Seeking Advice on Improving Purchase Order Terms for Yarn and Fabric Procurement

Dear Seniors,

Currently, our concern is purchase orders for material procurement pertaining to production, such as yarn, fabric (greige and finished), and accessories (sewing and packing). These contain terms and conditions in six bullet points, as follows:

Terms and Conditions

1. Materials will be received only if delivered in good condition.
2. Each delivery should bear the invoice affixed with our gate seal without fail.
3. Send the duplicate purchase order along with your bill.
4. Goods should be delivered on or before the above-mentioned delivery date.
5. Dispatch has to be done on the specified delivery date mentioned in the purchase order and dispatch slip. Failure to do so will result in a penalty based on the purchase order value.
6. Eco-friendly packaging should be used wherever possible.

Kindly advise if we can proceed with this or add some more points.

Hi, referring to point no. 4, what if the goods were not delivered on or before the committed date? Could you provide a more concise explanation?

Delayed Delivery

In case of any delay in the delivery of goods beyond the committed date, the Buyer reserves the right either to accept the delayed delivery at a reduced price, as mutually agreed upon between the Buyer and the Seller, or to partially or fully cancel the order.

Dear Raghu Pathi,

Following are my point-wise comments:

1. Materials will be received only if delivered in good condition

Just writing "good condition" is not sufficient. Please specify the exact quality requirement.

2. Each delivery should bear the invoice affixed with our gate seal without fail

You need to write "the goods should accompany the invoice." This is sufficient. Affixing the seal at the company's entrance gate is the responsibility of your security.

3. Send the duplicate purchase order along with your bill

Why do you need a duplicate copy? If the PO Number against which the invoice is raised is mentioned, then it should be sufficient.

4. Goods should be delivered on or before the above-mentioned delivery date

5. Dispatch has to be done on the specified delivery date mentioned in the purchase order & dispatch slip

Failure to comply will result in a penalty based on the purchase order value. You are putting a strict condition. However, these things are decided while negotiating with the supplier. Secondly, what should be the penalty percentage for how many days of delay needs to be specified.

6. Eco-friendly packing should be made wherever possible

"Eco-friendly packaging" is a vague concept. Specify what material the packaging should be made of.

Additional points that merit inclusion

7. Quantity

What if the material meets the quality requirement but not the quantity? What if there is an unreasonable deficiency?

8. Payment terms

Please write the details of the credit period as negotiated.

9. Conditions if any on rework after the delivery

10. Method of inspection of the material

Write clearly how the quality check of the material will be done, what types of laboratory tests will be conducted, etc. If the buyer and supplier adopt different methods, then it could create problems after the delivery.

11. Insurance and transportation

If it is not mentioned in the INCO Terms, then specify clearly whose responsibility it will be to insure and transport the goods.

Thanks,

Dinesh Divekar