in 4ast one "ear

(; e i5" stri es, 4o outs, and too4 down i5 an")

1.10 Tota4 Num er o5 regu4ar em 4o"ees on t9e ro4e

a) Manageria4 ) + e uti es

) ;u er isorsd) Gor man

1.11 + ansion 4ans i5 an"

1.12 $etai4s o5 re4ati es em 4o"ed NTPC

(Ei e 5u44 detai4s iD. Name, $esignation,

$e artment and unit in w9i 9 wor ing)

1.13 #n" ot9er in5ormation in "our 5a our.

?( Te%&ni%a! in4orma ion

2.1. List o5 ma 9iner" a ai4a 4e 5or manu5a turing t9e rodu ts (i5 manu5a turer)

Name o5 t9e ma 9iner"/e


100/238

+ngineers India Ltd.

L4o"ds

IT+

( Commer%ia! in4orma ion-

3.1 I5 a4read" wor ed as a su 4ier, gi e t9e 5o44owing in5ormation.

Name o5 Power Eo t. $e artment Items su 4ied *a4ue

ear

;tation Pu 4i ;e tor

Underta ing

e uted P t. Co.

YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY

3.2 I5 sto iest /dea4er (distri utor)

;L N7 Produ ts manu5a turer $ea4ers9i re5eren es no.

$ated

1.

2.

3.

#ttested o ies o5 dea4ers9i to e en 4osed

3.3 'a i4ities/nearest ran 9es 5rom w9ere

#5ter ;a4es ;er i es to e ro ided

3. . Categor" o5 wor 5or w9i 9 registration is

;oug9t (P4ease indi ate ategor" as er NIT

3.>. Indi ate monetar" 4imited 5or i) u to s. > 4a 9s

egistration ii) u to s. 1> 4a 9s3.%. Mention an" ot9er re4e ant detai4s.

3.% MUST ENCLOSE T.O COPIES O2 CATALOGUES,SPECI2ICATION

SHEETS,PAMPHLETS O2 PRODUCTS MANU2ACTUREED OR

MAR1ETED

Produ t detai4s Cata4ogues detai4s

100


101/238

YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY

YYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY

I erti5" t9at a44 t9e in5ormation and data 5urnis9ed as a o e 5orm are true and

om 4ete to t9e est o5 m" now4edge.

;ignature o5 a 4i ant/or 9is

#ut9oriDed erson (;ea4)N.=.

a) G9ere er ne essar" se arate s9eets ma" e atta 9ed i5 s a e is 4ess in an" o4umn

) List o5 en 4osure1. =an erFs Certi5i ate es/No2. In ome Ta C4earan e Certi5i ate es/No3. ;a4es Ta C4earan e Certi5i ate es/No

. Per5orman e Certi5i ate 5rom im ortant ustomers es/No>. List o5 im ortant ustomers es/No%. Centra4 ;a4es Ta egistration Certi5i ate es/No?. ;tate ;a4es Ta egistration Certi5i ate es/No

) No orres onden e on t9e su 8e t 5rom endor s9a44 e entertained. T9e" s9a44 e

in5ormed, in due ourse, as soon as registration is 5ina4iDed.

d) In om 4ete a 4i ations s9a44 not e onsidered

2OR O22ICE USE-

In4orma ion %a!!ed 4rom +endor "To be s$**!ied be4ore #

1.

2.

3.

Manager (Materia4s/ Contra ts)

ASSESSMENT REPORT

Committee Mem ers ('inan e) (Materia4s) (User) (:ua4it"

#ssuran e)

RECOMMENDATIONS

APPROVED

101


102/238

In5ormation to t9e art" sent ide 4etter No.YYYYYYYYYYYYYYYYYYYYYYYYYY

datedYYYYYYYYYYYYY

Manager

(Materia4s 6/Contra t

SUPPLIERS EVALUTION

T9e s"stemati e a4uation o5 su 4ier is nown as Asu 4ier a raisa4B i5 done e5ore an order

and Asu 4ier ratingB i5 done in numeri a4 terms a5ter an order.

;u 4ier rating is t9e measurement o5 a tua4 er5orman e w9ereas su 4ier a raisa4 is t9e

assessment o5 otentia4 er5orman e.

;u 4ier e a4uation in 4udes ot9 a raisa4 and rating

S$**!ier A**raisa!

