Study of Procurement process at Reliance

Communication Ltd.

Submitted in partial fulfillment of the requirements

For the award of the degree of

Master of Business Administration

In
Software Enterprise Management

Under the guidance of

Mr. Mohit Bhatnagar

(Circle Co-ordinator)

&

Mrs. Shikha Priya

(ERP Consultant - MM)

Submitted by
Deepti Singh

Centre for Development of Advanced Computing, Noida

Affiliated to
Guru Gobind Singh Indraprastha University
Kashmere Gate, Delhi - 110006
 DECLARATION

I hereby declare that this Project Report entitled “Study of Procurement process at Reliance

Communication Ltd.” submitted by me to the GGSIPU Delhi, 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 or published any time before.

Name: _____________________
Signature of the Supervisor

Enrolment No. :

Semester :

Date :

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 CERTIFICATE

This is to certify that the project report (SE 253) entitled “Study of Procurement process at

Reliance Communication Ltd.” done by Ms. Deepti Singh enrolment No. 0221189908 is an

authentic work carried out by her at Reliance communication, Lucknow under my guidance.

The matter embodied in this project work has not been submitted earlier for the award of any

degree or diploma to the best of my knowledge and belief.

Date : (Signature of the Supervisor)

Mohit Bhatnagar

Circle Co-ordinator (UP East),

Reliance communication

Lucknow.

(Signature of the Internal Guide)

Mrs. Shikha Priya

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 ABSTRACT

Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group

(ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock

Exchange, it is India’s leading integrated telecommunication company with over 77 million

customers. The business encompasses a complete range of telecom services covering mobile

and fixed line telephony. It includes broadband, national and international long distance

services and data services along with an exhaustive range of value-added services and

applications.

This project aims to study the Procurement process of the Reliance Communication. The

project details out every step of purchase and payment process in the form of a flow diagram.

The project also gives a brief outlook of how information technology is incorporated in the

functioning of the Reliance Communication. Reliance Communication has implemented SAP

through which it keeps the transparency in the system. SAP (SAP ERP) stands for Systems

Applications and Products in Data Processing. With the help of the IT tool like SAP, the

managers are able to take fast and better decisions. And because of these tools the system has

also been made more transparent and efficient.

Procurement department is responsible for the acquisitions on the behalf of the company.

These acquisitions include goods, services, vendor payments as well as reimbursements and

developing the contacts of these vendors. Thus it plays a vital role in performing day-to-day

operations of the business. The study will focus on the purchase process starting fro

identification of need till the payment of the Vendors.

The methods of data collection will be through training from external guide, study materials

provided by the company, working as a member with the external guide and through internet.

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 ACKNOWLEDGEMENT

I would like to express my sincere gratitude towards CDAC, and Reliance Communication
Ltd., for having provided me this great opportunity to work and learn through the Summer
Internship Program.

I would like to acknowledge the guidance I received from my Industry Guide Mr. Mohit
Bhatnagar, Mr. Anurag Dwivedi, Commercial Department and Mr. Dheerendra Verma,
Procurement Head. This project would not have materialized without their support

I am grateful to my Internal Guide Mrs. Shikha Priya for imparting constant attention, useful
suggestions, expert guidance and valuable suggestions during the course of this project. I
would also like to thank all the faculty members of MBA department of CDAC for their
support and encouragement.

I also express my sincere indebtness and gratitude to my parents, brother and all my friends
who have encouraged and inspired me constantly to complete this project work.

