SOP Library
SOP NO:
NG-GO02
(List of Exhibits/Attachments)
Mission
:
Other SOPs
Area:
Human Resource (HR)
Title:
Revised SOP on the Disposition of Damaged/Defective, Bad Orders, and Slow/Non-moving Non-Grains Kadiwa Inventories
Date Approved/Issued:
07/16/1985
Date Effective:
08/01/1985
Digest:
I. TERMS OF REFERENCE
A. Rationale
B. Objective
C. Scope
D. Basis
II. IMPLEMENTING GUIDELINES
A. Stocks Classification
As basis for determining manner of stock disposition, stocks shall be classified according to quality condition, profitability/marketability and the manner of disposition per expressed agreement made by NFA with supplier.
1. Classification according to quality/condition:
1.1 Damaged/Defective Stocks
1.1.1 Fit for Human Consumption
a. Partly Defective - processed commodities with external container defects
caused by rough handling or mishandling of stocks (those with dents, label defects, slight rust, etc.) but still fit for human consumption based on results of laboratory analysis.
b. Partly damaged - non processed commodities involving damage of only a localized portion, enabling physical segregation of the affected portion from the recoverable good portion.
1.1.2 Unfit for Human Consumption
a. Totally Defective Stocks - processed commodities with external container defects caused by physical and/or microbial spoilage which are no longer fit for human consumption as confirmed by laboratory tests and analysis.
b. Totally Damaged - non-processed commodities in which the damage is uniformly distributed making segregation of the unsound portion physically impossible.
c. Expired Stocks - manufactured commodities which have exceeded normal shelf-life based on expiry date or production codes indicated on the item's label or container.
1.2 Slow/Non-Moving Good Items
These are commodities with very low marketability which may be due to any or a combination of the following: poor quality, high selling price, non-familiarity to buying public.
Stocks Nearing Expiration - stocks which are and/or about to surpass recommended shelf-life as indicated by expiry dates or production codes on items label or container and in which all efforts to dispose said stocks thru regular selling strategies have proven futile.
2. Classification according to manner of disposition per expressed agreement:
2.1 Returnable Stocks - commodities which may be returned to supplier in view of its substandard condition which commonly include bad-orders and slow/non-moving good items. Damaged/defective stocks may be considered returnable if stipulated in expressed agreement.
Bad-Orders - refers to defective/damaged commodities, causes of which are traceable to factory and/or handling defects discovered prior to acceptance of NFA accountable officer or within a specified period agreed upon between NFA and the supplier (flippers, springers, soft and hard swells, dents, leaks, defective seams, soft spots, label defects, and with rusts).
2.2 Non-Returnable Stocks - commodities which are not considered returnable per provisions of the expressed agreement between NFA and the supplier.
B. Stock Classification Procedures
1. To facilitate immediate disposition of stocks, a Kadiwa Merchandise Evaluation Committee shall be formed for each provincial office, which shall be responsible for the proper classification of stocks and the determination of the appropriate manner of disposition thereof. It shall be composed of the following:
Provincial Manager - Chairman
Accountable Officer (Warehouse Supervisor/Custodian/Sales
Supervisor) - Member
Standard Quality Assurance Officer - Member
Accounting Representative - Member
2. As a general rule, all stocks received from suppliers shall be covered by expressed agreements between NFA and the former regarding terms and conditions for return of purchases. In arriving at the agreement, the following factors shall be considered:
2.1 Scheme of return (in kind/replacement or in cash/repurchase)
2.2 Place of return (regional/local branch)
2.3 Mode of return (whether to be delivered by NFA or picked-up by supplier)
2.4 Suppliers' acceptance standards
2.5 Valuation of returns
2.6 Others as may be mutually agreed upon between NFA and the suppliers.
3. For partially or totally defective/damaged and nearing expiration/expired stocks requiring laboratory analysis prior to disposition the following policies shall apply:
3.1 The NFA SQAO or Food Procurement Inspector shall conduct sampling at the same time in the presence of the COA representative. For purposes of claiming insurance, sampling and laboratory analysis shall be done with the insurance adjuster. This shall be documented by the Quality Inspection and Sampling Report (QISR).