G9en a su 4ier wis9es to e en4isted as an a ro ed endor to u"er, t9e need 5or a raisa4is 5e4t. #t time, during negotiations, a u"er ma" wis9 to assure 9imse45 t9at su 4ier an meet

to 9is re


103/238

T9e ur ose o5 5ie4d resear 9 is to o tain 5urt9er data regarding manu5a turing

5a i4ities/ a a it",


104/238

Modern or anti


105/238

Com*e en%e o4 e%&ni%a! s a44

Con ersation wit9 design, resear 9 or 4a orator" sta55s indi ate t9eir now4edge o5 t9e 4atest

materia4s, too4s and ro esses re4ating to t9eir rodu ts and on anti i ated de e4o ments in

t9eir industr".

Com*e en%e o4 managemen

#44 t9e a o e areas, are, in essen e, a re54e tion o5 management and t9ere5ore indi ate its


106/238

G9ere ossi 4e, is ins e tion/testing arried out at ea 9o erationH es/No C2 &

Is e


107/238

now4edgea 4e ande erien ed wit9 t" e o5

rodu ts eing rodu edH es/No C1 12

emar sPoints 5or age Ma 212 # tua4

;ignature ..$ate .

;u 4ier rating ma" e " im ression mar ing i.e. AEoodB, A5airB, Aunsatis5a tor"B or, as int9e a o e e am 4e, on a ( ating ==)K satis5ies some re


108/238

a) To ro ide t9e ur 9aser wit9 o 8e ti e in5ormation on w9i 9 8udgement re4ating to

sour e se4e tion is ased.

) +na 4es t9e ur 9aser to ro ide in5ormation to t9e su 4iers ertaining to t9eir

er5orman e. T9is 9e4 s t9em to im ro e t9eir er5orman e, i5 re


109/238

determine weig9tage o5 ea 9 attri ute, w9i 9 ma" de end u on indi idua4 u"er o4i ies i.e.,

is de4i er" er5orman e as

im ortant as


110/238

.EITHING O2 ATTRI)UTES

+a 9 attri utes, on e determined, is gi en a mar or s ore de ending u on 9ow im ortant is

t9e attri ute to u"er, out o5 assignment o5 tota4 100 s ore 5or a44 ut toget9er. T9is e er ise

9as to e done er" are5u44". T9is an e made 4ear wit9 t9e e am 4e o5 one 5irm w9i 9 was

tr"ing er" 9ard to get its su 4ier to ee read" sto 5or immediate de4i er" and a44o ated a

9ig9 s ore to t9is attri ute. T9e resu4t was t9at su 4ier wit9 e e44ent er5orman e on

=. ig9t time de4i er" er5orman e 2>

C. ;taggered de4i eries made w9enre

E. # i4it" to rom t4" res ond to an"


111/238

!. Per5orman e o5 t9e sa4esman 0>

. # i4it" to assist t9e ustomer inredu ing ost ( a4ue ana4"sis, rodu tim ro ements. C9ea er su stitute 10

---------- T7T#L 100 ----------

Meas$remen o4 s$**!ier *er4orman%e on &ese inde6es is $se4$!

i) In om aring t9e er5orman e o5 su 4ier wit9 re5eren e to gi en 5a tors 5rom one

"ear to anot9er.

ii) G9en t9e orders are di ided etween two or more su 4ier and ur 9aser wis9es

to monitor t9e er5orman e o5 ea 9 5or t9e ur ose o5 om arison.

)U/ER,SELLER RELATIONS

Eood u"er se44er re4ations are anot9er im ortant as e t o5 e55i ient and e55e ti e u"ing.

;moot9 running o5 industr" needs t9is ordia4 re4ations9i . =u"er and se44er must understand

t9at t9eir growt9 de ends on goodwi44 and re4ations9i etween t9e two.

T9is re4ations9i is on ea w9en su 4ier su 4ies


112/238


113/238

On Te%&ni%a! 2ron

Pro ides assistan e on a 4i ation engineering.

Pro ides assistan e in design.

and4e s e ia4 needs and ontri utes to im ro e rodu t e55i ien ".

On A+ai!abi!i y 2ron

;u 4ies t9e materia4 wit9in assured de4i er" eriod wit9out onstant 5o44ow u .

;tri es er" 9ard to im ro e u on de4i er" eriod w9en t9ere is risis at u"ers end

wit9out e 4oiting t9e situation.