Deepti Singh

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 Table of Contents
DECLARATION...................................................................................................................................II
CERTIFICATE....................................................................................................................................III
ABSTRACT.........................................................................................................................................IV
ACKNOWLEDGEMENT.....................................................................................................................V
1 INTRODUCTION..............................................................................................................................3
1.1 BACKGROUND.......................................................................................................................4
1.2 COMPANY’S PROFILE.............................................................................................................5
1.3 ORGANIZATION STRUCTURE...............................................................................................8
1.4 OBJECTIVE OF THE PROJECT..............................................................................................10
1.5 SCOPE OF THE PROJECT......................................................................................................11
2 LITERATURE REVIEW.........................................................................................................................12
2.1 DEFINITION............................................................................................................................13
2.2 FUNCTIONS OF PROCUREMENT DEPARTMENT.............................................................14
2.3 MATERIAL DESCRIPTION....................................................................................................15
3 BUSINESS PROCESS...........................................................................................................................17
3.1 PROCUREMENT CYCLE............................................................................................................18
3.1 PURCHASE PROCESS............................................................................................................18
3.1.1 Raising a Purchase requisition note....................................................................................19
3.1.2 Solicitation..........................................................................................................................20
3.1.4 Raising a Note for Approval (NFA)....................................................................................22
3.1.5 Raising a Purchase Order / Work Order..............................................................................23
3.1.6 Raising a Goods / Service Receipt Note.............................................................................23
3.2 PAYMENT PROCESS..............................................................................................................24
3.2.1 Invoice Verification............................................................................................................24
3.2.2 Tax Deduction at Source Run.............................................................................................26
3.2.3 Payment..............................................................................................................................27
4 SAP AS A TOOL..................................................................................................................................28
4.1 SAP – An Introduction..............................................................................................................29
5 DATA COLLECTION METHODOLOGY.................................................................................................31
5.1 PRIMARY SOURCES..............................................................................................................32
5.2 SECONDARY SOURCES........................................................................................................32
 5.3 RESEARCH INSTRUMENTS OR TOOL USED.....................................................................32
6 FINDINGS..........................................................................................................................................33
6.1 BENEFITS OF ERP IN BUSINESS..........................................................................................34
6.2 LOOP HOLES IN PROCUREMENT PROCESS.....................................................................35
7 CONCLUSION & RECOMMENDATION...............................................................................................36
7.1 CONCLUSION.........................................................................................................................37
7.2 RECOMMENDATION.............................................................................................................37

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1 INTRODUCTION
Chapter 1 Introduction

1.1 BACKGROUND

Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group

(ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock

Exchange, it is India’s leading integrated telecommunication company with over 80 million

customers. Therefore, it has to fulfill the requirement for accomplishment of day to day

operation in organization and to improve the efficiency of their internal processes. For smooth

running of organizations functions some commercial requirements are raised which have to be

fulfilled. These requirements can be in form of services or materials. Procurement of right

service or material at right time, from right supplier, in right quantity and at the lowest

possible price is a daunting task. One of the biggest procurement issues include hamper in

supply of the inputs from the supplier. If supplier refuses to provide resources or inputs at the

specified time, it can result in serious consequences such as delay in the manufacturing of the

product, spoiling the image of the company, decrease in cash flows and customer

dissatisfaction. An organization can incur great cost savings if it chooses the right supplier

which is cost effective as well as quality focused. This calls for a Commercial Department

which procures services and materials for daily operations and makes payments to the

respective vendors.

Procurement is related with attaining goods and services that are necessary for the working of

a business or an enterprise. Procurement department is a department which is responsible for

the acquisition of goods and services as well as other things such as the vendor payments,

their reimbursements and developing the contacts of these vendors. The commercial items are

those items which are used itself by the organization like stationary item, publicity items etc.

As procurement of commercial items is an important task for an organization so I pursued

training in similar field.

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Chapter 1 Introduction

1.2 COMPANY’S PROFILE

Reliance Communication Ltd. (formerly Reliance Infocomm) is the outcome of the late

visionary Dhirubhai Ambani's (1932-2002) dream to herald a digital revolution in India by

bringing affordable means of information and communication to the doorsteps of India's vast

population. Today, Reliance Communications is revolutionizing the way India communicates

and networks, truly bringing about a new way of life.

Reliance Communication offers complete range of mobile and fixed line telephony including

broadband, distance services, data services and a wide range applications that enhances

productivity of enterprises of telecom services, covering national and international long of

value added services and individuals.

Founder – Sh. Dhirubhai Ambani, who single-handedly built

India’s largest private sector company virtually from scratch, had

stated as early as 1999: “Make the tools of information and

communication available to people at an affordable cost. They will

overcome the handicaps of illiteracy and lack of mobility.”

Chairman – Sh. Anil Dhirubhai Ambani is the chairman of all

listed companies of the Reliance ADA Group, namely, Reliance

Communications, Reliance Capital, Reliance Energy and Reliance

Natural Resources limited. He is also Chairman of the Board of

Governors of Dhirubhai Ambani Institute of Information and

Communication Technology, Gandhi Nagar, Gujarat.

5|Page
Chapter 1 Introduction

Vision - “We will leverage our strengths to execute complex global-scale projects to

facilitate leading-edge information and communication services affordable to all individual

consumers and businesses in India.”

“We will offer unparalleled value to create customer delight and enhance business

productivity.”

