Reference no: EM131269357

The Blozis Company was a manufacturer of highly technical equipment. The $16 million gross sales of the company consisted primarily of units designed to customer specifications by the engineering department and produced on a job-shop basis by the production department. The engineering department also designed highly complex control equipment of general industrial application to be sold by the Blozis Company on an off-the-shelf basis.

The supply department consisted of the supply manager, a buyer, and two clerks who handled typing and filing. Although many of the items purchased were of a highly technical nature, the supply manager had no technical training. Through the years, he had picked up a fair grasp of the engineering terminology used in the field, but had made no attempt to keep up with the specialized design problems of the company. The buyer was a woman who was known in the trade as “hard-boiled but big-hearted” and was generally considered a competent general supplies buyer. Without great ingenuity, the buyer also successfully handled technical items if detailed specifications were supplied by engineering or production.

An expediter was attached to production. He formerly had been one of the technicians in the production shop and had picked up some technical training in the Army. Because he could understand verbal descriptions of items needed by engineering and production, these groups often contacted him on ordering problems before submitting a requisition to supply. He frequently would suggest substitute components that could be drawn immediately from the stock room; or he would convert the oral description into a commercial specification, type a requisition, and submit it to the supply department. The expediter had two primary responsibilities: to pick up rush orders and to supervise the stock room. He spent about 50 percent of each day picking up items at nearby suppliers, at truck terminals, or airports, or carrying materials to subcontractors, to platers, or to various carriers for shipment. In the stock room, a clerk kept up the facilities, issued supplies to engineering and production personnel, and kept stock records. The clerk reported to the expediter, who reviewed the stock records, prepared requisitions for items at their reorder points, and disposed of items that were turning too slowly or had deteriorated.

Frequent problems had arisen when suppliers claimed long overdue payments on materials that had been received by the Blozis Company. In these cases it always developed that someone had forgotten to make up a receiving report. Since supply passed bills for payment only after receipt of the receiving report, several sizable discounts had been missed and the company had been substantially tardy in meeting the net date on several bills. In these cases, the expediter was always sure that the item had come over the receiving dock, and the receiving clerk was just as sure that the expediter had brought it into the plant in the back of his station wagon.

A particularly unfortunate incident had occurred when two special micrometers disappeared within the plant after the Blozis Company had waited six months to receive them. The supplier could prove receipt by the bill of lading signed by the receiving clerk. The receiving clerk claimed the expediter had picked up the micrometers on the receiving dock to carry them to the engineers as quickly as possible. The expediter claimed he had never seen the micrometers. Both the production and plant maintenance managers had backed their respective men to the fullest. No disciplinary action had been taken since there were no signatures on the receiving reports to prove either case.

The expediter periodically typed up purchase orders for rush items. In other cases, he picked up the desired items and informed the suppliers that they would receive “confirming orders” from the Blozis Company supply department. When the expediter forgot to ask supply for a confirming order, the supply department was occasionally distressed to be processing invoices for which it had no corresponding orders. Some suppliers were also mildly petulant when a promised purchase order was not forthcoming. Although suppliers had been warned not to honor an order from the Blozis Company unless it bore the supply manager’s signature, it was considered poor business to penalize the suppliers who had honored the expediter’s request in good faith. Consequently, purchase orders were often made up to match invoices if the material had obviously been received from the supplier.

The president liked to operate “informally” and allowed anyone in the company to initiate requisitions. The only approval signature required on orders up to $10,000 was the supply manager’s. Orders over $10,000 required the president’s approval on requisitions, but, in practice, all orders for more than $10,000 were approved by the president either in the materials budget or the capital budget long before requisitions were made out.

The president had heard something of the micrometer incident from his brother, but had dismissed the whole matter as “one of those unfortunate interdepartment squabbles.” However, when his engineering manager and his production manager began to complain of the difficulties of staying within the materials budget, he looked further into the matter. In subsequent talks with both men he drew up the following summary list of complaints:

1. The managers did not know what materials were being charged to their departments until the monthly accounting statement came out.

2. The engineering and operating personnel were not notified when materials came in unless the expediter dropped the material on the desk of the requisitioner.

3. The supply department was entirely too slow in processing orders. It took almost a full day just to get the order to the telephone.

4. The supply department did not understand technical specifications and the expediter was being overworked by handling all technical orders.

Answer this question:

You are the purchasing manager and will implement procedures for the company. You are drafting a memo for all employees that explains the procedures. For each of the following various purchasing forms and items, describe the procedures that you are implementing and explain your reasons. These are 1) purchase requisitions, 2) purchase orders, 3) receiving, inspection and delivery, and 4) rush orders. Outline format is acceptable; be concise and SPECIFIC; generalizations will result in fewer points.