Example of procedure for control of supply chain management

1.0 PURPOSE

The purpose of this procedure is

• To ensure that the supply chain activities for the product realization are conforming to specified requirements.
• To ensure that the critical products, components or activities identified in product realization are treated accordingly in supply chain activities and are in conformance to product or customer specifications;
• To do initial evaluation and selection of supply chain partners (suppliers, associated sub-suppliers or subcontractors) based on their ability to supply products, components or activities in accordance with XXX‘s requirements.
• To ensure controls are in place for the entire supply chain activities based on the criticality of the product, components or activities.
• To include criteria, scope, frequency, and methods for reassessment of supply chain partners.
• To ensure a listing of approved supply chain partners are in place and maintained in accordance with the scope of their approvals.

2.0 SCOPE

This procedure is applicable to all the following systems and standards

• API Spec Q1, 9th edition/ ISO2 9001: 2022
• API Spec ……
• API Spec ……
• API Spec ……
• API Spec …..
• API Spec …..

3.0 RESPONSIBILITY

• Head of supply chain /Manager
• Management representative/ Lead QA/QC
• All concerned process heads

4.0 INPUTS

• Material Requisition (MR) or Request for Quote (RFQ)
• Inventory Management System (IMS)

5.0 RESOURCES

Competent Personnel, Adequacy of infrastructure, Information Technology as needed, intellectual property or information as needed, Funds.

6.0 DESCRIPTION

Supply chain defines in XXX is the department handling “supplier and associated sub-supplier(s) required for the product realization” including purchase, logistics, materials control and subcontract activities.

All purchased products or activity conforms to the specified requirements.

All supply chain activities will be documented, records and are made available all the time (Material Requisition – MR, Request for Quotation – RFQ, Technical Delivery Conditions – TDC, Comparison Statement – CS, Purchase Order – PO, Subcontract Agreements – SA, Store Receipt Voucher – SRV, Store Issue Voucher – SIV,  and Stock Register/Inventory List (System Generated).

The primary concerns of Purchasing are:

1. To maintain a consistency of quality material which permits efficient and effective operations
2. To get the most competitive rate and thus reduce the production cost to the minimum.
3. To maintain availability of material in time.
4. To develop and maintain good relationships with supply chain partners so that XXX will have a competitive edge with its competitors, satisfying customer and maintain good cash flow.
5. To develop and maintain optimum inventory stock and efficient inventory management system
6. To maintain good records and controls.
7. To provide input to design and development or operations for new development.

7.0 GENERAL PURCHASING PROCESS

• Purchase of any products, components or activities are done in a systematic manner so that they are consistently conforming to the specific requirements of the intended application and customer satisfaction.
• In order to meet the above requirement, the company identifies the product category (critical or no-critical), evaluate and select supply chain partners in accordance with the specific category of purchase, re-evaluate the suppliers based on risk and quality performance of supplier, ensure right sourcing in accordance with this procedure, confirm supply chain communication are documented adequately and described the product or activity to be purchased in line with the conformity to the final product or service requirement.
• Upon receipt the product or activity they are verified for it conformance prior to the acceptance of the product or service.

7.1 PROCEDURE FOR SELECTION OF SUPPLY CHAIN PARTNERS

1. In order to have the consistency in obtaining product or service quality the purchase activity in XXX are categorized mainly in to two ‘Critical and Non-Critical’. Accordingly, an “Approved list of Supply Chain Partner” is also maintained for both Critical or non-critical categories.
2. In order to do this segregation a list of critical goods, service, products will be prepared and maintained
3. The selection of the supply chain partners are based on their ability to supply products, components or activities in accordance to the Quality Management System requirements.
4. The criteria for the selection of the supply chain partners are done based on:
   • Technical listing
   • Achieved Quality status
   • References and Historical Quality Data
   • Initial Supplier Evaluation – Critical & Non-Critical
   • Re-evaluation of supply chain partners

7.1.1 Technical Listing

Technical listing is acquired from the list that provided by the client, owner, legal entities, or other international journals including API Composite Catalogue. 

