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SERVICES STANDARDISATION
(Central Procurement, ACC Ltd.)
ACKNOWLEDGEMENTS
This project could not have been completed without the support of many persons, and I would like to thank those who have in one way or another contributed to this project. I take this opportunity to express my gratitude to the management of ACC Ltd. for giving me the opportunity to be part of the company as a summer intern. I thank Mr. Shakti Arora for proposing this project to me and for defining the project scope, Mr. G.N. Pandey for his commitment, interest, positive attitude and unwavering faith in me, which has been a big motivating factor. Also, I thank the members of the procurement team at ACC Cement House, Churchgate. It is difficult to imagine how I would have completed this project without their continuous support. Finally, I wish to place my sincere thanks to all my professors and friends who directly or indirectly helped me in completion of this project and my Institute, Mumbai Institute of Management & Research for providing an opportunity to explore the learning horizon on job.
EXECUTIVE SUMMARY
Service Procurement poses a challenge because of the variability associated with services. A gap may exist between the understanding of a Purchaser, the End User and the Service Provider. Hence, it is necessary to standardize the Service Procurement Procedure right from need recognition to performance by adopting companywide best practices and rejecting the deviations. The Service Contracts need to be drawn in such a way that the understandings of the stakeholders are not divergent in technical as well as commercial terms. The contract language should be so forthright and clear that all the requirements , procedures and terms are clear to any of the user of the Contract and if one day, the original parties to the contract move on, it is not difficult for the new Purchaser to understand it / User to understand it.. To ensure standardization of the procurement procedure it is important to target those services which form the bulk of either the value or the volume share. The individual service contract value may be small, but if it is recurrent, the annual spend for the service could be an appreciable amount. Also, it is important to consider those service providers who handle contracts over a large value spectrum to consider the possibility of service job pooling and reducing the number of contracts as well as vendors. These three criteria formed the basis of the ABC analysis of electrical and instrumentation department related services. The output of the analysis showed that Material Handling, Packing and Security servicing formed the bulk respective departmental service spending. Based on the study of existing service contracts, certain observations and deviations were marked. To locate the points of intervention, a detailed study of the process and the business workflow was done and individual stakeholder responsibilities mapped. The recommendations were made as a Standard Operating Procedure for procurement of services and the best practices to be implemented. The Mandatory clauses for the Material Handling servicing were proposed citing important examples. Finally, an outline for implementing SAP service master was proposed, together with the methods to accelerate procurement process for planned as well as unplanned services in terms of blanket purchase orders, vendor classification, use of value limits etc.
DECLARATION
I hereby declare that this project report entitled Services Standardization, submitted by me to Mumbai Institute of Management & Research, University of Mumbai, is a bonafide work undertaken by me and it is not submitted to any other university or institution for the award of any degree/ diploma/ certificate. The sources of material & data used in this study have been duly acknowledged.
