Unit 1 notes

PURCHASE MANAGEMENT
Purchase Management is a function of materials management in a company. Their basic
function is procuring the inputs for production function. This function encompasses
suppliers in the market external to the organization and several internal to the
organization.
Till recently, the purchasing process simply involved placing an order with the supplier who
offered the lowest price. Nowadays, increase in competition and market demand and scarcity
of resources have forced organizations to reexamine their purchasing activities. The
purchasing department functions have expanded considerably and include activities such as
verifying the credentials of suppliers, inspecting the quality of the material to be purchased,
ensuring the timely delivery of the material, etc.
While the value of purchased items varies from industry to industry, it adds up to more than
fifty percent of sales in all industries. Purchase management is regarded as a significant
activity in many organizations because of the high cost involved in carrying out purchasing
activities, increasing quality benchmarks, and increasing global competition.

Purchase departments buy raw materials, parts, machinery, and services used by production
systems. The objective of purchase management is to procure the right equipment, materials,
supplies and services in the right quantity, of the right quality, from the right suppliers, at the
right time, at the lowest price.
IMPORTANCE OF PURCHASE MANAGEMENT
Purchase management is considered to be very important function of materials management
in a company. Its importance is felt even outside the formal scope of materials management.
As the purchase decisions commit a very large portion of financial resource of the company
purchase function is said to be highly important. Purchase personnel deal with large number
of external agencies while performing their functions. Hence they represent company’s
reputation in the outside world. As they negotiate and finalize deals worth lot of money for
the company their integrity is of utmost importance for the organization.
OBJECTIVES OR GOALS OF PURCHASING
Primary objective or goal of purchasing function is making inputs available to the conversion
process at minimum cost to the final output of the company. Thus focus is on system output
rather than on micro level objectives.
The inputs to be made available are raw materials, semi finished items, bought out items etc.
There are certain parameters to be monitored for fulfilling the system objectives. We can call
them goals of purchasing. These goals are popularly known as 5R’s of purchase namely, right
price, right quantity, right quality, right place and right time. In simple terms, if the above
5Rs are achieved primary objective is fulfilled:-
• Right Price: Right price is determined by costing the production process of the supplier.
Right price is determined by allowing reasonable profit for the supplier and insisting and
helping to reduce cost. Tender system should be used to identify lowest responsible
bidder rather than lowest bidder. Principles normally used to ensure right price are cost
structure and learning curve.
• Right Quantity: Right quantity of purchase is the one that ensures no excess and no
shortage. High priority items are subjected to EOQ analysis to determine the right
quantity for purchase. This ensures overall minimum cost for inventory.

• Right Quality: In an item purchased should ensure adhering to mutually accepted
standard by supplier and customer at the time of finalizing the purchase order. The
accepted standard may be a drawing, a sample, a grade or a universal standard like DIN,
IS, BS etc.
• Right Place: is the one where the item is going to enter the value stream. If the item is
not available here, when needed, it is in short supply for the process.
• Right Time: is as decided by production schedule for meeting customer’s requirements.
ORGANISING PURCHASING
The effectiveness of purchasing activities can be enhanced by proper organization and
coordination of the activities. There are two types of purchasing system:-
Centralized purchasing system
• Decentralized Purchasing system
i. Centralized purchasing system: In a centralized purchasing system, all purchasing
activities of an organization are carried out by a separate department. A centralized
system is effective when an organization has a number of production sites within the
same site which requires the material with same or similar specifications. In such cases,
a centralized system allows pooling of all the requirements so that benefit of bulk
purchasing can be realized. The centralization also leads to consistency in buying
policies and uniformity in maintaining purchasing records.
ii. Decentralized Purchasing System: In a decentralized purchasing system, the heads of
different departments purchase the needed materials according to their specific
requirements. This method gives each department the flexibility to alter its purchasing
policies on the basis of specific requirements.
However, most organizations do not totally depend on any one system: instead, they use a
combination of both the systems.
FUNCTIONS OF PURCHASING DEPARTMENT