7.1.2 Achieved Quality status

Achieved Quality status is the supplier/or service provider’s capability and quality of supply is assessed and confirmed by a third party or by the organization (Supplier Audit) through verification of their quality management system or product/service provided by the supplier to a known circle.

7.1.3 Reference and Historical Quality Data

• Selection of supply chain partner based on their past performance in providing such services in the market that is verified and conformed either by the organization or through other reputed organization or references.
• Retaining supply chain partners in the approved list based on their historical data available with the organization and their ability to consistently meet the requirements of XXX product/service quality, acceptance criteria and need of personnel qualifications as applicable.

7.2 INITIAL SUPPLIER EVALUATION

7.2.1 Critical Purchases

1. In order to do the evaluation, selection and re-evaluation of Supply Chain Partner in Critical Purchases XXX identified its critical supply chain activities, product and services as mentioned in the table -1 (See Annexure)
2. Prior to the incorporation of the critical suppliers to the approved list, they are to be evaluated using supplier evaluation form but specific to the product/service considering the following but not be limited to:    
   • Verification that supplier’s quality system requirements needed for the supply or product/service (job specific)
   • Verification of the type and extend of controls applied by the supplier, internally and to their supply chain, in order to meet the organization’s requirements
   • Assessment of the supply chain partner to ensure its capability to meet Organization’s Purchasing requirements by doing one or more of the following:
     • Performing on site evaluation of relevant activities OR
     •  Inspection verification of similar product or service manufactured by the supply chain partner and ensures they are conforming to the stated requirement.
     • When product or service limited by proprietary, legal, and/or contractual arrangements; they are to be verified in accordance with product specific requirement of the final product, requirements specified by the customer or other regulatory body and where applicable the design acceptance criteria of XXX or its customer.

7.2.2 Non Critical purchases

XXX for the purchase of non-critical products, components or activities that impact product realization or the final product, the criteria for the initial evaluation of external provider/suppliers as one or more of the following

1. Verification that the supply chain partner’s Quality Management System conforms to the quality system requirements specified for the supply chain partner by XXX; or
2. Assess supplier by suitable means to ensure that they are capable of meeting the requirements specified or intended by the product realization
3. By doing Assessment of the Product or component upon delivery, or activity upon completion. This may be done by the QA/QC personnel up on receipt of goods at XXX facility.

APPROVED LIST OF SUPPLY CHAIN PARTNERS

1. Upon completion of evaluation, XXX maintains the approved list of supply chain partner they are listed either in Master List of Critical Suppliers or Master List of Non-Critical Supplier as applicable.
2. All active supply chain partners shall be evaluated once in year using Supplier Evaluation Form. If any new supplier to be added shall be done initially by using the supplier inclusion form and shall be monitored for three consecutive supplies prior to the inclusion.
3. Any supplier whose performance found to be poor during evaluation shall be identified by ‘W’ – watch in Master List.
4. Continuous deterioration of quality of supply by any means in three consecutive evaluations shall be marked as ‘Q’ and shall be shifted to the Quarantined list.
5. If any supplier in the “Q” list to be used shall be done under surveillance with close monitoring of every product or service they provide. In such case they are to be marked ‘S’ in the quarantine list. After 5 consecutive successful supplies they may be shifted to the Master List again and then will be treated as a normal approved supplier.
6. Records of the result of all evaluation and any necessary actions arising from the evaluation shall be maintained.

7.4 SUPPLIER PERFORMANCE RATING AND RE-EVALUATION:

1. The performance the supplier/supply chain partner shall be rated for every lot he has supplied on the basis of following criteria

• Quality     – 70 %
• Commercial – 30%

2. Quality of Supplies are further Rated as per following criteria

2.1 Ability to meet the requirement specified  –  5

(Scale: Fully meeting specification – 5 –  Not meeting specification -0)

2.2 Product/Service Quality (Non-conforming product or service if any) – 5

(Scale:  Rejection per lot 100 % Pass – 5, Rejection in whole lot of supply – 0)

2.3 On time delivery – 5

(Scale: On time delivery on all PO – 5, Delay in all deliveries – 0)

2.4 Quality Management System (Assessment based on performance) – 5

(Scale: 100% meeting QMS requirement – 5, Not meeting QMS Requirements -0)