3.2 All damaged stocks samples must be forwarded to the Regional Office or SQAD-TRED together with the corresponding Quality Inspection Report not later than the next day from the date of sampling.
3.3 Analysis shall be conducted by the Regional Office or SQAD-TRED upon receipt of the samples.
3.4 The Laboratory Analysis Report shall state the findings - whether stocks are "fit" or "not fit" for human consumption and shall be considered final to all parties.
3.5 The Laboratory Analysis Report (LAR) shall be submitted within three working days unless further test is required. The LAR shall be prepared based on the accomplished Result of Laboratory Analysis Report prepared by the SQAD/Food Technologist. The latter shall be attached to the LAR copies of the Minister cc. DNG, concerned regional/provincial offices, and GRAINSCOR if covered by peril insured.
4. In order to determine the manner of stock disposition, inspection, sorting, trimming, and/or packaging shall be undertaken. Results shall be documented thru the
Inventory Reconciliation Report
(IRR) Exhibit 1. This pre numbered form shall be used to reconcile the volume or quantity of individual weights per category (after the activity) as against the initial weight (before the activity). This shall be prepared in six (6) copies to be distributed as follows:
Copy 1 - Accounting Unit
2 - COA
3 - Quality Assurance Officer
4 - ECO Unit
5 - Accountable Officer (warehouse supervisor/custodian/sales
supervisor)
6 - Operation Unit
C. Schemes of Stock Disposition and Procedures
1. Stocks shall be classified according to quality condition and returnability to supplier per expressed agreement with same. On the basis of the arrived at classification, the manner of disposition shall be determined. The following schemes shall be adopted:
1.1 For returnable goods, return of purchases to supplier in either of two-ways:
a. In-kind/replacement - the supplier all stocks returned by NFA with good quality stocks of the same brand and specification or substitute thereof or other saleable items depending on negotiation or agreement made with supplier.
b. In-cash/replacement - the supplier pays NFA for its own returned products at a price equal to NFA landed cost or otherwise depending on agreement, either in cash or thru credit memo.
1.1.1 Stocks for return shall be issued back to source depot only upon confirmation of same.
However, provincial offices sourcing their stocks from a depot not located within the province, may directly negotiate for return with the supplier's branch in the provincial office's locality should there exist and following the original terms and conditions stipulated in the expressed agreement covering the same purchase. This shall be done in coordination with source depot.
Failure to return stocks to suppliers shall be made known to DNG for appropriate advice.
1.1.2 During negotiation for return, deviations from expressed agreement shall be treated as follows:
1.1.2.1 If the negotiated amount/value of repurchase/replacement is less than the landed cost of the item(s), approval for return shall be secured from the Regional Director thru wire and subject to confirmation from DNG.
If DNG's confirmation wire is not received within 5 working days (based on date of wire seeking confirmation) purchases return transaction shall be implemented immediately by the provincial office concerned.
1.1.2.2. If the negotiated amount/value of repurchased/replacement is based on the landed cost of the goods, no approval from the Regional Director or confirmation from DNG shall be necessary.
The provincial office shall immediately effect the return of said goods in cash or in kind and inform DNG accordingly thru wire.
1.1.3 It shall be the responsibility of the PM/OIC to act immediately on returnable stocks based on expressed agreements with supplier.
All items not returned within the period agreed upon with the supplier traceable to negligence shall be charged to the accountability of the Provincial Manager/OIC.
The abovementioned policies are foreseen to minimize if not totally eliminate irreplaceable stocks in inventory.
1.2 For non-returnable goods
1.2.1. Sale at Reduced Price
1.2.1.1. Price reduction shall be resorted to only after all efforts such as negotiation for return, reconditioning, and disposal at regular selling price are undertaken and proven ineffective.