“We will also generate value for our capabilities beyond Indian borders and enable millions of

India's knowledge workers to deliver their services globally.”

Company Type Public (BSE: RCOM)

Founded In 1999 by Sh. Dhirubhai Ambani
Headquarters Navi Mumbai, Maharashtra India

1.
Anil Ambani, Chairman and Managing Director
Key people 2.
Satish Seth, Vice-Chairman Reliance-ADA Group
3.
S. P. Shukla, CEO - Personal Business & Director -
Reliance Telecom
1. Shri Anil D. Ambani - Chairman
Board of Directors 2. Prof. J Ramachandran
3. Shri S.P. Talwar
4. Shri Deepak Shourie
Industry Telecommunications

Products CDMA service, GSM service, Broadband Internet Service

Revenue US$ 4772.7 Million

Total Net Income US$ 1341.9 Million
Employees 36,650
Website www.reliancecommunication.com

Reliance APEX, Company’s Identity / Symbol

6|Page
Chapter 1 Introduction

The new identity reflects commitment and passion to shape a better future, create a better

quality of life and give wing to million dreams and inspirations.

The symbol ‘Reliance APEX’ conveys the spirit of

excellence, the human urge for progress, the desire to reach

higher, the resolve to ‘shape a better future’.

 The ‘APEX’ is highest point – the pinnacle – an abiding symbol of hope and

optimism, achievement and success.

 The blue in Reliance APEX represents the inner strength, the self belief, the quite

confidence, the sense of purpose that go into the making of an epic journey.

 The red in the Reliance APEX represents the energy and dynamism that propels one to

the pinnacle of one’s ambition.

The Multidimensional look conveys deepest appreciation for the rich diversity of human life

and human desire - unifying basis of varied business interest.

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Chapter 1 Introduction

1.3 ORGANIZATION STRUCTURE

The Structure of organization gives an overview of hierarchy of organization, graphically

depicting the departmental level in an organization. The figure below gives the departmental

structure of Reliance Communication Ltd.

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The Head Office is located in Mumbai where all the major decisions are taken. It is

responsible for successful management of Reliance Communication’s operations. The budget

for every year is sanctioned from the Head Office. Also if procurement is to be made more

than Rs 100000 then approval from head office is given. The board of Directors of Reliance

communication are Shri Anil D. Ambani – Chairman, Prof. J Ramachandran, Shri S.P.

Talwar, Shri Deepak Shourie.

There are about 23 circles in Reliance communication located at Andhra Pradesh, Chennai,

Delhi, Gujarat, Haryana, Jammu & Kashmir, Karnataka, Kerala, Maharashtra, Punjab,

Rajasthan, Tamil Nadu, Uttar Pradesh (East & West), Assam, Bihar, Himachal Pradesh,

8|Page
Chapter 1 Introduction
Madhya Pradesh, North Eastern States, West Bengal. These are responsible for managing all

the activities like procurement, Annual Budget preparation, distribution of material among the

clusters etc. The Circle head office for UP(East) is located in Lucknow.

Every circle have several clusters which are controlled by respective circle heads. The

requirements of the cluster is forwarded to the circle office by the cluster head. After approval

the material or service as required is provided to the cluster through circle office.

Verticals are present in circles as well as cluster which monitors there respective operations.

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Chapter 1 Introduction

1.4 OBJECTIVE OF THE PROJECT

The objective of my project is

 To understand the procurement process for commercial items.

 To study the documentation work involved in procurement process.

 To study the usage and benefits in incorporating IT tool – SAP in procurement process.

Significance of Project:

 Commercial Department plays a vital role in the operation of a company. The most

important purpose served by the commercial department is to provide uninterrupted service to

all the departments of organization.

 The need of study of user department is to know how to ensure purchase of the right

material or service in the right quantity, of the right quality, from the right suppliers, at the

right time, at the lowest price. 

 The need of study of payment department is to understand and learn the payment

procedure followed in the Reliance Communication. To know how to process the bills,

make the payments on time to prevent blockage of payments and allocation of funds.

 The need to study documentation work performed by the employees for proper

functioning of the system.

 The study of the usage and advantages of IT tool i.e ERP SAP implemented at

reliance Communication Ltd. which makes the system transparent and effective.

Hence because of the above described reasons the need to study the purchase and payment

process has its own significance.