Contents
ACKNOWLEDGEMENTS ........................................................................................................................... 2 EXECUTIVE SUMMARY ............................................................................................................................ 3 INTRODUCTION COMPANY PROFILE .................................................................................................... 0 HISTORY .................................................................................................................................................. 1 VISION ..................................................................................................................................................... 2 CENTRAL PROCUREMENT ORGANISATION ............................................................................................. 3 SERVICES: KEY ISSUES ............................................................................................................................. 4 PROCESS FOR STRATEGIZATION OF SERVICE: ......................................................................................... 5 VENDOR SELECTION: ....................................................................................................................... 6 SCOPE SPECIFICATION & UOM: ...................................................................................................... 6 COST ESTIMATION: ......................................................................................................................... 7 CONTRACT & CONTRACTING PROCESS:.......................................................................................... 7 MEASUREMENT, CERTIFICATION & EXECUTION:............................................................................ 8 VENDOR PERFORMANCE MEASUREMENT: .................................................................................... 8
MATERIAL HANDLING ............................................................................................................................. 9 PROBLEM IDENTIFICATION: .................................................................................................................. 12 OBJECTIVE: ............................................................................................................................................ 12 METHODOLOGY USED: ......................................................................................................................... 14 DELIVERABLES: ...................................................................................................................................... 15 UNDERSTANDING THE PROBLEM: ........................................................................................................ 16 SPEND ANALYSIS: .................................................................................................................................. 17 PROPOSED STANDARD OPERATING PROCEDURE FOR MATERIAL HANDLING SERVICES ..................... 19 The guide lines on different steps in procurement process are as follows .................................... 19 SCOPE & APPLICATION:..................................................................................................................... 19 NEED: ................................................................................................................................................ 19 VENDORS & VENDOR DATABASE: .................................................................................................. 20 PURCHASE REQUISITION: .................................................................................................................. 22 RFQ (REQUEST FOR QUOTATION)..................................................................................................... 24 REQUEST FOR PROPOSAL: ................................................................................................................ 25 OFFER RECEIPT: ................................................................................................................................. 26 BID EVALUATION:.............................................................................................................................. 27 COMPARATIVE DATA ANALYSIS: ....................................................................................................... 28 NEGOTIATING FINAL TERMS: ............................................................................................................ 29 APPROVAL FROM APPROVING BODY: .............................................................................................. 30
SIGNATURES AND KICK OFF MEETING .............................................................................................. 30 END USER RESPONSIBILITIES............................................................................................................. 30 CONTRACT AND CONTRACTING STRATEGY: ............................................................................... 31 INSPECTION, ACCEPTANCE, MEASUREMENT, CERTIFICATION & PAYMENT PROCESS........ 32 OBSERVATIONS: ................................................................................................................................ 34
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HISTORY
ACC was formed in 1936 when ten existing cement companies came together under one umbrella in a historic merger - the country's first notable merger at a time when the term mergers and acquisitions was not even coined. The history of ACC spans a wide canvas beginning with the lonely struggle of its pioneer F E Dinshaw and other Indian entrepreneurs like him who founded the Indian cement industry. Their efforts to face competition for survival in a small but aggressive market mingled with the stirring of a country's nationalist pride that touched all walks of life - including trade, commerce and business. The first success came in a move towards cooperation in the country's young cement industry and culminated in the historic merger of ten companies to form a cement giant. These companies belonged to four prominent business groups - Tatas, Khataus, Killick Nixon and F E Dinshaw groups. ACC was formally established on August 1, 1936. Sadly, F E Dinshaw, the man recognized as the founder of ACC, died in January 1936; just months before his dream could be realized. In a sense, the formation of ACC represents a quest for the synergy of good business practices, values and shared objectives. The use of the plural in ACC's original name, The Associated Cement Companies Limited, itself indicated the company's origins from a merger. Many years later, some stockbrokers in the country's leading stock exchanges continued to refer to this company simply as 'The Merger'. The house of Tata was intimately associated with the heritage and history of ACC, right from its formation in 1936 upto 2000. Between the years 1999 and 2000, the Tata group sold all 14.45 per cent of its shareholding in ACC in three stages to subsidiary companies of Gujarat Ambuja Cements Ltd (later called Ambuja Cement Ltd), who then became the largest single shareholder in ACC. The house of Tata was intimately associated with the heritage and history of ACC, right from its formation in 1936 upto 2000. Between the years 1999 and 2000, the Tata group sold all 14.45 per cent of its shareholding in ACC in three stages to subsidiary companies of Gujarat Ambuja Cements Ltd (later called Ambuja Cement Ltd), who then became the largest single shareholder in ACC. This has enabled ACC to enter into a strategic alliance with GACL; a company reputed for its brand image and cost leadership in the cement industry. ACC has also extended its services overseas to the Middle East, Africa & South America, where it has provided technical and managerial consultancy to a variety of consumers, and also helps in the operation and maintenance of cement plants abroad. The overseas contract with YANBU Cement Company, Saudi Arabia for management and operation of its cement plants, is an ongoing relationship for the last 29 years and has been renewed up to February 28, 2011.