1.2.1.2. The following non-returnable commodities may be subjected to price reduction.
a. Bad Orders
b. Partly damaged/partly defective
c. Slow-moving/non-moving
1.2.1.3 Approval to reduce price shall require a supporting report containing the following information:
a. Recommendation reduced selling price
b. Cost computation
c. Original selling price
d. Result of cost-benefit evaluation
e. Reasons for down-grading and previous action taken on
the matter
f. Result of Quality Inspection
1.2.1.4. Specifications of Authority for the approval of the Selling Price Bulletin:
a. If the recommended reduced price is not lower than the total commodity cost:
R Kadiwa Merchandise
Evaluation Committee
A Provincial Manager
b. If the recommended reduced price is lower than the total commodity cost
R Provincial Manager
A Regional Director
1.2.2. Negotiated Sale/Bidding of Stocks
Stocks which are classified as unfit for human consumption but are still fit for animal consumption based on result of laboratory analysis shall be disposed of thru negotiated sale or public bidding on a case to case basis but shall strictly be used for non-food industrial purposes, hence strict control measures shall be set by NFA to ensure its purpose.
Stocks sold thru this scheme shall be stripped of labels and permanently marked with "X" to indicate "not for human consumption", prior to its issuance to salvage buyer. This is to ensure purpose of sale.
Detailed procedure in negotiated sale/bidding of stocks shall be covered in a separate SOP.
1.2.3 Burning/Dumping
1.2.3.1. Stocks classified as totally defective/damaged, and expired items which are non-returned and classified as unfit for human and animal consumption shall be disposed thru burning/dumping.
1.2.3.2. Burning/dumping must not be detrimental to public safety. The following shall be observed in the process:
a. Dumping shall be done in seas/oceans
b. Burning shall be done in places far from bodies of water (e.g. seas, oceans, lakes, etc.) and populated areas and preferably should be done during early morning and late evening.
c. Burning/dumping must be covered by a permit from the City/Provincial Health Office for dumping and/or local fire department for burning.
1.2.3.3. Burning/dumping transaction shall be documented thru the I & I Report and shall be approved as follows for both processed and non-processed commodities:
a. If book value is P100,000 and below
R PM
A Regional Director
b. If book value is above P100,000 but not more than P150,000
R PM
Regional Director
A DNG Director
c. If book value is above P150,000
R PM
Regional Director
DNG Director
A Minister/Deputy
Administrator
R Recommending approval
D. Treatment of Insured Damaged Stocks
1. In case of defects/damages covered by insurance, immediately after the incidence of fire, flood, and typhoon, theft and robbery, or earthquake, the necessary documents to support the claims must be submitted to IBCD, DAB (cc. DNG thru wire containing estimated volume of damage).
The following are the documents required:
a. Picture of fire debris, flooded stocks, or warehouse condition to show damage.
b. Police report
c. Report on the inventory of stocks before and after the incident with corresponding bases on acquisition cost.
d. Laboratory Analysis Report ( after inspection by the adjuster)
e. I & I Report
The abovementioned documents shall be prepared by the concerned provincial office and personnel as defined under responsibility or portion of this SOP and must be duly approved/certified by the Regional Director.
2. Insurance claims shall be made from the insurance company through the GRAINSCOR.
E. Other Documentation Procedures
1. The Commodity Authority to Issue (CAI) shall be the document to be issued to authorize the concerned accountable officer to issue stocks for return/burning dumping.
2. All issuances shall be covered by a Warehouse Commodity Issue (WCI).
F. Reporting
1. The Sales Supervisor shall prepare a
Price-Reduced Commodities Sales Report
or PRCSR
(Exhibit 2) at the end of the day. The PRCSR shall record all sales price-reduced commodities at reduced prices for the purpose of facilitating reconciliation of assumed sales with actual cash receipts.
Copy distribution shall be as follows:
Copy 1 - Accounting
2 - COA
3 - ECO Section
4 - Accountable Officer (Warehouse Supervisor/Custodian/Sales Supervisor
2. The Provincial Economist shall include in the Monthly Selling Price Report submitted to DERS, Central Office, all partly defective, partly damaged, nearing expiration, slow and non-moving goods sold at reduced price which shall be properly footnoted. Based on such report, ECO shall monitor price setting to ensure that such is within reasonable bounds.
3. A report to record the actual disposition of stocks thru bidding or burning/dumping duly certified by the Provincial Manager/OIC and concurred by t he Auditor shall be submitted by the provincial office to ONG-C.O. cc. regional office. The I & I report no. and WCI no. are reflected in the report
(
Exhibit 3
)
.