3.5 Quality in communication (response, actions and completion) – 5

(Scale: Excellent co-ordination – 5, Very Good – 4 marks, Good – 3 Marks, Average -2 marks, poor -1 marks, No –Coordination – Zero)

3. Commercial Rating is further divided into

3.1 Response to enquiry in time – 5

(Scale: Same day – 5, within two days – 4, between 2-4 days – 3, between 4-7 days – 2, between 7-10 days – 1, more than 10 days – 0)

3.2 Cost competitiveness – 5

(Scale: Average all competent – 5, Average all Expensive -0)

3.3 Payment terms/Credit – 5

(Scale: >90 days  – 5, Between 60 -90 – 4, between 45-60 –3, between 30 & 45 – 2, up to 30 days -1, no credit – 0)

3.4 Flexibility in payments – 5

(Scale: > 45 days  – 5, Between 30 -45 days – 4, between 15-30 days –3, between  07 to 15 days – 2, up to 7 days -1, no credit – 0)

3.5 Post Delivery activities -5

(Scale: Excellent Support – 5, Very Good – 4 , Good – 3 , Average –2 , Poor – 1 , No Support -0)

4. Supplier rating will be done by the team lead by head of supply chain and the team comprises of (Head of Supply Chain, Lead QA/QC or his designee, Chief Accountant or his/her designee, store, and production head or his designee)

5. The performance rating of suppliers will be recorded on a quarterly basis and at the end of the year will be analyzed and external provider/supplier will be rated as follows :

Sl NO	SCORE	GRADE	STATUS	REMARKS
	> 90%	A	Best	Priority supplier – Appreciation
	71% – 90%	B	Good	Monitor frequently the weak areas – Communicate to improve
	61% – 70%	C	Vulnerable	Communicate & Re-evaluate before placing order  and check result
	50% – 60%	D	Weak	Quarantine (only if no other option – use with high alert) & Communicate
	<50%	E	Poor	Remove from the list permanently

6. When supplier rating is falling shall be treated in accordance with 5.3 of this procedure and may be intimated to the supplier for their necessary corrective action.

7. Based on the risk analysis for every supplier on the product realization and impact on the products,  the overall risk and impact of the risk will be determined by averaging the percentage and categorized as High (>50%), Medium (15%-50%) and Low (<15%). According to the result of the risk analysis, frequency of the re-evaluation will be defined as  follows :

• after every serious failures
• If no failures :
  • High – 9 months or ordering whichever is longer (this may be increased based on good historical records);
  • Medium – Within 18 months;
  • Low – No re-evaluation

7.5 PROCEDURE FOR PURCHASE

1. Need for any material, item or service by any department furnish a Material Requisition Form (MR).  In case the procurement is from a single source or the quotes are obtained in case of technical procurement – the originator shall attach the copy of the details along with the MR for preparing the PR.
2. The MR prepared by the user/store, reviewed by the concern Engineer/in-charge and approved by the Head of the department.
3. Incomplete or inaccurate requisitions may be returned or notified to the originator for completion or correction.
4. Before floating enquiry by Supply Chain, he/she shall ensure with Stores for in-house availability of the product.
5. After receipt of completed requisition and confirmation from the stores, enquiry is floated to the potential external provider/supplier’s for bidding and the external provider/supplier making the “best offer” is selected.
6. Although the “best offer” concept is generally associated with lowest price, this is not always the case. In addition to price, consideration is given to availability, quantity, quality and service.
7. A comparative statement shall be made considering all the facts and before placing the order the same is been approved by General Manager. Alternatively a PO may also be made for the most competitive offer and submitted to the GM for his approval along with the comparison.
8. Purchase Orders shall be clearly described with the purchasing information as needed or applicable. Where it is found to be necessary a Technical Delivery Conditions (TDC) prepared and issued by the design or quality may be attached with the PO with a clear reference in the PO.
9. Information in the purchase document shall include as applicable:
   • Proper specification, including name, part number, type, class, grade, size, etc.
   • Technical details like relevant standards, specifications, drawings, process requirements, Traceability & other Technical data as required.
   • Other details like delivery place, delivery schedule, inspection requirements, packing requirements, etc.