The purchase department is one of the key players in achieving the strategic objectives of a
firm. Functions of purchasing department or often categorized as the responsibilities of
Purchasing Manager are:-
• Vendor Development: The primary responsibility of a purchase manager is to search
for and identify a list of possible suppliers. He should ensure that sources of supplies
are reliable and stable.
• Selection of Suppliers: The purchase manager should examine the cost of the material
and other aspects. And selection should be made after analyzing all the relevant
issues.
• Contract Negotiations and Communication Interface: Once a vendor is selected, the
purchasing manager should negotiate and establishes the terms and conditions of
contract to be drawn between the two parties.
• Value Analysis: The purchasing manager conducts value analysis that aims at
achieving cost effectiveness and maintaining the required level of quality.
PURCHASE SYSTEMS
In an organization all activities are carried out according to systems and procedures for
reducing variations and errors arising out of individuality. This makes performing the
function simple and less prone to errors. Purchase organization also consists of such systems
established for smooth running of purchasing function. These systems are pre purchase
system, ordering system, post purchase system.
1. Pre Purchase System: This system lays down how purchase activity is initiated. Various
activities controlled by this system are requisitioning, selection of suppliers and obtaining
& evaluating quotations.
• Requisitions: Requisition for an item may be made by anyone in the organization.
Pre purchase system prescribes separate requisition form for capital equipment as
this purchase activity is controlled by a separate system. Requisition for an item
shall be made in a standard format. This format ensures that indenting person
furnishes all relevant information like quantity, specifications, etc. and gets the
purchase authorized by competent authority in the organization. Thereby making

purchase activity easier and less time consuming. This system shall identify the
hierarchical level competent to authorize the purchase depending on the nature
and value of the item.
• Traveling requisitions: In an inventory system where an item is made a stock
item to be perpetually maintained at a minimum level, purchase activity is
triggered by stores function based on ROL. The requisition is a permanent
document with specification, authorization and quantity required permanently
marked on it. The traveling requisition returns to indenting department after
purchase is initiated.
• Inquiries: Pre-purchasing system prescribes standard formats for making
inquiries in the market for supply of a particular product. These are standard forms
boldly declaring that they are not explicit or implicit purchase orders.
2. Ordering System: Purchase order is the most important element in ordering system.
Purchase manager releases the purchase order after selecting the supplier and finalizing
the price and other conditions of sale. Once the purchase order is raised and accepted it
becomes a legal document.
Contents of the purchase order are:-
Purchase order reference number

• Description of materials and specifications
• Quantity required and delivery schedule
• Price and discounts
• Shipping instructions
• Location where the material is to be shipped
• Signature of the authorized officer
• Detailed terms and conditions:-
a) Several numbers of copies made to be forwarded to various recipients. Many
companies color code the copies making the color destination specific.
b) Original and a copy is sent to the supplier for acknowledgment of the original
order. This acknowledgment is acceptance of terms and conditions of purchase
order.
c) One copy is sent to the receiving department for making necessary receiving
arrangement
d) One copy is sent to the indenting department for information.
e) One copy is sent to finance department for organizing payment to the supplier.
3. Post Purchase System: This system includes follow up procedures, receipt and checking
invoices.
• Follow up procedures: Follow up is an expensive activity for an organization.
Hence this should be minimized and made more effective. A sound procedure for
follow up is required to eliminate duplication and ineffectiveness. After conducting
FSN analysis follow up frequency should be fixed for follow up according to FSN
status so that follow up doesn’t become wasteful. Follow up responsibility is
assigned to buyers responsible for areas in which suppliers are situated.
• Receipt: Receipt system should ensure that defects in receipt process are eliminated
proactively. A systematic record of all receipts, carrier details and descriptions is
maintained. This record is in chronological sequence of arrival of supplies. The
system ensures that inspection of consignments received is arranged in time and
payment to suppliers for accepted consignments is organized. In many organizations
a receipt section handles this activity centrally.