III. RESPONSIBILITIES
1.
Kadiwa Mechanics Evaluation Committee (KMEC)
a. Inspects and classified commodities and determined appropriate manner of disposition of such.
b. If goods are for burning/dumping, wires DNG cc. IBCD for insurance covered goods of the schedule.
c. Supervises actual dumping/burning of merchandise.
2.
Provincial Standards and Quality Assurance Officer (SQAO) /PSQAO-05/
a. Supervises posting, trimming, and or packing of Kadiwa inventories. Conducts inspection of commodities.
b. Reports non-grains stocks which are damaged/defective, slow or non-moving, bad orders, and expired or nearing expiration to the Kadiwa Merchandise Evaluation Committee.
c. Supervises sorting of flipped, dented, bulging, busted, expired, etc. manufactured items or rejected manufactured items intended for return.
d. For damaged/defective non-grains stocks, covered by insurance, collects samples and sends the same via the fastest available means to the Regional Office or SQAD-TRED for laboratory analysis. Sampling is done with the insurance adjuster.
3.
Accountable Officer/Warehouse Supervisor/Provincial or Source Depot Custodian /WS-24/
a. Prepares the
Inventory Reconciliation Report
, signs appropriate portion and seeks the approval of the IRR. Distributes the IRR as follows:
Copy 1 - Accounting
2 - COA
3 - Quality Control Officer
4 - ECO Section
5 - Accountable Officer
6 - DNG-C.O.
b. Receives CAI for the return of returnable commodities and prepares the corresponding WCI as follows:
1. If returnable goods are for return to local supplier, indicates /x/ replacement or /x/ repurchase under transaction position.
2. If returnable goods are for return to provincial or source depot, indicates /x/ transfer under transaction portion of WCI and indicates "for replacement" or "for repurchase" under remarks portion.
c. Receives good non-grains stocks as replacement for returned stocks. Prepares and issues WCR:
1. If goods came from local supplier, indicates /x/ replacement under transaction portion of WCR.
2. If stocks came from provincial or source depot, indicates /x/ transfer under transaction portion and "as replacement for returned stocks" under remarks portion of WCR.
d. In case of damage/defect due to fire, typhoon, flood, earthquake, and/or theft and robbery and other perils usually insured, reports the incident immediately to the Provincial Manager. Prepares report on inventory of stocks before and after the incident and endorses to accounting unit for valuation.
Replacement of Returnable Stocks by the Provincial or Source Depot Only
a. Accepts rejected items. Prepares "Warehouse Commodity Receipt (WCR) in 5 copies and distributes as follows:
Copy 1 - Trucker/carrier
2 - Accounting
3 - Auditing
4 - Issuing Officer
5 - Handler
6 - Depot Custodian File
b. Upon availability of good stocks, replaces rejected items with good ones. Issues WCI indicating /x/ transfer under transaction portion and "Replacement for Returned Items" at remarks portion.
c. Returns accumulated rejected commodities to supplier.
4.
Regional Quality Assurance Section/SQAD, TRED
a. Receives samples and QISR from Provincial SQAO.
b. Conducts sensory and chemical analysis of samples.
c. Prepares the Laboratory Analysis Report within three working days from receipt of samples unless further test is required. Distributes LAR as follows:
Copy 1 - DNG
2 - Office of the Minister
3 - DERS
4 - Insurance Adjuster
5 - GRAINSCOR
6 - DAB-IBCD
7 - Field Office Concerned
8 - TRED File
9 - COA
5.
Provincial Operations Officer
a. Negotiates with supplier re: return of returnable commodities based on expressed agreements with the same.
b. Based on negotiation made with supplier, seeks the approval of appropriate authorities for the replacement/repurchase of goods.
c. Prepares CAI for return of goods. Seeks signature of appropriate authorities.