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Chapter 1 Introduction

1.5 SCOPE OF THE PROJECT

The span of my work includes the study of procurement process, payment process and

organization structure in Reliance Communication Ltd. The scope of the project is defined as

follows

 Analyzing the purchase process

 Analyzing the payment process.

 Study the Documents involved.

 Analyzing the benefits of ERP-SAP

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2 LITERATURE REVIEW
Chapter 2 Literature Review

2.1 DEFINITION
Materials Management - Materials Management is a process of management which

coordinates, supervises and executes the tasks associated with the flow of materials to

through and out of an organization.

Procurement - The term Procurement used to describe the purchase of things that a

company or organization uses itself in its daily operations such as paper, printer ink or toner,

staples, stationery, etc. for an office.

Inventory - Any available resource having economic value but kept idle is called

inventory.

Services - A service is an intangible, non-storable good, e.g. contractors working for

Reliance are performing a service. As materials, service details are kept in service master

records.

Taxation - The act of imposing taxes, as on the subjects of a state, by government, or on

the members of a corporation or company, by the proper authority for the raising of revenue.

Delivery Terms - Delivery terms define the obligations and the responsibilities of the

buyer and seller during the delivery of goods.

Payment Terms - Conditions under which a seller will make a sale. Typically, these terms

specify the period allowed to a buyer to pay off the amount due, and may demand cash in

advance, cash on delivery, deferred payment period of 30 days or more, etc.

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Chapter 2 Literature Review

2.2 FUNCTIONS OF PROCUREMENT DEPARTMENT

The main functions of the procurement department are :-

 Receiving Purchase requisitions

 Selection of source of supply

 Placing the order

 Delivery at right time

 Inspection and passing of bills to payment department

 Preservation of purchase records

 Good relations

 Moral and ethical standards

 Coordination

 Purchase budget

 Payment against bills to vendor

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Chapter 2 Literature Review

2.3 MATERIAL DESCRIPTION

Following are main user department for the procurement departments

1. Marketing Department

2. IT Department

3. HRC Department

Procurement materials under Marketing

Events Sales promotion Items Outdoors Activities Collaterals

Van Show T-Shirts Sun Boards Brochures

Celebrity Night Canopy (shade) Inkjet printing Bunting

Sponsored Events Gift items for retailers Signage Foam Banners

Boucher stand Rentals of hoardings Posters

Flanges Solvent Printing Cloth Banners

Umbrella Digital Printing

Procurement under IT Department

 Desk top/Laptop

 UPS

 Cartage

 Printer

 Scanner

 LAN

 Server

 Rental Equipments

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Chapter 2 Literature Review
 Other material like Pen drive etc

Procurement materials under HRC

1 Opex 2 Capex

A Services A New Office Set up

a House Keeping a BOQ and Specification

b Courier and Cargo Services b Contract approval

c AMC for AC/DG B Office Equipments

d Vehicle Hire Charges Train Tickets a Scanner

e Train Tickets b Calculator

f Catering Related Services c Sport Equipments

g Guest House maintainance d Furniture items

h Office manpower e AC

i Computer hire f Water Cooler

j Function/Events C Guest House material

B Material

a Stationery and Printing

b Computer paper and Printing

c Gift

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3 BUSINESS PROCESS
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Chapter 3

3.1 PURCHASE PROCESS

Business Process

3.1 PROCUREMENT CYCLE

Purchasing refers to a business or organization attempting to acquire goods or services to

accomplish the goals of the enterprise. Purchase activities can be organized by using two

basic approaches: centralization and decentralization. Reliance Communication uses a blend

of these two approaches to organize their purchase activities. Few items can only be

purchased by circle office while few items can be purchased by clusters. The procurement

process includes following steps:

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Chapter 3 Business Process

3.1.1 Raising a Purchase requisition note

A purchase requisition is an authorization for a purchasing department to procure goods or

services. It is originated and approved by the department requiring the goods or services.

Typically, it contains a description and quantity of the goods or services to be purchased, a

required delivery date, account number and the amount of money that the purchasing

department is authorized to spend for the goods or services. Often, the names of suggested

supply sources are also included. A purchase requisition is owned by the originating

department and should not be changed by the purchasing department without obtaining

approval from the originating department.

As part of an organization's internal financial controls, the commercial department institutes a

purchase requisition process to help manage requests for purchases. Requests for the creation

of purchase of goods and services are documented and routed for approval within the

organization.