#d an e ommuni ation in ase o5 e e ted de4a"s in de4i eries.

#4so maintains sto 4o a44" to meet re


114/238

=ui4ding u a mutua4 mar et (re ommending u"erFs rodu t to ot9er u"ers)

$e e4o ing mutua4 understanding- a sense o5 artners9i 5or ea 9 ot9er and

a re iating ea 9 ot9erFs 4imitations.

Trans aren " in re4ations9i - u"er s9a44 9a e eas" e ess to data o5 su 4ierFs in ut

ost et et .

SELLER;S E3PECTATIONS 2ROM A )U/ER

# re4ia 4e su 4ier e e ts ontinuit" o5 usiness dea4ing wit9 u"er in return 5or

reasona 4e ro5it. T9is re4ations9i an not e de e4o ed on 4owest ri e onsideration

a4one.

In ase o5 ri e in rease due to sudden 9ange in t9e mar et onditions it is e e ted

t9at u"er wi44 suita 4" om ensate and not a44ow su 4ier to su55er 4osses.

;u 4ier e e ts 5rom a good u"er a"ment o5 in oi es rom t4". I5 a"ments are

undu4" de4a"ed, 9is ro5it margin s9a44 e eaten awa" " wa" o5 interest urden and

e55orts in e ending a"ment.

Prom t ins e tion, i5 P$I (Pre-des at 9 Ins e tion) is re


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Nego ia ion' An E44e% i+e Too! o4 Pro4essiona! P$r%&asing

NEGOTIATION

Negotiation is any 4orm o4 +erba! %omm$ni%a ion in


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Mar et must onsist o5 ade


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) 7n4" two a e ta 4e o55ers 9a e een re ei ed against a tender and rates o5

e a4uated L1 idder are


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G9ere t9e 5ina4 ri e annot e determined wit9 ertaint" due to ost arising due to

un ertain ontingen ies

G9ere an item is designed and manu5a tured to ur 9aserFs s e i5i ations.

G9ere 4earning e4ement is in o4 ed.

G9ere ur 9aser ontri utes e ertise, materia4s 4ant e


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T9e 5ewer onstraints im osed on a negotiator, t9e greater wi44 e t9e s o e 5or 9is

ersona4 9ara teristi s su 9 as now4edge, e erien e and ersona4it" to

in54uen e negotiation ro ess.

T&e b$yers nego ia ing *osi ion

T&e b$yer


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su55i ient4" in ad an e o5 re


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Eood e"e onta t. 'inger stro ing 5a e

Interested in w9at "ou are sa"ing

7ne s9ou4d, o5 ourse, e er" are5u4 in inter reting od" 4anguage. ou an it

wrong. + erien ed negotiators, 9owe er, o er a eriod o5 time get to understand

t9e od" 4anguage o5 t9e ot9er side, w9i 9 an ontri ute to in reasede55e ti eness. # good negotiator must a4so e attuned to t9e wa" eo 4e answer

and as


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Pre'Nego ia ion

T9e out ome o5 negotiation o5ten de ends u on t9e re eding resear 9 and 4anning on t9e

art o5 t9e u"er. T9e matters to e determined are -

a# .&o is o nego ia e' Indi+id$a! a**roa%& or eam a**roa%&

b# T&e +en$e

%# Ga &ering in e!!igen%e-

(ii) #s ertaining 9e strengt9s and wea nesses o5 res e ti e negotiating

ositions.

(iii) #ssem 4ing re4e ant data re4ating to ost, rodu tion, sa4es et .

(i ) Pre aring data, w9i 9 is intended to resent at t9e negotiation in t9e

5orm o5 gra 9s, 9arts, ta 4es et ., so t9at it an e 0YYYYYY%0YYYYY?0YYYY&0YYYYYY&0YYYY100YYYY110YYYYY120YYYY130YYY

(Pri e to as s.)