• Invoice checking: supplier sends his invoice to customer’s finance department for
payment for the goods supplied. Invoice checking system ensures that the invoice is
checked against the PO terms, receipt details, quantity received, inspection reports
[accepted quantity and rejected quantity], losses, damages etc. this system helps
materials management to coordinate with finance department for payment to
suppliers.
IMPORTANCE OF SOURCE
Source is the place from where we procure our inputs. These inputs may be in the form of
raw materials, out sourced components or semi finished items. Manufacturing companies
outsource large number of items as they slim down processes.

Following reasons are considered to be making source an important element in materials
management:-
• Source of market intelligence: source is a window through which the buyer
organization looks at the world outside. Source provides access to the real time
information about the phenomenon. Information about current trends and industrial
climate is obtained from the sources.
• Crucial for product quality: buyer organizations depend on out sourced components
for producing the product which central to the objectives business. Reliance on
capabilities of supplier to meet tough quality standards is very high in current
business environment.
• Member in the value chain: supply source is an important element in the value chain.
Any cost added to the value chain reaches the end user as price. Hence effectiveness
and efficiency of the source becomes vital to business.
• Import substitution, cost reduction, value improvement: as indigenization of sub
assemblies, components and spare parts is necessary to reduce the cost of product in
competition, buyer organizations turn to supply sources to develop these items.
Several trials and corrections may be required to finalize the substitute. In house
capacity is generally not available for this kind of trials. A resourceful supplier is very
useful in this process. Same logic holds good in other exercises for cost reduction and
value improvement. It is quite logical that entire process is not outsourced but isolated
developmental activities are invariably done. It is common knowledge that many
small scale companies do not have full-fledged tool rooms but rely on sources for all
tool room activities.
PURCHASING POLICIES
The major principles on which purchasing policies should be based are a sound orientation,
reflect a cross –functional approach and be directed at improving the company’s bottom line.
i. Business orientation

Developing a purchasing and supply strategy requires a thorough understanding of the
company’s business policies. The following questions are important to determine how
purchasing and supply strategies will need to support the company in meeting its goals and
objectives:-
- What end-user market is the company targeting and what are the major developments
going on in those markets?
- What competition is the company suffering from and what leeway does the company
has in setting its own pricing policies?
- To what extent can material’s price increases can be passed onto the last customer or
is it impossible?
- What changes are happening in the company’s product, production and information
technologies?
- What investments will be made by the company in terms of new products and
technology?
- What products will be taken out of the market for the years to come?
ii. Integrated, cross-functional approach
Purchasing decisions cannot be made in isolation, and should not be aimed at optimization of
purchasing performance only. Purchasing decisions should be made taking into account the
effects of these decisions on other primary activities like:-
- Production planning
- Materials management
- Transportation
Therefore purchasing decisions need to be based on balancing total cost of ownership. When
buying for instance, a new packaging line it is important to consider not only the initial
investment, but also the costs which will be incurred in the future for buying accessories,

spare parts and services. This example itself illustrates the complexity of its type of purchases
and the different kind of decisions that need to be made.
Careful decision making in those circumstances, therefore requires a cross functional and
team based approach among all the business disciplines affected by it. This can only be done
when top managers are involved. The purchasing and supply manager will lead the
developing of such views and visions.
iii. Bottom-line orientation
The purchasing should provide a healthy commercial opposition vis-à-vis its internal
customers. Through their activities the buyers should make their company more and more
cost aware. They should consistently look for improving the price/value ratio of the goods
and services bought by the company. To accomplish this, purchasing should be able to
suggest alternatives to existing product designs, materials or components to be used and
alternative suppliers. Experience with companies in which purchasing is recognized as a
bottom-line driven activity shows this function contributes to a permanent reduction in cost
price of the end product, whilst stimulating innovation from the suppliers at the same time.
IMPLEMENTATION OF PURCHASE POLICY
Important areas to consider when implementing supply and purchase policy are supply,
product and supplier quality, materials costs and prices, supplier policy and communication
policy
i. Supply
Supply is aimed at the optimization of both the ordering process and the incoming materials
flow.
Purchasing order processing entails handling of:-