Process of purchase requisition note:

1. Creation of Purchase Requisition Note.

2. Release of Purchase Requisition Note.

Purchase Requisition Note is prepared through SAP. It is an online process and is released at

different levels of management i.e. A1, A2, A3, A4, A5 according to the amount required for

procurement. Upto Rs. 1 Lakh release from A1, A2, A3 levels is required while for amount

exceeding Rs. 1 Lakh release from level A1 to A5 is required. The different levels of

management are as defined below:

A1 - Requisitioner / Creator of Purchase Requisition note

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Chapter 3 Business Process
A3 – Commercial Head

A5 – NHQ

After release of Purchase Requisition Note the purchase order are raised. Only specifically

authorized Reliance personnel’s are able to create requisitions. Once a requisition has been

entered into SAP it must be converted into a Purchase Order.

3.1.2 Solicitation

Solicitation means obtaining quotations, bids, offers or proposal from potential sources as

appropriate. It is required to obtain quotation for price comparison and to study terms &

conditions of work. Request for quotation (RFQ) are send to selected potential vendors via

 Telephone (verbally)
 E mail (Written)

The documents include Request for proposal (RFP), Request for quotation (RFQ), Invitation

to bidding, invitation for negotiation, contractor initial response. Others: project SOW,

description of the desired format of the response, required contractual provisions, evaluation

criteria to rate or score proposals (objective or subjective), overall or life-cycle cost, technical

capabilities, management approach, financial capacity.

Solicitation involves obtaining information in the form of bids and proposals from

prospective sellers. The seller trying to win business bears most of the effort of gathering the

information.

Organizations can advertise to procure goods and services in several ways

– approaching the preferred vendor

– approaching several potential vendors
– advertising to anyone interested

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 Chapter 3 Business Process

A bidders’ conference can help clarify the buyer’s expectations

3.1.3 Vendor Selection

Once the activity / procurement material or service has been identified, approved for execution and

budget being available, then following activities are performed by Shared Services Team:

a) Identifying the Vendor

Shared Service – Procurement Team identifies minimum of 3 Vendors who could

undertake the execution of proposed activity. While identifying the Vendor-following

things are taken into consideration:

 Past experience of the Vendor-in execution of the proposed activity

 II Past experience with the Vendor-in previous deals with “Reliance”

 III Capability of the Vendor-in execution of the proposed activity within the given

time frame.

b) Obtaining quotations

All the identified Vendors are asked to submit a quotation through RFQ (Request for

quotation) for the proposed activity within the specified timeframe. The Quotations

submitted contains:

I. Rates: With bifurcation into different elements of cost of Material/Labour and

any other charges like installation/Municipal Taxes etc.

II. Profit Margin

III. Taxes Claimed/Chargeable-Service Tax / Sales Tax etc.

IV. Freight, if any.

V. Terms of Execution / Performance

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 Chapter 3 Business Process
VI. Terms of Payment

VII. Any other details that may be specifically asked from the Vendor.

c) Negotiations & Vendor Selection

Once all the quotations have been received, the same are analyzed with the help of

analysis sheet w.r.t. Rates, Terms of Execution / Performance, Terms of Payment, Past

Performance, Market standing (Execution purpose) and any other factor that may be

important for the purpose of taking decision in selection of the Vendor. The

negotiations with the Vendor is performed by a team consisting of Circle Shared

Services Head, and User Department.

3.1.4 Raising a Note for Approval (NFA)

Note for approval is a documentary i.e. paper work done for record keeping through which

approval for procurement of any material or service is taken. It is performed after vendor

selection by the user department. The note for approval is verified and validated by creator,

circle user department head and then approved by circle head. At the time of taking approval

availability of budget for respective GL Account and Cost Center is checked by the finance

department. The following steps are performed while preparing a Note for Approval:

Budget Availability :- The different activities / procurement can be initiated only budget for

the same is available. The activities required in this matter are:-

a. Against Local Budget

b. Against allocation from NHQ
c. Budget Tracking.

The user department keeps track of the budget and the expense incurred in each month and it

is certified by the shared services department.

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Chapter 3 Business Process
After Vendor Selection and Negotiations have been done, NFA is prepared for approval before work

is actually allotted to the short listed Vendor, and signed by the following persons:

a. User Department

b. Head of User Department

c. Procurement Lead

d. Circle Shared Service Head.

This NFA acts as back up for generation of Work / Purchase Order and bill passing. Once NFA is

signed by all the members as mentioned above, User Department shall raise the Purchase order or

work order.

