Cash Purchase Scenario in Garment Manufacturing Units: An area to use Blanket Purchase Orders
All those who have worked in or are familiar with the working of Garment manufacturing units, they must be highly conversant with terms like Garment Delivery Date, Fabric Trims, Cash Purchase etc.
In a common scenario whenever some trim fabric or item (such items which are readily available in retail market as well with a slight up charge) like a white sheeting fabric or buttons, hangers, etc. fall short for a consignment nearing a garment delivery date the production people (not the procurement people ) go for a cash purchase from market. By doing this they bypass the standard route of raising Purchase orders and sending them to vendors as it might take some time. There are cases when Garment Delivery in just hours away and immediate cash purchase in retail rates looks easy and the only solution.
Although the above arrangement can also be mapped in SAP but the procurement does not get reported by the Procurement Team and also in case the cash purchased stuff gets rejected then it goes to the same store area where other rejection are kept thus making it difficult in later days to identify the exact rejected stock per department (i.e. procurement, production, cutting etc.)
To tackle this problem what I suggest is to raise a Blanket purchase Order (Doc Type FO, Frame work order) and this can be given to the suppliers (vendors). With this arrangement the last minute exigencies of shortfall, be in terms of fabric or trims can be covered by a proper purchase order scenario and will be in books for the Procurement and the Finance department. Also as it is purchased against a purchase order the store department also can back track the residual at any given time.
Blanket Purchase Orders can either be provided to vendors nearing the shipment date or well in advance keeping in mind the generic pendency behavior purely based upon past experiences. Since this Purchase order comes with a validity period the options of misuse are also negligible.