- Purchasing requisitions
- Order processing and expediting
- Development of efficient, computer –supported order routines
Materials and supply planning relates to:-
- Issuing materials delivery schedules to suppliers
- Reducing supplier lead times
- Troubleshooting in case of delivery problems
- Reducing (pipeline) inventories
- Monitoring supplier delivery performance
ii. Product and supplier quality
Central to this aspect are the materials specifications. Two important subjects of concern here
are purchasing early involvement in design and product development and improving product
and supply quality performance. Activities which may contribute to both areas are:-
• Standardization of materials-by striving for standardization or simplification of
product- specifications, the buyer may reduce product variety resulting in both cost
reduction and supplier dependence at the same time;
• A purchasing policy focussed on the life cycle of the end products- there is not much
point in investigating material quality improvements used in products which will be
eliminated shortly;
• Specific quality improvements- negotiating targets on improving reject rates, reducing
incoming inspection, and negotiating quality agreements;
• Agreeing on and gradually extending permanent warranty conditions that are to be
provided by the supplier;

• Initiating special programmes in the field of value analysis to simplify product design
and/or reduce product costs;
iii. Materials cost policy
The objective of cost policy is twofold:-
- First to obtain control of materials cost and prices in such a way that suppliers are
unable to pass on unjustified price increases to the company.
- Second, to systematically reduce the supplier’s materials cost through joint, well
prepared action plans.
In order to be successful in both aspects a thorough knowledge of the supplier’s pricing
policies and cost structure is required. Understanding and knowledge of the market structures
and of their susceptibility of the price paid to market and cost factors is necessary. It should
be decided for what products to build detailed cost models, for what models to monitor
underlying cost factors, and for what products to develop detailed materials budget estimates.
iv. Supplier policy
The supplier policy is focused on the systematic management of the company’s supplier base.
- Decisions need to be made for what commodities to pursue a multiple sourcing
strategy or to go for single sourcing or a partnership relationship.
- Suppliers who perform best should be rewarded with more business in the future.
- Targets and possible projects for future co-operation should be determined carefully.
- Relationships with suppliers who consistently fail to meet the company’s expectations
should be terminated.
However such decisions need to be made based on detailed data on how the supplier
performed in the past and be implemented carefully.

v. Communication policy
The company’s purchasing policies need to be communicated both internally and to
suppliers. Companies use the Intranet for the former and many employ their own Purchasing
Websites in order to communicate their future materials requirements and ways of working to
their suppliers.
The next step is that preferred suppliers have access to the customer’s Intranet through which
internal users can order directly from them through their electronic catalogues.
VALUE ANALYSIS
The purchasing manager conducts value analysis that aims mainly at achieving cost
effectiveness and maintaining the required level of quality. Value analysis is an organized
effort that studies in detail the ‘value’ of material. Value Analysis reviews the design changes
with the objective of eliminating high cost materials and the materials that are technically
obsolete and reducing the number of parts. After analyzing the functions and cost of material,
the purchasing manager evaluates the possibilities of using the material.
Value Analysis evaluates the materials by seeking answers to the following questions:-
- What is the function of the item?
- Is it possible to run the system without the item?
- Can the item be substituted with a standard part?
- How much does the item cost?
- How much does the substitute, if any, cost?
- Can the functions performed by two or three materials be clubbed together and be
replaced by any other material?
Value Analysis involves the coordinated efforts of the engineering, production and the
purchasing personnel and helps in reviewing purchase activities to ensure that expenditures
result in the receipt of appropriate value.

The step by step procedure of Value Analysis is given below:-
- Examine all the products/materials that are being reordered and identify each
product/material that needs an improvement.
- Gather all possible information about the designs, costs and so forth of the product.
- Form a team that includes experts from various functional areas that are related to the
functions performed by the material.
- Generate alternatives by generating new ides and evaluate different ways of
accomplishing the task.
- Evaluate the alternatives on criteria like cost and feasibility and eliminate the non
feasible alternatives.
- Refine the feasible alternatives and select the optimal one.
MAKE-OR-BUY DECISIONS
The make-or-buy decision is the act of making a strategic choice between producing an item
internally (in-house) or buying it externally (from an outside supplier). The buy side of the
decision also is referred to as outsourcing. Make-or-buy decisions usually arise when a firm
that has developed a product or part—or significantly modified a product or part—is having
trouble with current suppliers, or has diminishing capacity or changing demand.
Make-or-buy analysis is conducted at the strategic and operational level. Obviously, the
strategic level is the more long-range of the two. Variables considered at the strategic level
include analysis of the future, as well as the current environment. Issues like government
regulation, competing firms, and market trends all have a strategic impact on the make-or-
buy decision. Of course, firms should make items that reinforce or are in-line with their core
competencies. These are areas in which the firm is strongest and which give the firm a
competitive advantage.
Considerations that favor making a part in-house:-
• Cost considerations (less expensive to make the part)