3.1.5 Raising a Purchase Order / Work Order

A purchase order (PO) / Work Order (WO) is a commercial document issued by a buyer to

a seller, indicating types, quantities, and agreed prices for products or services the seller will provide

to the buyer. Sending a PO / WO to a supplier constitutes a legal offer to buy products or services.

Acceptance of a PO by a seller usually forms a one-off contract between the buyer and seller, so no

contract exists until the PO is accepted.

A Purchase Order is a document representing a formal request to a vendor to supply goods in

accordance with stipulated terms and conditions. Purchase Orders are created in case of material

purchases only. Work orders are same as purchase orders, but are created for services. Work order

is stand for issuing some task to the vendor. These are the basis for processing goods / service

receipts and invoice verification. It can also be described as a legal commitment between Reliance

and a vendor for the supply of goods or services. After creation of NFA for services to be

availed ,work orders are created , which are send to the vendors so that they can start their activities

as required by the buyer.

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Chapter 3 Business Process
3.1.6 Raising a Goods / Service Receipt Note

Service Requisition Note is the recording of work performed by a vendor/subcontractor on site.

Service entry can be created by the plant/department user on the basis of the completion of the

job/event in partlfull as per the terms and conditions of the purchase order or release order. The

estimation of the job done can be attached to the service entry for the verification. The purchase

order history in SAP will be automatically updated when acceptance of service entry is performed.

Where the actual work done exceeds the ordered amount and it’s tolerance limit, the user will have

to amend the purchase or release order. When all the details of planned/unplanned services have

been entered in the service entry sheet, the entry sheet will then need to be approved.

Service acceptance is the approval of both planned and unplanned services that have been

recorded against a purchase or release order on a service entry sheet. Changes can be made to

entries in the entry sheet by the authorizer and any changes will be communicated to the user by a

work flow message in the system. After final acceptance, SAP will not allow any change to the

service entry details and these deatails will then be posted as a goods receipt.

Goods receipt note is a document used to record the inward entry of the any goods received at the

premises of the organization. The document normally consists of the details of Quantity Received,

Quantity Rejected and Quantity Accepted, Supplier Name & P.O.No. It is generated to ensure the

receipt of goods at the warehouse and to complete the invoice cycle. The report is generated for the

materials, which are received in response to the purchase orders, send to the vendors. Once a

Purchase Order has been completed the information sits in the system until the goods is received.

Once this has happened and you have an invoice it is time to complete a GRN. The GRN has

information relating to what has been received, how much and when. On completion of the GRN a

copy is sent to payments, with the invoice, for payment.

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Chapter 3 Business Process
3.2 PAYMENT PROCESS

3.2.1 Invoice Verification

Invoice verification provides the link between the purchasing and accounts payment

processes. Invoice verification tasks includes:

 Entering invoices and credit memos received from vendors.

 Checking the accuracy of invoices with respect to the contents, prices and arithmetic.

 Executing the account postings resulting from an invoice.

 Updating certain data in the SAP system, for example open items and material prices.

 Checking invoices that were blocked because they varied too greatly from the purchase

order.

 Hacking the quantity of goods received on the excise invoice against the quantity of goods

on the material document, and posting the excise invoice in SAP

Invoice verification does not include the payment or analysis of invoices. However, the information

required for these processes is passed on to the other departments. Invoices are received from the

Scrolling Department for verification and processing. If any clarification or purchase order

amendment is required before processing, the invoices are sent to the Clarification Department for

necessary action. When an invoice from a vendor is entered into SAP for verification, SAP

proposes default values based on the goods receipt(s) and purchase order(s).

The default data proposed by the system needs to be accompanied by the invoice and, if necessary,

the variances should be corrected. Where there are variances between the purchase order or goods

receipt and the invoice, SAP issues a warning for invoices that are over the order quantity but

within pre-set tolerance limits. In such cases the invoice can be posted but it will be automatically

blocked for payment For invoices that exceed both the order quantity and the pre-set tolerance

limits, no posting will be allowed.

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Chapter 3 Business Process
Blocking the invoice means that the accounting entries are posted, but that a payment block

prevents payment until the invoice is released. Invoices are also blocked if the goods have not yet

been released from quality inspection.

Invoices can also be blocked for retention. An additional line item is created in the document as a

vendor credit for the amount to be retained. Blocking for retention can be due to the following;

 penalty

 delayed delivery

 retention as per purchase order

 excise invoke defective

As soon as IV is created , provisional liability is debited and vendor is credited. That is

provisional liability Dr

vendor Cr

Invoice verification serves the following purposes:

 Takes over from the Materials Management Process, which starts with the purchase

requisition, continues with the purchase order and goods receipts and ends with the invoice

receipt.