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VISION
Vision is defined as a mental image or foresight. Associated Cement Companies Ltd. says its vision is
To be one of the most respected companies in India; recognized for challenging conventions and delivering on our promises.
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ACTIVITIES:
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COMMON OBSERVATION:
VENDOR SELECTION:
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COST ESTIMATION:
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MATERIAL HANDLING
OVERVIEW
Solid fuels (coal, pet coke, lignite etc.) ,raw materials (Lime stone) , Corrective materials (Red ocher, Brown ocher , Blue dust, silica sand, Aluminous clay, shale, Laterite, Iron ore, Milscale, Bauxite etc.) and additive materials (gypsum, slag, pozolana, fly ash etc) are the various materials are required for cement manufacturing in bulk. Handling activities like loading, unloading, shifting etc are required to be undertaken at various transition points from source to plant till the materials are finally consumed for production. Materials are transported through rail and road and various methods of material handling are used. Coal, pet coke and gypsum are procured through central contracts while the procurement of other raw material corrective material and additives are through local contracts. The contracts for supply include transportation up to plants in some cases. Separate contracts for transportation and handling are also released. Material handling services within the plants are outsourced under separate contracts. Cost of material transportation and handling services provided by various contractors are being captured in SAP in following manner. 1. Directly assigning to material cost: by attaching as condition vendor in the material supply purchase orders. 2. Separate Purchase orders for service are issued using (06 segment) material group.PCS family 02, 03 and 99. Above practice is not followed uniformly at all plants and hence tracking of spends is very difficult due to above variation.
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OUTSOURCING:
Material Handling Services includes activities like: Unloading of materials Loading and Shifting Mixing and feeding Wagon/ truck/ Track cleaning Tarpaulin covering of stocks
Clamshells, backhoe, wagon tippler, truck tippler are the various equipments used for unloading. Unloading is also done manually. Clamshell/ Backhoe can be in-house or provided by the contractor. Cleaning of trucks/wagons for residual material is carried out manually. Loading, Shifting, stacking, feeding, mixing is carried out using in house or out sourced machine i.e. Clam shell, pay loader, dozer, truck, dumper etc. Man power for operations of equipments is either in house or out sourced. On account of infrastructure and space constraint in the plant, bunching of rakes (arrival of rakes within short interval), number and types of material, quality of material, process requirement etc. material handling activities required to be performed at various plants differs. Accordingly the type of equipment and other resources needed to be deployed and the cost for material handling service is not uniform. For Coal and gypsum, contracts for material handling services performed at source end and transportation up to plants / transshipment points near plants are being finalized by CP, for other materials these contracts are finalized by plants.
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OBSERVATION:
The process of procurement and execution are diverse across the units. Some of the observations are as under Huge Vendor base across plants. Different way and equipments used in material handling services UOM is different (MT, Mandays, Wagon basis, lump sum, hour basis, per truck, etc.) Basis of costing is not available in most of the plants, Mostly there are adjustments given to the existing Vendors. Roles & responsibilities for inspection acceptance & measurement are different as per local management. There is no operational SOP Measurement on estimation/random checking basis of material loading, shifting, re-shifting Spends posted in different PCS groups (01, 02, 06, 06999). Handling charges loaded on material through conditional vendors at some places and separate service PO are being prepared in other places. Many activities are performed through manpower basis Contracts on man days basis Contracts do not capture all aspects , liabilities are not defined. Different contract for different activity in plants. No single contract for all activity. No vendor data based on vendor pre qualification and vendor performance evaluation. Contracts are released on legacy vendor & competitive bidding is not followed since long. Many contracts do not have clarity with respect to scope, UOM and deliverables Inspection, measurement and acceptance process are diverse. Documentation is minimum and not uniform. Some of the plants has outsourced all the activities, where as some plants has partially out sourced. Multiple vendors are engaged for different activities in most of the plants. Loading for internal shifting, internal shifting, mixing and feeding operations are out sourced on quantity (Rs. /MT) OR time rate (Hiring) basis.