7.6 PURCHASING INFORMATION

1. XXX ensures the adequacy of specified purchasing information prior to their communication to the supply chain partners.
2. Purchasing information provided to the supply chain partner is documented and adequately describe the product or activity to be purchased, including acceptance criteria, and where appropriate:
   • Requirements for approval of supplier’s procedures, process, and equipment;
   • Applicable version of specifications may include or be derived from the customer, API product specifications, design output and/or industry standards, process requirements, inspection instructions, traceability, and other relevant technical data;
   • Requirements for qualification of supplier’s personnel; and
   • Inspection and test requirement including XXX or it’s customer verification at supplier’s location including Hold or Witness points if any. 
   • Verification or validation activities that the organization, or its consumer, intends to perform at the supplier’s premises.
   • Quality management system requirements.

7.7 VERIFICATION OF PURCHASED PRODUCT AT SUPPLIER PREMISES

• Where there is a need of verification of purchased product at the supplier premises by the company or it’s client prior to the release of good from supplier premises, shall be stated clearly in the purchase document in detail such as verification arrangements, method of product release, arrangements needed for verification activity that has to be provided by the supplier.
• Although the product verified by the company or it’s customer at supplier premises, the product is subject to incoming inspection upon arrival prior to the release of item(s) to it’s next activity.

7.8 EMERGENCY PURCHASE

• Emergency purchase is applicable for emergency situation such machine breakdown, emergency requirement by the client that needs to be handled by XXX, or other emergency situation which are not created deliberately or a result of poor planning.
• All emergency purchase shall be approved by the General Manager/Chairman.
• Product or service purchased on an emergency shall also be subjected to the same verification process as needed by the regular purchase process

7.9 CONTROL OF OUTSOURCED PROCESS

1. Based on the criticality of product, where documented procedures, qualification of personnel or equipment, calibration records, validation of process(es) or quality management system requirement is in need shall be stipulated in the purchase document and shall be verified and confirmed by XXX’s QA/QC.
2. XXX ensures that all the outsourced processes which are required validation, shall be done in accordance with the procedure L2 – 13, Validation of processes for Production and Servicing.

7.9.1 CALIBRATION

When calibration process is outsourced, prior to the confirmation of order to the supplier shall ensure:

1. The adequacy of facility for the calibration of equipment to the required standard and its traceability to the international measurement standards as applicable.
2. Quality Management System of the calibration laboratory and it’s confirmation of it’s accreditation or certification such as ISO 17025.
3. Technical expertise of the personnel working in calibration laboratory as well as the calibration validity and traceability of their master equipment.
4. Calibration documentation with it’s measurement uncertainty for the master equipment
5. Assurance to quality and reliability.

7.9.2 LABORATORY ANALYSIS – CHEMICAL, MECHANICAL, ELECTRICAL, OR INSTRUMENTATION

When laboratory analysis is outsourced, prior to the confirmation of order to the supplier shall ensure:

1. The adequacy of facility for the analysis to be performed including equipment, environment,  and other as needed for the required service.
2. Quality Management System of the calibration laboratory and it’s confirmation of it’s accreditation or certification such as ISO 17025.
3. Technical expertise of the personnel working in calibration laboratory as well as the calibration validity and traceability of their master equipment.
4. Assurance to quality and reliability.

7.9.3 NON-DESTRUCTIVE TESTING – RADIOGRAPHY / ULTRASONIC INSPECTION

When NDE process is outsourced, prior to the confirmation of order to the supplier shall ensure:

1. An approved procedure verified by the NDE Level III is available.
2. Equipment for NDE is appropriate to the application and where applicable are calibrated.
3. NDE personnel are qualified and certified NDE Level II in accordance with SNT-TC-1A, where found necessary the qualification of NDE personnel shall be reviewed by company appointed Level III.
4. Ensure reporting is done in accordance with the relevant standard requirement.
5. Acceptance criteria of NDE shall be communicated to the NDE contractor.