 Allows invoices that do not originate in materials procurement (for example services,

administrative expenses do) to be processed.

 Allows vendor credit memos to be processed.

Invoice documents, including both invoices and credit memos, can be cancelled. The amount and

quantity for a credit memo / invoice is copied from the document to be cancelled. This avoids

variances between the original document and the reversal document.

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Chapter 3 Business Process
3.2.2 Tax Deduction at Source Run

Tax deducted at source is one of the modes of collecting Income-tax from the assessees. Such

collection of tax is effected at the source when income arises or accrues. Hence where any

specified type of income arises or accrues to any one, the Income-tax Act enjoins on the payer of

such income to deduct a stipulated percentage of such income by way of Income-tax and pay only

the balance amount to the recepient of such income. The tax so deducted at source by the payer,

has to be deposited in the Government treasury to the credit of Central Govt. within the specified

time. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax

by the recepient at the time of his assessment. Income from several sources is subjected to tax

deduction at source. Presently this concept of T.D.S. is also used as an instrument in enlarging the

tax base. Some of such income subjected to T.D.S. are salary, interest, dividend, interest on

securities, winnings from lottery, horse races, commission and brokerage, rent, fees for

professional and technical services, payments to non-residents etc.

The Tax Deducted at Source (TDS) on processed invoices is not deducted at the time of invoice

verification. As a result of this, it is essential that the Post Withholding Tax (YTD2) transaction be

executed. Invoices can be selected using one or more of the following selection criteria:

Posting Date

Document Type

Document Number

If the TDS is on provisions (made based upon goods receipt or service receipt entries) the TDS on

subsequent invoices posted on the goods receipt or Service receipt is deducted a adjustment is

made to the TDS on provisions. TDS is done only for services and not for materials.

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Chapter 3 Business Process
3.2.3 Payment

In last step print out of the previous document is taken out. It is attached with the service

entry document and signed by the maker, and then send to the banking department for

making of cheques.

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4 SAP AS A TOOL
Chapter 4 SAP As A Tool

4.1 SAP – An Introduction

The recent advancements in the field of information technology have given the present

industry many effective and efficient tools. With the help of these tools the growth of the

industries has touched the new heights. Among these tools the Enterprise Resource Planning

(ERP) system is the major contribution of the information technology towards the growth of

the industry. The incorporation of the ERP system has reformed the working of the

industries. It has helped in faster communication, has eliminated the chances of any kind of

discrepancies like theft and has made the system transparent from top to bottom. SAP is a

software used to implement the ERP system by the Reliance Communication Ltd.. The

Reliance SAP Project team has created this intranet based interaction tool for the entire

Reliance Group SAP users.

SAP R/3's applications are modules. They can be used either alone or combined with other

solutions. The integration capability of these applications increases the benefits derived for

any company.

Logistics: Logistics comprises all processes involved in purchasing, materials management,

manufacturing, warehousing, quality management, plant maintenance, service management

and sales and distribution. All applications access a shared consistent database, supported by

production data management.

SD: Sales & Distribution: SD helps to optimize all the tasks and activities carried out in sales,

delivery and billing. Key elements are: pre-sales support, inquiry processing, quotation

processing, sales order processing, delivery processing, billing and sales information system

PP: Production Planning and Control: PP provides comprehensive process for all types of

manufacturing: from repetitive, make-to-order, and assemble-to-order production, through

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Chapter 4 SAP As A Tool
process, lot and make-to-stock manufacturing, to integrated supply chain management with

functions extended MR

PS: Project System: PS coordinates and controls all phases of a project, in direct cooperation

with Purchasing and Controlling, from quotation to design and approval, to resource

management and cost settlement.

MM: Materials Management: Supports the procurement and inventory functions occurring in

day-to- day business operations such as purchasing, inventory ,management, reorder point

processing, etc

QM: Quality is a quality control and information system supporting quality planning,

inspection, and control for manufacturing and procurement.

PM: Plant Maintenance. PM provides planning, control, and processing of scheduled

maintenance, inspection, damage-related maintenance, and service management

SM: Service Management: SM provides highly integrated customer service functionality to

compete in today's global markets.

PDM: Product Data PDM supports in creating and managing product data throughout the

product life cycle.