I;

; '=P

123

@0 YYYYYYYYY


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#ssuming t9at matter under negotiation is ri e -

i) #-= re resents t9e ositions, t9e negotiators ma" ta e.

ii) I; e4ow #-= re resents t9e u"erFs Idea4 ;ett4ement i.e. most 5a oura 4e

ri e t9at an, wit9 rea4ism, e a 9ie ed in negotiation i.e. s. >0

iii) I; a o e #-= re resents t9e endorFs Idea4 ;ett4ement i.e. s. 130

NOTE- In most ases is wi44 re resent t9e starting osition o5 ea 9 negotiators

su 8e t to t9e oint t9at i5 t9ere is to e negotiation at a44 t9e initia4 demands must

not e too 5ar a art to re 4ude argaining.

i ) ; e4ow #-= is t9e u"erFs rea4isti sett4ement i.e. s. &0) ; a o e t9e 4ine is endorFs rea4isti sett4ement i.e. s. 100

i) '=P e4ow #-= is u"erFs 5a44- a ositions i.e. s. 100 or t9e ri e e"ond

w9i 9 9e wi44 not go, ma" t9in o5 a4ternati e means.

ii) '=P a o e #-= is t9e endorFs 5a44- a osition i.e. s. &

iii) T9e re tangu4ar ortion re resents t9e area o5 sett4ement.

T9is mode4 is ased u on t9e on ention t9at ea 9 side norma44" is re ared to

mo e 5rom origina4 osition. T9e negotiated ri e wi44 e etween s. &0 to

s. 100 de ending u on negotiating s i44 o5 negotiators.

=e5ore ommen ing negotiations, u"er s9ou4d 9a e a 4ear mandate 5rom 9is

su eriors to sett4e at an" oint not e eeding an agreed 5a44 a osition

(e) Ta% i%s and s ra egy(

# ta ti is a osition, maneu er or attitude to e ta en or ado ted at an

a ro riate oint in t9e negotiation ro ess. ;trateg" om rises t9e o era44

ta ti s designed to a 9ie e, as near4" as ossi 4e, t9e o 8e ti e o5 t9e

negotiation.

12


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Among &e a% i%s o be de%ided are- '

i) T9e order in w9i 9 t9e issues to e negotiated s9a44 e dea4t wit9.

ii) G9et9er to ado t a 9ard or on i4iator" attitude.

iii) G9et9er to s ea 5irst or a44ow t9e o onent to o en t9e negotiation.

i ) G9at on ession to ma e, s9ou4d t9e need arise.

) T9e timing o5 on essions

i) G9at issues an e 4in ed i.e. ri e and im ro ed


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iii) Con essions are a means o5 se uring mo ement w9en negotiations are

dead4o ed. esear 9 5indings s9ow t9at 4osers tend to ma e on essions and

t9at ea 9 on ession tends to raise as iration 4e e4 o5 o onent. =u"ers s9ou4d

a oid a attern o5 on essions in w9i 9 t9roug9 inade


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T9e res ri ti e guide4ines 5or t9e ost negotiation 9ase in 4ude

i) Produ e t9e 5irst dra5t agreement. $es ite t9e 5a t t9at "ou are re orting, 9onest4",

w9at "ou e4ie e to 9a e een agreed, it wi44 e "our ersion, de e4o ed 5rom "our

iew oint. In addition t9e ot9er art" wi44 e 5reed 5rom doing t9e initia4 dra5t- a

5a t w9i 9 wi44 e a re iated " most eo 4e. C4ear4" t9e dra5t s9a44 e sent to t9e

ot9er art" wit9 t9e re


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&0

$ire t %0Man'&o$rs

er unit 0(in unit o5 s.)

20

0 20 0 %0 &@ 100

Cumu4ati e units rodu ed.

In industr" ost redu tion arising 5rom 4earning ma" e om ination o5 5o44owing 5a tors

a) Less time re


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T9e 4earning ur es a roa 9 indi ates t9e area in w9i 9 to on entrate on a ri e

ana4"sis in order to o tain t9e greatest sa ing es e ia44" to re-negotiate 5or a re eat

order.

) Ma:e or b$y de%isions

In om aring t9e ost o5 ma ing and u"ing, t9e e55e t o5 4earning on ea 9

rodu tion run s9ou4d e determined and ta en into onsideration as we44 as


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Ty*e o4 *ri%ing agreemen s and *ri%e +aria ion 4orm$!a

# rudent u"er, most o5 t9e time, re5ers a 5i ed ri e agreement i.e. ri e remains 5i ed

unti4 om 4etion o5 order. ;u 9 ri es ro ide greater ertaint" and t9e u"er nows 5rom t9e

er" start as to w9at 9e is 4i e4" to a". T9is a4so assures t9at t9e su 4ier wi44 e e ute t9e

order rom t4", we44 wit9in agreed de4i er" eriod to a oid an" 5inan ia4 4oss due to in rease

in ri es.

