Institute of Chartered Financial Analysts of India (ICFAI) University 2008 Certification Certified Financial Planner Portfolio management - Question Paper

called for at 1 time. If reliable suppliers who supply at competitive rates are known, orders can be placed by directly
negotiating with them, saving time and effort in calling for tenders and evaluating them. Calling for tenders is also not necessary
when there are only a few well-known suppliers. Deals can be struck with them through negotiations. Before placing orders in
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bulk, it is the general practice to visit the factory of the supplier. This is necessary to make sure that the supplier has the needed
capabilities and is not acting as a middleman to someone else. There are 2 important points to be kept in mind while placing
orders – one, scheduling the deliveries and two, scheduling of the orders. The delivery schedules should be bid down 1st based
on the work schedules, keeping sufficient buffer time. Then, the order schedule should be worked out depending on the delivery
schedule needed and the time needed by the suppliers. This should be done carefully. Otherwise, either the material will be
supplied earlier than needed and will outcome in storage costs and earlier than expected payments to suppliers, or the supply gets
delayed and the works get held up.
iv. Expediting: The 4th step is expediting or follow up. Depending on the relationship with the supplier and his
dependability, occasional visits to his plant may be made. A few days before the delivery is due, he should be contacted to check
whether the material is reaching on time or not. If there is a delay, option arrangements should be tried out, depending on the
urgency, costs involved and availability. Sometimes, a `risk purchase’ clause is included in the purchase contract. Under the
clause, if there is a delay in supply due to the negligence of the supplier, the purchaser is enabled to buy the materials from
whichever source, and at whatever cost they may be available, at the risk of the negligent supplier. When the suppliers’
dependability is doubtful, it is necessary to include this clause.
v. Taking Delivery: The final step is taking delivery and inspection. Delivery can be asked for at the project site if the time of
delivery is close to the time when the material is needed. Otherwise, delivery should be taken at the storehouse. Everything, of
course, depends on the terms of the contract. Once delivery is taken, it is essential to inspect the material to see whether it meets

Earning:   Approval pending.