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5 DATA COLLECTION METHODOLOGY
Chapter 5 Data Collection Methodology

5.1 PRIMARY SOURCES

Primary data is the data which is collected initially for the first time. It helps in the

validation of secondary data from secondary sources. It is originals in nature and it may

include the following methods:

 Observations
 Personal interaction

5.2 SECONDARY SOURCES

Secondary data is the details that are available in the form of facts and figures. The sources

of secondary data are;

 Magazines
 Websites
 Books

Most of the data in this research is primary in the form of print screens & also secondary

data are used in this project.

5.3 RESEARCH INSTRUMENTS OR TOOL USED

Research instrument used for collection of information is Observation, Practice &

Interviews. As this research is descriptive so it includes the study of process as it is by

observing people on their work, doing the process on computer system & taking print

screens at the same time, & taking interviews of people by asking them questions to give

recommendations for improvement.

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6 FINDINGS
Chapter 6 Findings

6.1 BENEFITS OF ERP IN BUSINESS

An ERP System is a fully integrated business management system covering among others,

Logistics, Production, Finance and Human Resources Companies both large and small

traditionally utilized multiple software applications from various vendors or developed their

own applications in- house to process their critical business transactions. Prior to the

proliferation of SAP, most companies supported a hill staff of program developers who wrote

their necessary business applications from scratch or developed highly complicated interfaces

to allow pre-packaged applications from several vendors to pass data back and forth as

necessary to complete any hill cycle business transaction. This process was extremely costly,

time-consuming, and error prone. It also made it very difficult for business managers and

executives to get a timely, comprehensive view of how their business was doing at any given

time. SAP was the first and, to date, the most successful company to integrate nearly all

business processes into one software solution for use in any business in any country in the

world. Not only did SAP’s applications reduce the need for complex and redundant in-house

development, but it also created new business efficiencies by automating many tasks across a

corporation and incorporating business’ best practices into each updated version of its

software

Tangible Benefits:-

 Provides greater and effective control on accounts payable by having increased

control on invoicing and payment processing

 Reduction of paper work

 Availability of timely information

 Greater Accuracy

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Chapter 6 Findings
 Improved cost control

 Enable quick response to change in business operations and market consumption.

 Provides a unified customer database usable by all applications

Intangible Benefits Of ERP

 Improved Customer Satisfaction.

 Improved vendor Performance.

 Increased flexibility.

 Reduced quality cost.

 Improved information utility.

 Improved information accuracy

6.2 LOOP HOLES IN PROCUREMENT PROCESS

LOOP HOLES IN PURCHASE PROCESS

 The employee were not aware about all the tools of SAP so proper training is required

for them.

 Although SAP is implemented but still paper work is done which causes delay in

process.

LOOP HOLES IN PAYMENT PROCESS

 The payment process suffered because of delay in process of budget sanctioning &

loading.

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7 CONCLUSION & RECOMMENDATION
Chapter 7 Conclusion & Recommendations

7.1 CONCLUSION

This project report is undertaken to understand and learn the procurement procedure followed

in the Reliance Communication. They are as follows:-

1. Proper procurement system is followed using SAP.

2. MIS is maintained properly through SAP so that the true picture of the purchase and

payment process is reached to the Top management and proper decisions can be made

on the basis of these reports.

3. Although the SAP is installed but still the process was slow because of more paper

work & lack of knowledge among employees about the SAP.

7.2 RECOMMENDATION

1. The new recruits and less experienced employees should be given proper training on

related SAP modules.

2. Proper work division should be done so that employee knows what work is assigned

to them. Sometimes during my training period I noticed that in the payment process

because of lack of coordination and work assigned to particular employees, was done

by their fellow employees who have to do the next step of payment so that the

payment is not blocked.

3. Several other industries like Tata Consultancy Services has adopted the process of E-

Procurement, I recommended them to adopt the system of E-Procurement to speed up

the process as well as to remain in global competition.

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8 REFERENCES
Chapter 7 Conclusion & Recommendations

8 REFERENCES

WEBSITES

 www.reliancecommunication.co.in

 www.relianceadagroup.com

 www.rcom.co.in

 www.google.com

BOOKS

 Enterprise Resource Planning by Leon

 Production & Operation Management by R.V. Badi

 Operation Management by Krajewski, Ritzman, Malhotra of Pearson Publication

 Purchase manual of Reliance communication Ltd. (Not Published)

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