#s a norma4 ur 9ase ra ti e, u"ers in or orate a standard 4ause w9i4e in iting tenders,

ad ising t9e ros e ti e su 4iers to $an i y7 %as& and Trade Dis%o$n s

ee ing in iew t9e a4ue o5 ur 9ase, u"er ma" 4i e to negotiate arious dis ounts.

:uantit" dis ounts are o55ered on 4arge orders. T9e su 4iers ene5it 5rom ig orders " wa"

o5 sa ing in dire t and indire t osts. T9e" ma" ass on some o5 t9ese ene5its to u"ers w9o

4a e ig orders. =e5ore a ai4ing a


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Man" a time su 4ier ma" insist rom t a"ments i.e. ad an e a"ment t9roug9 an in

e 9ange o5 des at 9 do uments i.e. ending re ei t o5 materia4s or a"ment against de4i er".

T9e u"er ma" negotiate wit9 t9e su 4ier to a e t 9is standard a"ment term ut i5 t9e

su 4ier is re4u tant, ma" negotiate to o tain as9/sett4ement dis ounts. ;u 9 dis ounts ma"

e etween 0.> to 2.> .

#not9er dis ount i.e. trade dis ount is traditiona44" gi en to tradesman (distri ution 9anne4

used " t9e manu5a turer). T9is dis ount is a4so o55ered to some ma8or ustomer as su 9 sa4e

9e4 s su 4ier to redu e 9is mar eting e enses.

# rudent u"er, w9i4e negotiating t9e ri e a4so a ai4 t9e o ortunit" to e 4ore ossi i4ities

o5 o taining t9ese dis ounts to ma imum e tent.

Terms o4 *aymen i(e( E6 ended %redi

# u"er norma44" insists 5or a"ment to t9e su 4ier as er 9is standard a"ment term.

Usua44" wit9in 30 da"s 5rom t9e date o5 re ei t and a e tan e o5 goods. T9e su 4ier due to

t9eir own 4i


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Trans*or a ion and Handing C&arges

;ometimes, t9e su 4ier ma"


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times, 9e ma" 9a e to a" a s4ig9t4" 9ig9er ri e. ;u 4ier ma" a4so agree to su 9 usiness

o er a eriod o5 time. Norma44", t9e sto -4ess u"ing agreements o er standard o55 t9e

s9e4 es items re$an i ies

C9anges in onsum tion attern, sometimes, warrant 9anges in ordered


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9is art to negotiate de4i er" s 9edu4e e5ore ma ing u 9is mind to go to ne t 9ig9er su 4ier

w9ose de4i er" eriod is suita 4e to 9im. ;ometimes, it e omes ne essar" e en to re-

s 9edu4e t9e agreed de4i er" eriod in iew o5 9anges in onsum tion. I5 t9e items are

e treme4" riti a4 su 9 res 9edu4ing an ami a 4" e reso4 ed " negotiation wit9 t9e

su 4ier w9o ma" a4so 9a e to re ise 9is rodu tion rogram and in e treme ases, di ert t9e

su 4ies meant 5or ot9er ustomers. ;ometimes, t9e su 4ier ma" 9a e to engage 9is 4a our

5or e on o ertime and 9e ma" demand additiona4 om ensation 5or su 9 su 4ies. #44 su 9

issues an e sorted out during t9e ro ess o5 negotiation.

Pa%:aging Re8$iremen s In%!$ding Pa!!e iza ion

In order to ensure sa5e mo ement in transit and a4so e55i ient 9and4ing at u"erFs wor s,

s e ia4 re


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art o5 w9i 9 needs to e assed on to t9e u"er. T9us a u"er an negotiate t9e ri e "

using t9is ana4"sis.

S$bmission o4 Sam*!es7 Pending )$!: S$**!ies

I5 t9e items are non-standard and manu5a tured to s e i5i ations/drawings/ 4ue- rints

ro ided " t9e u"er, it is im ortant t9at 5irst sam 4e su 4ies are manu5a tured and u4

su 4ies are arranged on4" w9en t9e sam 4es are a ro ed " t9e u"ing organiDation.