• Desire to integrate plant operations
• Productive use of excess plant capacity to help absorb fixed overhead (using existing
idle capacity)
• Need to exert direct control over production and/or quality
• Better quality control
• Design secrecy is required to protect proprietary technology
• Unreliable suppliers
• No competent suppliers
• Desire to maintain a stable workforce (in periods of declining sales)
• Quantity too small to interest a supplier
• Control of lead time, transportation, and warehousing costs
• Greater assurance of continual supply
• Provision of a second source
• Political, social or environmental reasons (union pressure)
• Emotion (e.g., pride)
Factors that may influence firms to buy a part externally include:-
• Lack of expertise
• Suppliers' research and specialized know-how exceeds that of the buyer
• cost considerations (less expensive to buy the item)
• Small-volume requirements
• Limited production facilities or insufficient capacity
• Desire to maintain a multiple-source policy
• Indirect managerial control considerations

• Procurement and inventory considerations
• Brand preference
• Item not essential to the firm's strategy
ONLINE PURCHASING
Features to look for:
Beyond those high-level principles, companies must decide on purchasing criteria that will
serve them for the long term. Among the areas to consider: Easy to use. Is the user interface
intuitive? If not, your roll-out could be slowed by the need to extensively train your
purchasing users. Ask whether your e-procurement provider offers training services to users.
Easy to locate items. Every e-Procurement system has a search function, but users look for
items in different ways. You want multiple ways to search or browse catalogues. Once found,
users want to save their commonly purchased items for future use. Also, they need to identify
preferred suppliers quickly.
Punch-out and round-trip. These capabilities allow buyers to access content or
configuration tools on a supplier’s Web site using the buyer’s own e-Procurement software.
This real-time access to configuration tools and product information is critical for products
with many configurations or options and for products that must be customized for each buyer.
Customize workflows. Every organization has its own authorization and approval processes,
and an e-procurement solution should adapt to existing practices or allow enterprises to
improve them. These include configurable approvals and routing and spending limits for
specific
purchasers.
Create single requisitions. Buyers want to specify purchases once and have them approved
and implemented without more paperwork. That means a single requisition for multiple
suppliers and shipping addresses.
Generate POs. Does the eProcurement system automatically create purchase orders, send
them electronically to suppliers, and request electronic confirmations? It should.

Check order status. Users should be able to log on and instantly see all their open orders and
requisitions and their status. Handle receivables. Reconciliation of items ordered to items
received, and items invoiced should be easy.
Global flexibility. Global companies need an e-procurement solution that can handle
multiple languages and multiple currencies
What about my suppliers?
As mentioned above, an e-Procurement system only works if your suppliers are able to
receive and process POs from it. Slow supplier adoption has hampered many e-Procurement
efforts.
Here’s what to look for:
A single connection.-Your company wants a single connection to many suppliers, not point-
to- point links for each supplier.
Open system.- For suppliers not already connected to your network, look for whether
suppliers can get online easily, accept electronic POs and issue invoices and ASNs, etc.
Catalogue management. -Suppliers should be able to submit their own catalogue or obtain
assistance in creating and loading them. Make sure those resources are available on the
network you choose.
Manage buyers-Suppliers need tools to manage multiple buyers (you and their other clients)
on the same system.
Killer combination.-procurement Manager and The Open Supplier Network
Perfect Commerce offers a hosted e-Procurement solution, Procurement Manager, that lets
purchasing departments take back control of their purchasing processes. Procurement