7.9.4 PWHT

When PWHT process is outsourced, prior to the confirmation of order to the supplier shall ensure:

1. The equipment is adequate and calibrated to perform PWHT
2. Qualified personnel are performing the PWHT activities
3. PWHT procedure approved by XXX is available for doing PWHT
4. Attachment of thermocouples to the job and its placement are communicated for every job and ensures it is done accordingly.
5. Acceptance criteria for calibration, placing of thermocouple, rate of heating, rate of cooling, soaking time and other critical information are in place and available for the operator/supplier

7.9.5 PROTECTIVE COATING

When and protective coating process is outsourced, prior to the confirmation of order to the supplier shall ensure:

1. The process is validated and parameters to be followed are developed and documented in the form of procedure and available for the supply chain partner.
2. Environment suitable for the application shall be defined and are communicated either by approving the supply chain partner’s procedure or a procedure to be issued by XXX to the supply chain partner. 
3. If validation of the process to be done by the supply chain partner for any reason shall be communicated and necessary action shall be taken accordingly.
4. Trained and experienced personnel shall be performing the protective coating.
5. When procedure from the supply chain partner is used, shall be reviewed and approved by XXX QA/QC prior to the use.
6. When hold or witness point is not there by XXX during the blasting or coating application, proper control measures from the supply chain partner assuring they adhere to the suitable environment condition.   
7. Supply chain partner shall have suitable inspection and test equipment for the verification as needed and it shall be verified and confirmed by the XXX QA/QC.

8.0 OUTPUT

• Purchase orders to external providers
• Products & services procured
• Supplier evaluation/rating

9.1 KEY PERFORMANCE INDICATOR

9.1 As per the Annual Objectives

10.0 ASSOCIATED DOCUMENTS & RECORDS

DESCRIPTION OF THE RECORD	FORMAT NUMBER	RESPONSIBLE
Master List of Critical External provider/suppliers	XXX / PRO / D01	Procurement Engineer
Master List of Non-Critical External provider/suppliers	XXX / PRO / D02	Procurement Engineer
Master list of outsourced services	XXX / PRO / D03	Procurement Engineer
Master List of Critical goods/products/services	XXX / PRO / D04	Procurement Engineer
Purchase Order	XXX / PRO / 01	Procurement Engineer
Comparison	XXX / PRO / 02	Procurement Engineer
Request for Quotation	XXX / PRO / 03	Procurement Engineer
Supplier Evaluation Form	XXX / PRO / 04	Procurement Engineer
Clearance Form	XXX / PRO / 05	Procurement Engineer
Vendor Rating	XXX / PRO / 06	Procurement Engineer
Supplier Registration	XXX / PRO / 07	Procurement Engineer
Vendor Appraisal Critical Suppliers	XXX / PRO / 08	Procurement Engineer
Supplier Audit Checklist	XXX / PRO / 10	Procurement Engineer

TABLE 1  – ANNEXURE

Product/Services	Criticality	Impact	Extent of Verification	Controls
				Internal	External
Welding	High	Product Quality	100%	Qualified Procedure	Qualified Personnel
Welding Consumables	High	Product Quality	100%	Receipt Inspection	Certificate of Conformity
NDE Personnel	High	Product Quality	100%	NDE Procedure	Personnel Qualification
NDE Consumables	High	Product Quality	100%	Receipt Inspection	Certificate of Conformity
Inspection Equipment/ Measuring Instruments	High	Product Quality	100%	Ordering information and Receipt Inspection	COC and Calibration Certificate
Inspection Personnel – TPI	High	Product Quality	100%	Selection	Qualification / Certification
Laboratory Analysis	High	Product Quality	100%	Selection	Qualification / Certification & Accreditation
Calibration	High	Product Quality	100%	Selection	Qualification / Certification & Accreditation
PWHT	High	Product Quality	100%	Procedure	Equipment and Operator Qualification
Protective Coating Material	High	Product Quality	100%	Receipt Inspection	Batch Certificate
Tools and Inserts	High	Product Quality	100%	Receipt Inspection	Reputation
Components or parts	High	Product Quality	100%	Receipt Inspection	Certificates
Raw material	High	Product Quality	100%	Receipt Inspection	Mill Certificate
Repair or maintenance	High	Equipment Performance	100%	Right Sourcing	Reputation/Qualification