PROBLEM IDENTIFICATION:
There are significant issues in the Central Procurement division related to standardisation of service contracts because of: The high degree of variability inherent in services Gap in how a service is perceived by the purchaser, the end user and the service provider.
OBJECTIVE:
Significant research has already been done in this area in terms of: Spend Analysis of service contracts across various departments Understanding the current practices of service contracts across ACC and Ambuja Cements Ltd. plants in India.
PURPOSE:
In view of prevailing diversities across various plants it is felt to standardize the processes as a step towards the strategic procurement and derive the benefits which will arise out of Standardization of scope and specification Competitive bidding Vendor consolidation Pooling the volume Standard processes for contracting Vendor development Standardisation of services would serve the following purpose: Maximize synergy benefits. Rationalize vendor base. Develop a lean business process. Cost Reduction.
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The cross functional teams comprising of functional and finance representatives of plants and central procurement have worked together to understand and capture the best practices in the following areas: Vendor Selection Specification and Scope Costing Contracting Measurement and Execution Vendor Performance The teams have recommended the standard operating procedure for procurement of material handling services in areas of contracting & contract execution.
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METHODOLOGY USED:
A three step methodology was followed: Understand and defining the problem (Study): Studying the service procurement process as handled in the Purchase department Data gathering and defining the scope of the research
Envision the process (Analyze): Present the design of procurement process by analyzing service procurement from: A process perspective A business perspective
Manage the problem (Develop): To carry out the transition from Understanding to Envisioning by: Developing a Standard Operating Procedure for procurement of services Proposing the mandatory clauses for a service contract Outlining SAP service master
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SCOPE OF SOP:
The project scope includes the study of various services for various departments. These SOP shall be known as Standard Operating Procedure for procurement of services for Material Handling inside the plant and shall cover following activities Unloading of materials from wagons/trucks by clam shell, backhoe and manually. Cleaning of residual material inside the wagon /trucks manually. Track cleaning for smooth movement of wagons Cleaning of adjacent area for smooth movement of trucks any spillage during movement of vehicle, Stacking /heaping of material at adjacent area. Loading & Shifting of material to normal storage / consumption point OR alternate storage. Stacking/heaping of material at storage locations, Loading & Shifting of material from normal storage to alternate storage. Loading and Shifting of material from alternate storage to normal storage point. Mixing and Feeding of material to hopper. Feeding of material to hopper Tarpaulin covering / uncovering of in house stock of raw material / wagon truck.
DELIVERABLES:
Proposed: Standardization of service procurement process uniformly across the company Efficient process implementable through SAP Best practice identification
This is achieved through the means of A process workflow A Standard Operating Procedure, Guidelines for putting mandatory clauses A concept document for implementing SAP service master
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To define a service a two step process was used: 1) Developed a questionnaire and understand services as in the Purchase department 2) Theoretical research on what is a service through journals and books A facility not related to labour or materials can be said to be a service. Also, there are some specialised services such as consulting availed in case of plant commissioning. A service is an intangible equivalent of good where the buyer doesnt obtain exclusive ownership of the service provided. Characteristics of a service are: Inseparable Intangible Variable Simultaneous Perishable A vendor contracted for providing a particular service is called a SERVICE PROVIDER. There are many Service providers across various plants of ACC and ACL. The problem lies in this unstandardised method of service those are provided by all these SERVICE PROVIDERS. So, it is desirable to standardise the services provided by these vendors.