Manager, built on sound procurement principles, offers a complete solution that gives buyers
centralized control of their entire procurement process.
Procurement Manager’s end-to-end functionality comes with features sophisticated buyers
will prize:
·Automated requisitions and purchase orders.
· Searches by supplier, manufacturer, keywords or UNSPSC commodity codes.
· Comparisons of products and pricing from multiple suppliers.
· A single requisition for multiple suppliers and shipping addresses.
· Automated workflows that conform to enterprise business processes.
· Support for multiple payment methods.
· Detailed reports on transaction and purchasing activity.
· Integration of PO extracts to AP and financials.
· Integration with invoice management, providing 2- and 3-way reconciliation and dispute
management.
In addition, Perfect Commerce’s Procurement Manager works closely with Perfect
Commerce’s Open Supplier Network (The OSN), which lists 8,000 suppliers and 21 million
products ready for purchase. Many enterprises will find their current suppliers already on The
OSN, the largest independent supplier network in the world. The OSN offers an “easy on-
ramp” with automated tools not only for buyers but for suppliers too. Together, The OSN and
Perfect Commerce’s hosted Procurement Manager comprise an “On- Demand” solution that
delivers the fastest road to ROI. With a low start-up investment and quick
deployment, Perfect Commerce’s automated processes save enterprises time and money.
With Perfect Commerce, the promised benefits of automated procurement are delivered with
a typical 75% reduction in purchasing cycle time and true visibility into enterprise-wide
procurement spending. Procurement Manager connects seamlessly not only to The OSN but
also to enterprise applications, enabling straight-through processing with financial and
accounts payable systems. Procurement
Manager’s flexibility lets companies configure it to their business processes, including
management approvals. In short, hosted procurement streamlines the purchasing process
through automation and improves spend management.

CASE STUDY
PZ Cussons is a major manufacturer of personal healthcare products, and consumer goods. It
operates worldwide, especially in Africa and Commonwealth nations. The company is listed
on the London Stock Exchange and a constituent of the FTSE 250 Index.
PZ Cussons was founded in 1879 as a trading post in Sierra Leone by George Paterson and
George Zochonis as Paterson Zochonis. The British-owned company expanded its operations
into nearby Nigeria before the end of the 19th century PZ expanded considerably during the
20th century, acquiring factories and establishing offices in Ghana and Kenya. It was one of
three or four firms which commercially dominated Guinea as a colony before 1958. In 1975
the Company acquired Cussons Group (founded by Thomas Cussons). Later that century
more offices and factories were acquired in Asia, with PZ's first factory built in Thailand in
1986, and operations expanded into Indonesia in 1988. In 1993 PZ bought the state-owned
Pollena Wroclaw in Poland, followed in 1995 by Pollena Uroda and in 2002 Paterson
Zochonis Plc was renamed PZ Cussons Plc.
In 2004 PZ Cussons sold the 1001 Carpet Cleaner brand to the American WD-40 Company
for £6.2 million.
In 2005 PZ Cussons closed their Nottingham factory (founded by Gerard Bros.), and
relocated the operations to Thailand. In 2006 PZ Cussons announced a plan to move their
remaining English factory from Kersal to Swinton, both in the City of Salford.
In 2008 PZ Cussons Plc acquired the Sanctuary Spa and Sanctuary products business.

Strategy of Company
PZ Cussons operates in Africa, Asia and Europe with its strategy built on four core
principles.
We operate in selected markets that have the potential for future growth, both in mature and
emerging markets. Our presence across Africa, Asia and Europe ensures a naturally balanced
portfolio of global markets, which we continually review to ensure they provide the Group
with the best opportunities for profitable growth. We take pride in our knowledge of local
markets which enables us to respond quickly and appropriately to local needs.
We develop leading brands for the markets in which we operate. Whilst some have global
reach, the majority of our brands are sold only in local and regional markets as we create
products that are particularly suited to local needs and tastes. Our strategy is to grow these
brands so they achieve category leading positions in their markets and we continually review
and expand the categories in which we operate to ensure profitable growth. We are proud of
our portfolio of category leading brands which are developed to satisfy the particular needs of
local consumers.
We operate world class supply chain networks that enable us to deliver our brands quickly
and efficiently to our local consumers. Our distribution systems vary by market type, from
traditional supply chain models in mature markets to extensive nationwide depot networks in
emerging markets. We continually adapt our methods of distribution to suit our local markets
and to changing market needs. We take pride in our flexible distribution capability which is
tailored specifically for the local market.
We recruit, develop and retain a great team of people who are aligned with our values and
who can drive our plans for growth. Our aim is to create a high performance culture offering
career experiences and development. We work together as a true meritocracy where
leadership is determined by talent.