;ometimes, u"ing organiDation ma" e en ut t9e goods on a tua4 tria4 and wat 9 t9eir

er5orman e e5ore ommuni ating t9eir a e tan e 5or u4 rodu tion. ;u 9 arrangements

ma" e negotiated e5ore 4a ement o5 order. I5 t9e sam 4es are 5ound unsuita 4e, t9e u"er

ma" resort to an e4 t9e order wit9out an" 5inan ia4 4ia i4ities.

Ins*e% ion *!ans "8$a!i y *arame ers and *!a%e o4 ins*e% ion#

I5 t9e items are o5 riti a4 nature and ita4 to t9e o era44 er5orman e o5 end rodu t o5 t9e

u"er, it is im ortant t9at suita 4e


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t9at attri utes and t9eir weig9ted im a t on t9e end rodu t due to ariation are t9oroug94"

dis ussed and agreed so as to a oid an" om 4i ation at 4ater date.

C&arges 4or $se o4 *a en o er wee or art t9ereo5 su 8e t to

13%


137/238

ma imum o5 > ). T9ese detai4s an e negotiated. No 4i


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E8$i*men Per4orman%e G$aran ee

+


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'or 9ig9 a4ue ma8or eUALIT/

Di% ionary meaning o4 8$a!i y is meri 7 e6%e!!en%e7 s$*eriori y7


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i) #s a mem er o5 ommittee on erned wit9 s e i5i ations and standardiDation "

a) #d ising ost, es e ia44" a4ternati es.

) #d ising a ai4a i4it" o5 materia4s to t9e s e i5ied


141/238

emo a4 o5 un ertaint" as to w9at is re$a!i y Ass$ran%e-

:ua4it" assuran e 9as een de5ined " =;I (=; ??&) Jas a44 a ti ities and 5un tions

on erned wit9 t9e attainment o5 $a!i y Con ro!-

1 1


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*endor a raisa4 and rating 5or $a!i y Con ro!

Ins e tion is arried out o5 a44 materia4s de4i ered to stores. T9is ins e tion must e

made against t9e re-determined 4e e4 o5 a e ta i4it".

;u 4" o5 sam 4es to ontro4 $a!i y Con ro! De*ar men -

Man" organiDations 9a e t9eir own


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Aims and Ob5e% i+es o4 >$a!i y Con ro!-

To set and monitor standards o5


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b# So$r%e Ins*e% ion "Ins*e% ion a s$**!ier;s


145/238


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=;I (same as I;I mar ed rodu ts in India). T9is an e4iminate mu 9 o5 t9e inward ins e tion

and


147/238

$esign onsideration o5 5un tion

;a4es onsideration o5 onsumer a e tan e

Manu5a turing onsideration o5 e onomi a4 rodu tion

Pro urement onsideration o5 mar et, materia4s a ai4a i4it" and ri e.

Poin s o be a:en in o %onsidera ion


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Ad+an ages o4 s*e%i4i%a ions-

$rawing u s e i5i ations needs are5u4 re iew, w9i 9 at times resu4ts in

sim 4i5i ation and ariet" redu tion and o5ten re ea4s o ortunit" o5 using 4ess ost4"

items. =ot9 resu4ts in e onomies.

'a i4itate ro urement " in iting ids

' *endors ro er4" understand re


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Tenden " o5 e oming o er re5ined in re aring s e i5i ations and onse

wide range o5 a 4i ations. 'or instan e, !IT is de endent on re4ia 4e su 4iers, tota4

re enti e maintenan e, under- a a it" s 9edu4ing and tota4


150/238

*ar %rea i+e!y in &e *rogressi+e e!imina ion o4 a!! non' +a!$e adding a% i+i ies and

&ro$g& &e a**!i%a ion o4 so$nd o*era ions managemen *rin%i*!es and g$ide!ines 4or

o a! 8$a!i y %on ro!( T&e FIT *&i!oso*&y is based on 0


151/238

as er ad i e o5 mar eting de artment. !IT ur 9asing is dire ted towards redu tion o5 waste

t9at is resent at re ei ing and in oming ins e tionK it a4so redu es e ess in entor", oor


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>$an i ies

;tead" out ut rate a desira 4e re-re


153/238

Eain ontro4 " use o5 om an" owned or ontra t s9i ing, ontra t ware9ousing,

and trai4ers 5or 5reig9t onso4idation/storage w9ere ossi 4e- instead o5 using ommon

arriers.