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SPEND ANALYSIS:
The entire spend data of the last year (approx 1163 cr.) was divided into various groups having unique code. e.g. Material Handling related Services, Mechanical related service etc. The Material Handling group was further classified as Unloading of materials Loading and Shifting Mixing and feeding Wagon/ truck/ Track cleaning Tarpaulin covering of stocks
ABC analysis of vendors of these 2 groups was carried out seperately and the A Class vendors were concentrated on at the beginning. Classification of A,B,C was done as top 75% contribution were considered A class, the next 15% were B class and the rest were C class. These A class vendors were considered for release of Standard Operating Procedure (SOP). A Standard Operating Procedure (SOP) is a set of written instructions that document a routine or repetitive activity followed by an organization. The development and use of SOPs are an integral part of a successful quality system as it provides individuals with the information to perform a job properly, and facilitates consistency in the quality and integrity of a product or end-result.
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SCREEN SHOT:
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NEED:
Service may be required from the service provider in the plant/site when: There is a change in policy of the company, wherein management has planned to outsource the service to an external service provider There is lack of sufficient manpower or available resources within the plant/site to carry put the service. In case the required technical knowledge and competence is not available in house, it is necessary and beneficial to get the service from OEM. Outsourcing of consultancy services.
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Identify Vendors with good performances track record within ACC & ACL & nearby cement plants. Market survey of similar industries. Compile List of eligible Vendors. Carry out the assessment on various attributes given in the matrix. Evaluate vendors and pick up 3 to 4 top ranked vendors. Obtain the approval of the delegated authority as per responsibility matrix.
PMM should include the prequalified vendors as approved vendors for Material handling services in the VENDOR DATABASE. Any change in the list shall be done only under proper change procedures. The team shall review the current standing of prequalified vendors every year. The current vendor shall also undergo the prequalification and performance review process.
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RECEIPT OF REQUIREMENT:
User department shall compile the requirement and submit to plant procurement with the estimated quantities and UOM. Requirement shall contain the detailed scope, responsibilities, boundary limits, quality norms, inspection requirement, measurement and control points, delivery timelines, acceptance and rejection criteria, penalties, etc. The specifications shall include means and methods of performance of work, details of equipment and machinery, safety requirements and general requirements of the work. Any special requirements/ conditions shall also be included. While working out the requirement of resources productivity of machinery and manpower shall be worked out to achieve best efficiency. To achieve benefits of single point responsibility, total accountability, ease in operation, flexibility in deployment of manpower and machine and their efficiency the requirement for all the related operation shall be combined. Wherever the monthly quantity is highly variable, minimum and maximum quantity with their expected period of occurrence shall be indicated in the requisition. The requirement shall be approved by the concern unit head or any delegated authorities by unit head. Requirement shall be submitted well before the expiry of the current contract [Recommended: 3 months] Such requirements shall be considered by plant procurement for entering into contract only. User can also submit the requirement through a SAP PR giving full details as above, however this is not necessary for entering into contract.
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PURCHASE REQUISITION:
With the help of the gathered specifications, a purchase requisition is prepared by the end user. The end user has to ensure that the PR contains: All relevant technical specifications. And the exact service requirements with required delivery time and price estimate Purchase Requisitions are of two types For a recurrent service For a new requirement/non-recurrent service For the PR of a recurrent service: a) Decide on the technical specifications and price reference, as in the existing contract/previous PRs, to raise a requisition. b) Get the request approved by the concerned approving body. The approval is based on the authority matrix. E.g. A requisition of less than Rs. 1.5 million is handled by the plant procurement department and above that it would go to the central procurement bucket. Purchase Requisition for a new requirement/non-recurrent service: a) Decide on the technical specifications and price reference in consultation. with the service providers and the purchaser, wherever needed. The documents created in the need recognition phase could also be used. b) Get the request approved by the concerned approving body. The approval is based on the authority matrix. E.g. A requisition of less than Rs. 1.5 million is handled by the plant procurement department and above that it would go to the central procurement bucket. The end user has to: Ensure that the requisition falls within the appropriate purchase group Attach, the drawings and specification sheets with the requisition, wherever necessary. Mail/ forward the hard copies of the drawings to the procurement department, as needed. Approval is required from the concerned approving body at the Purchase Requisition stage. The approval could be at the plant or the CP level based on the authority matrix.