Operations
PZ Cussons has factories in Salford and a number of countries abroad including Poland,
Thailand and Indonesia.
The PZ Cussons Group operates in Europe, Africa and Asia, in both mature and emerging
markets.
Brands
• PZ Cussons' main brand is the Imperial Leather range of soaps, bath and shower and
cosmetic products.
• It also produces Joy soaps, Cussons Kids toiletries, Premier soaps, Carex anti-
bacterial moisturisers,
• Cussons baby lotions, Luksja gels and soaps, Makler perfumes, Pearl soaps, Sweet
Seventeen teenage cosmetic products, Venus range of hair care products,
• Original Source shampoos and gels, Morning Fresh dishwash liquid, Flourish
Toothpaste, Elephant Extra Detergent, Radiant Laundry Granules,
• Robb mentholated rubs, Duck Laundry Soap and Minerva Olive Oils.

Purchase Procedure of PZ CUSSONS
The specifications and number/quantity and delivery of
equipment, devices and materials are determined by the
department that will be using the product or materials. The
Purchasing Department conducts purchase activities based on
purchase requests submitted by the Concern department.
　
The Purchasing Department, at its sole discretion, selects
companies from which estimates will be sought. Suppliers are
selected from the files of "Companies with Previously
Established Business Relationships", "Companies from Which
Estimates Can Be Requested" and "Products and Suppliers".
Selection is made by comprehensively evaluating such factors as
the quality and performance of the equipment, device(s) or
materials to be purchased, compatibility with existing facilities,
degree of reliability, product requirements including safety,
delivery time, the scale of the order, after-sale service and the
company's previous business record.
　
As a rule, when requesting an estimate from a company that it
has selected, PZ Cussons will set out a specification from listing
PZ Cussons requirements in respects of quality, performance
standard, size, inspection and method of inspection. The selected
companies will be asked to submit cost estimates and
specifications to PZ Cussons prior to a specified date.
Specification sheets submitted by potential suppliers at their
own expense are checked by the Purchasing Department and
the department that will be using the product, in order to
Annual
Requirement/
Purchase
Request
Selection Of
Companies/
Regular
Supplier
Selection Of
Companies/
Regular
Supplier
ESTIMATE
REQUEST
ESTIMATE
REQUEST
SUBMISSION
ESTIMATE

determine whether the required standards are met by the
product. All products must pass this examination. During this
process, Osaka Gas may request additions or changes to the
specifications.
　
After valid cost estimates and specifications have been
comprehensively evaluated in respect of price, technical
requirements, etc. PZ Cussons will commence negotiation with
the company with the most attractive proposal to discuss the
amount of the contract and other terms and conditions. The
selection of such a company shall be made by PZ Cussons at its
sole discretion. Contract terms and conditions will be decided
upon mutual agreement.
　
The business will be established upon conclusion of a contract,
in the form of a written document if necessary. The obligations
and liabilities of PZ Cussons arise only when such contract is
concluded.
　
Delivery dates specified in the contract must be strictly
observed. Precise details of the delivery schedule will be
agreed between the supplier and the relevant department of PZ
Cussons. Delivered equipment, device or materials must pass
inspections conducted by the relevant department of PZ
Cussons. When deemed significant, an interim inspection may
be conducted during the manufacturing process.
Payment will be made according to the payment terms
specified in the contract.
NEGOTIATIONNEGOTIATION
CONTRACT
CONCLUSION
CONTRACT
CONCLUSION
DELIVERY
AND
INSPECTION
PAYMENTPAYMENT

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