Goa!s o4 FIT P$r%&asing-

1. E!imina e $nne%essary a% i+i ies

'or instan e, re ei ing and ins e tion a ti ities are unne essar" under !IT. I5 t9e

ur 9asing 9ad een e55e ti e in se4e ting and de e4o ing t9e su 4iers, t9e ur 9ased

items an e re ei ed wit9out 5orma4 ounting, ins e tion and testing ro edures. To

do t9e 8o we44, t9e ur 9asing sta55 re3


154/238

u"ing organiDation 9as no 5inan ia4 4ia i4ities 5or in entor" o5 goods eing

ur 9ased. T9e goods are 4o ated at u"erFs 4a e or su 4ierFs 4a e (i5 su 4ier is

er" near "). 'or instan e an assem 4" 4ant ma" 5ind a 9ardware su 4ier w9o is

wi44ing to 4o ate its ware9ouse w9ere t9e user urrent4" 9as its sto - room. In t9is

manner, w9en 9ardware is needed, it is as near as sto room. T9e su 4ier raises t9e

eriodi a4 in oi e 5or t9e


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in54ated, re>


156/238

re4ia 4e. Ma 9iner" and too4s 5ai4 at aw ward times and a 4a o5 om etent trained

em 4o"ees a4so ontri utes to un ertainties in rodu tion ro ess.

=e ause o5 a o e reasons, in entories in rodu tion and distri ution s"stem o5ten e ist J8ust

in aseF somet9ing goes wrong i.e. 8ust in ase some ariation 5rom rodu tion 4an o urs. In

su 9 a on e t, in entor" management s"stem does not mean J8ust in timeF ut J8ust in aseF.

!IT in entor" is t9e minimum ne essar" in entor" to ee a er5e t s"stem running. In !IT

in entor" management s"stem, t9e e a t amount o5 goods arri es at t9e mo ement t9e" are

needed, not a minute e5ore or a5ter t9e units are re


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;ome wor - in- ro ess in entor" ma" e ist e ause o5 " 4e time o5 manu5a turing a

rodu t. owe er, redu ing " 4e time 9e4 s in redu ing wor -in- ro ess in entories. 75ten it

is not di55i u4t.

'igure e4ow s9ows, most o5 t9e time a rodu t is J eing madeF it is in 5a t sitting id4e. # tua4

wor time or JrunF time is sma44 ortion o5 t9e materia4s 54ow time.

INPUT

7UTPUT

L+EITIM#T+ L+#$ TIM+ C#T+E7 I+;

C CL+ TIM+

M 7 in entories e ist e ause need and timing 5or some maintenan e and re air o5

e


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In entor" o ers t9e ro 4emsK

Pro 4ems dam u in entor"

:ua4it" *aria i4it"

In- transit de4a"s

Ma 9ine rea - down

Long set u s

Large 4ot siDes

Ina urate engineering drawings

+m 4o"eeFs attendan e aria 4e

M#T+ I#L 'L7G

"A#

;M77T M#T+ I#L 'L7G

")#

T9ere5ore, to a 9ie e 8ust in time in entories, management must egin " redu ing t9em.

edu ing t9e in entor" un o ers t9e ro s t9at re resent t9e aria i4it" and ro 4ems

urrent4" to4erated. Git9

1>&


159/238

redu ed in entor", management 9i s awa" at t9e e osed ro 4ems unti4 t9e stream is 4ear

and t9an ma e additiona4 uts in in entor", 9i ing awa" at t9e ne t 4e e4 o5 e osed

ro 4ems. U4timate4" t9ere wi44 e no in entor" and no ro 4ems ( aria i4it").

Per9a s t9e manager w9o said, AIn entor" is t9e root o5 o eration management e i4sB was not

5ar 5rom t9e trut9. I5 in entor" is not e i4, it tends to 9ide t9e e i4 at great ost.

F$s ' in' Time Prod$% ion-

!IT rodu tion 9as ome to mean e4imination o5 waste, s"n 9roniDed manu5a ture and a er"

sma44 in entor". T9e e" o5 !IT rodu tion is sma44 4ot siDes to standards. edu ing t9e siDe o5

at 9 an e a ma8or 9e4 in redu ing in entor" and 9o4ding ost t9ereo5. G9en t9e in entor"usage is onstant a erage in entor" is sum o5 ma imum in entor" 4us minimum in entor"

di ided " two as under

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