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Purchase Requisition Stage : Approval at the plant level. Before approving the requisition, the approving body has to: Ensure that the PR is assigned to the proper purchase group Check that the PR is within the allocated budget Check whether the information provided by the end user is correct/ complete in all requests. In case of the PR approval scenario, two cases arise: a) The requisition is approved based on the existing contract b) The requisition is not approved based on existing contract In case the requisition is approved based on the existing contract, the purchaser has to: I. II. III. Select the vendors from the approved vendor database Select new vendors if they satisfy the vendor qualification criteria Get the approval from the concerned approving body (Offline + Online) and draw the PO based on the terms and conditions (commercial + technical) of the existing contract. The phase of RFQ and Negotiation would be bypassed.
IV.
In case the requisition is not approved based on existing contract, the purchaser has to: I. With the help of the specifications and details provided by the end-user, prepare a tendor/ RFQ. II. III. IV. Select the vendors from the approved vendor database Select new vendors if they satisfy the vendor qualification criteria Float the RFQ with respect to the proper tendor.
The purchaser also has to: Ensure that the requisition in his bucket is allocated to the right purchasing group Check that the necessary drawing and specification sheets are attached/ received and the requisition is complete in all respects Verify that the vendor qualification criteria is in accordance with the company policy.
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In case the tender is of small value (less than Rs. 1 lakh), a two part offer with the detailed terms and conditions is not necessary In case the offer is of high value (more than Rs. 1 lakh), a two part offer should be requested, which should include: A technical bid And a commercial bid
Check the last date of offer receipt should be in line with the lead time of the requested service and for this, continuous follow up is to done with the service providers for sending their offers within time Take care that the offer is requested from all approved vendors or any new potential vendors with prior approval from approving body so as to ensure bid competition and comparative analysis. Ensure that vendor recommendations are taken from the End User/ Approving Body.
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OFFER RECEIPT:
In this stage, the purchasing department receives and then records the offer from the service provider. He then submits the bids to Plant/ Site/ TSS for their evaluation. The Purchaser has to: Record and duly acknowledge the received offer Verify that the offer is complete in all respects with technical as well as commercial bids Check that the offer is received in line with the lead time for the requested service Ensure that the bid is submitted the Plant/ Site/ TSS as soon as the offer is received and continuous follow up should be done by the purchaser to ensure that bid evaluation is completed within timelines.
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BID EVALUATION:
In this stage the End User goes though the offers in detail and evaluates them based on the following parameters: a) Scope of Service b) Technical Specifications c) Key Performance Indicators (KPIs) d) And any other details given by vendors The purchaser has to Ensure that if required the end user interacts with the service provider to seek any clarifications, keeping purchasing department in the loop Also ensure that if the technical bid is found acceptable, the End User submits the TBA to the Procurement Department Check for any changes that may have arisen in the commercial offer once TBA is received. The changes could be pertaining to: a) Scope of the Service b) Time of the Service c) Pricing based on updated technical specifications Request the service providers for the updated offer based on the changed scope and specifications. Meet/discuss with the potential service provider(s) to verbally review the Final Contract, so as to question the service providers understanding of the requirements before beginning the negotiations Ensure that the final commercial bids are received with respect to the lead time of the requested service and for this; continuous follow up is to be done with the service providers.
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At this point, the purchaser is responsible for selecting a provider or may be required to provide recommendations to the approving body (Offline). For this: Compare the terms and conditions of different vendors and minimize the deviations if any from the Tender document Try to bring all the selected service providers at par with respect to commercial terms and conditions Select one or more potential providers with which to continue negotiations of price, schedule, terms and conditions, as appropriate Ensure that that the comparative data analysis is in accordance with the time lines, keeping in mind the lead time of the requested service.