Indicates under remarks portion of CAI whether the goods are for replacement or repurchase.
d. Instructs ECO Unit to evaluate price reduction and to prepare SPB of reduced prices.
e. Seeks approval of SPB.
f. Receives approved SPB and issues a copy to the sales supervisor.
g. In coordination with accounting, prepares a weekly report on the sale of downgraded commodities for submission to DNG and DAB.
h. Prepares a weekly report on returned/replaced items based on WCI and WCR and submits the same to DNG and DAB.
i. For goods intended for burning/dumping, prepares CAI and secures approval from the PM.
j. Effects dumping/burning in the presence of the COA Auditor, a representative from the Regional Office and an insurance adjuster if covered by insurance.
6.
Provincial Economist
a. Conducts cost-benefit analysis for the downgrading of commodities. Endorses cost computations and results of cost benefit analysis to Provincial Operations Officer.
b. Prepares SPB for downgraded commodities and endorses the same to the Provincial Operations Officer to be attached to the recommendation for price reduction for approval by the Provincial Manager. Furnishes Sales Supervisor of approved SPBs.
7.
Provincial Accountant
PACNT-16/
a. For stocks to be burned or dumped, determines the book value of stocks.
b. In case of occurence of damage/defect due to peril, insured, indicates corresponding values based on acquisition cost of stocks on inventory report before and after the incident, coming from accountable officer.
8.
Sales Supervisor
a. Supervises coding, pricing and display of downgraded merchandise separately from the regular items for sale.
b. Verifies recorded sale and signs DCSR.
c. Forwards DCSR to teller, retains one copy.
9.
Sales Aide
a. Records in a logbook the individual sales of downgraded goods indicating quantity and amount.
b. At the end of the day, accomplishes the DCSR in four (4) copies indicating individual sale, quantity and amount.
Copy distribution of DCSR:
1 - Accountant
2 - COA
3 - Head Teller
10.
Teller
/TEL0-06/
a. With the code DS on commodities' container, determines/counterchecks the price based on the downgraded commodity price list.
b. Accepts payment
c. Accomplishes Teller's Daily Report attaching copies of DCSR for distribution to the following:
Copy 1 - Accounting
2 - COA
3 - Head Teller
11.
Provincial Manager
/ PM-35/
a. Approves the
Inventory Reconciliation Report
(IRR).
b. Approves return of returnable goods if value of return is equal to the landed cost of the returnable good or if return is in accordance with expressed agreement.
c. Recommends approval for return of returnable good to the Regional Director in case the value of replacement or repurchase is less than the landed cost of stocks or when return arrangement with supplier deviates from the expressed agreement.
d. Approves all issuances thru the CAI.
e. Approves recommendation for price reduction and SPB if recommended selling price is equal to the landed cost of downgraded stocks.
f. Recommends price reduction and SPB to the Regional Director if recommended selling price is less than the landed cost of downgraded stocks.
g. In occurrence of damage/defect covered by peril insured, instructs NFA official photographer or hired photographer to take pictures of fire debris. Also, secures Police Report.
h. Recommends approval of I & I Report.
i. Signs CAI and effects actual burning/dumping of stocks with approved I & I Report.
12.
Regional Director
/RD-12/
a. Evaluates and approves return of stocks wherein the value of replacement/repurchase is less than the landed cost of the goods for return.
b. Prepares and endorses memo for confirmation of return to DNG cc. Provincial Office Operations Unit.
c. Evaluates and approves recommended reduced prices and SPB in case the recommended selling prices of goods is less than the landed cost of said goods.
d. Approves I & I Report for stocks intended for burning/dumping whose book value is P100,000 and below and endorses approval of I & I report to DNG/Deputy Administrator if book value is above P100,000.
IV. FLOW CHART
B.
2. Actual Return of Returnable Goods
C. PRICE REDUCTION AND SALE OF PRICE-REDUCED COMMODITIES
1. Approval of Price-Reduction and SPB
C.
2. Sale of Price-Reduced Commodities
D. BURNING/DUMPING OF TOTALLY DAMAGED/DEFECTIVE STOCKS
1. Laboratory Analysis of Stocks for Disposition thru Burning/Dumping
D.
2. PREPARATION AND APPROVAL OF I & I REPORT
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EXHIBITS
Price-Reduced Commodity Sales Report (PRCSR)
Damaged Stocks Disposition Report - Exhibit 3