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At this step, the purchaser has to: Ensure that the potential service provider(s) are those which satisfy the criteria of the buyer and have a clear understanding of: a) The Scope of Services (SOS), b) Terms and Conditions c) And of the final agreement Confirm that the service provider(s)' proposed prices and services have been: a) clearly communicated to the End User b) And are judged through the TBA to be consistent with those desired Initiate the discussions between the two signature parties (The Buyer and the Service Provider) with the relevant members (End User, Purchaser, Approving Body and FICO) to negotiate any unresolved issues related to : a) The Proposed Price b) Schedule of the Service c) Terms and Conditions- (Technical, commercial as well as Financial) Act as a mediator between various parties and ensure that a point of common understanding is reached Perform iterative edits and reviews to the contract to ensure the service providers are in agreement with the final written document.
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Approval is required from the concerned approving body. For this, the purchaser should: Ensure that the negotiation process has been completed. Verify that a comparative analysis of the shortlisted service providers is available for the Approving bodys reference. Verify that a comparative analysis of the shortlisted service providers is available for the Approving bodys reference.
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CONTRACT
The contract document/s shall comprise of an agreement part and detail annexure
Agreement shall contain the information on all the points of agreement between the contracting parties which shall be binding on both the parties. The clauses of the agreement shall include appropriate references to all agreed points detailed in the various annexures. Annexure should contain detailed scope, specification, rates, inclusion and exclusion and specific conditions related to that particular service.
Agreements shall be prepared on a legal stamp paper of Rs. 200/- denomination. The agreements along with its annexure shall be signed by both the contracting parties and two independent witnesses. The contract can be registered if required by paying necessary stamp duty and registration fees.
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MEASUREMENT,
CERTIFICATION
&
All inspections and measurements shall be recorded and validated. User and PMM together can request to incorporate specific changes suitable to the process requirement in their plants. Such request shall be submitted to CPO after validation from functional head/unit head. The verification of the bills shall be made against contract terms and conditions Quantities verification shall be commensurate with weighbridge records for material receipt in SAP. Wherever measurements records are not supported by weighbridge record and maintained manually in a joint MB (material shifting, mixing, feeding etc.), same records shall be consider for quantity verification. A joint record shall be maintained for deviation/subnormal performance with reference to the contracts and applicable deduction shall be made. Verification by an independent third party shall be incorporated in the system particularly where the measurements are done on assessments e.g. volumetric measurement and also where the services are performed outside the plant premises. e.g. Mines, siding, open yards and sources where the payments are released based on the quantity invoiced by the source vendor. Service entry sheet and payment:
Service entry sheet shall be prepared by the receiver of the services/ requisitioner as authorized in the plant and SAP. Services entry sheet release will be at two levels. The release will be by roles other than creator of the SES. [The current practices will continue till the release procedure is created and mapped in ACC]
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SAP PO CLOSURE:
Purchase orders shall be released for a maximum period of one quarter. The purchase order shall be closed for any transactions within 15 days of last billing date of the quarter. Any change in the PO after closure for facilitating any transaction shall be done only under separate written approval of unit head/ director plant. Plant procurement shall monitor such incidences and institute measures to stop these.
DOCUMENTATION:
Maintain individual files of service reports of all equipments. Enter the details of all routine as well as trouble-shooting service calls by the manufacturer's engineer. Maintain a file of all manufacturer's instructions and where required display them close to the equipment. Record the name, address and telephone number of the service engineer to be contacted in case of need
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OBSERVATIONS:
Based on the SOP, the service contracts were analyzed and following observations made:
The Vendor Qualification is limited to the Vendor Appraisal performed by the End User The commercial terms and conditions take a back seat
The fixed SOR is not adaptive to the changes in the labor market scenario To eliminate this problem, the job could be negotiated on LUMP SUM BASIS This eliminates: The dependency of rate contracts on fluctuating labor markets Increase in the scope of a Purchaser while negotiating rate contracts Negotiations performed by qualified personnel If the contract cannot be negotiated on lump sum basis the next best practice is to define the job on MARKET RATE BASIS. This eliminates: The rigid nature of fixed SOR in terms of responsiveness to fluctuating labour market Increases the scope of commercial negotiations
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This does not eliminate: The dependency of rate contracts on the fluctuating labour market SOR could be modified based on the following conditions: Seasonality Issues Location Constraints Current Market Scenario
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This would help in ensuring that vendor selection is line with the company goal of trimming the approved vendor database
The vendor qualification criteria should not be relaxed in case the proposed vendor is an existing vendor in a sister plant Services could be pooled together to achieve cost savings:
This could support negotiations by increase in the volume of work Help reduce the number of contracts and hence the number of vendors for a service More competitive bidding by the service providers This comes with a caveat that it may promote vendor monopoly, to avoid the same there should be an upper limit on number of contracts per vendor.
Service providers could be given incentives to perform in remote locations where it would be difficult to locate/ deploy service providers
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PERFORMANCE EVALUATION:
Cross functional team comprising of user, procurement and finance of the plant shall be responsible for vendor performance. Procurement should obtain the feedback from users, finance and market at regular intervals on the performance of the vendors and shall take appropriate view and provide necessary feedback to vendors to make corrections wherever necessary. Cross functional teams shall carry out the final assessment annually and provide necessary feedback to the vendor and jointly formulate action plan for improvements wherever needed. The assessment of vendor performance shall be carried out on the various attributes.
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SUMMARY:
The cement industry in India has come a long way since 1914, when the first cement plant was commissioned with a production level of 1000 tons/ annum. Today India is the second largest cement producer in the world with a production level of about 99 million tones (about 5% of world production ~ 2000 million tonnes). The installed capacity is about 119 million tonnes and at an expected 10 % growth rate the production is likely to grow to about 158.5 million tones at the end of 2006-2007. However, cement consumption per capita in our country at about 99-kg/ capita is one of the lowest. The world average is about 267 kg/capita. While that of China is 450 kg/capita. Similarly in Japan it is 631 kg/capita while in France it is 447 kg/capita. Over the years, the growth of the industry has been uneven. With traditionally cement deficit regions covering the most of the major growth centers of the country. Cement plants in our country have mostly changed from the wet process to the energy efficient dry process. Out of 157 kilns, 117 are dry process based, 32 are based on wet process and 8 on semi dry. Though the best of our industry matches quite well with world standards in terms of energy (thermal energy Kcal/kg of clinker India 665 against 690 of Japan) and pollution norms (SPM of 40 in India against 20 of Japan) but the average performance of the Indian industry is lagging behind. In the coming years, in order to survive and grow in the globalize market, rapid modernization and adoption of cost effective energy efficient and environment friendly technologies will be the prime mover for the viability of the industry in the global canvas. The industry should increasingly look for other cheaper fuel options like sludge from paper plants, sugar cane trash, bagasse, jute dust, textile dust, biogas refinery waste like pet coke etc. The industry should be known in future as savior of the country for sustainable development by consuming most of the industrial wastes
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CONCLUSION:
Working in ACC gave me a vast learning experience and has helped to enhanced my knowledge. During my training I have learn about Monitoring and Analysing of Vendors Performance and Material Handling which can be a profit centre for a company if it is well managed and organised and Standardization of this practises will plays a vital role for it. SOPs help a business have predictable end results, something that can be repeated again and again. SOPs enables to work SMARTER, not just HARDER.
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BIBLIOGRAPHY:
ACC Standard Operating Procedures and Manuals http://www.acclimited.com
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