Glossary
Purchase & store terms, explained
What every word on an indent, PO, GRN or store register means, with worked examples in rupees.
Comparative statement
A comparative statement (CS) is a side-by-side table of quotations from different vendors for the same items, comparing rate, taxes, freight, delivery time and payment terms. It shows the lowest acceptable offer (L1) and records why a vendor was chosen.
Dead stock
Dead stock is inventory that has not been issued or used for a long period, commonly 12 months or more, and is unlikely to be used soon. Slow-moving stock is used, but rarely. Both tie up cash, take store space and often end up as scrap.
Gate pass
A gate pass is a document that authorises material to leave the factory gate. A returnable gate pass (RGP) is used when material is sent out and expected back, such as a motor sent for rewinding. A non-returnable gate pass (NRGP) covers material leaving for good, such as scrap or rejected goods.
GRN (Goods Receipt Note)
GRN stands for Goods Receipt Note. It is the document the store creates when material arrives, recording what was actually received against the purchase order, its quality check result and any shortage or rejection. The GRN updates stock and is the basis for clearing the vendor's invoice.
Indent
An indent is an internal request raised by a department asking the store or purchase team for material. It lists the item, quantity, required date and purpose. Once approved, the store issues the item from stock or the purchase team buys it.
Lead time
Lead time in purchase is the total time from recognising a need to having the material available in the store. It includes internal time (indent, approval, enquiry, PO) and supplier time (processing and transport). It is a key input for reorder level and safety stock.
Material issue slip
A material issue slip is the store document that records material handed out from the store to a department, machine or job. It captures the item, quantity, cost centre and who received it. Every issue reduces stock and charges the cost to that cost centre.
Min-max inventory
Min-max inventory is a stock control method where each item has a minimum level (the reorder point) and a maximum level. When stock falls to the minimum, you order enough to bring it back up to the maximum. It prevents both stockouts and overstocking.
Purchase order
A purchase order (PO) is a formal document a buyer sends to a supplier listing items, quantities, agreed rates, delivery date and payment terms. Once the supplier accepts it, it becomes a binding contract and the reference for goods receipt and invoice checking.
Purchase requisition
A purchase requisition (PR) is an internal, approved request asking the purchase department to buy material or services. It is not sent to a vendor. Once approved, the purchase team uses it to get quotes and raise a purchase order.
Reorder level
Reorder level is the stock quantity at which a new order must be placed so fresh material arrives before stock runs out. The standard formula is: reorder level = average daily usage × lead time in days + safety stock.
RFQ (Request for Quotation)
RFQ stands for Request for Quotation. It is an enquiry the purchase team sends to several vendors asking for their price and terms for specific items and quantities. The replies are compared on a comparative statement before a purchase order is placed.
Safety stock
Safety stock is the extra quantity of an item kept as a buffer against late deliveries or higher-than-normal usage. It is the part of stock you plan never to touch in a normal cycle. A simple formula is: (maximum daily usage × maximum lead time) − (average daily usage × average lead time).
Store ledger
A store ledger is the running record of every receipt and issue of an item, with the balance quantity and value after each transaction. It is kept item by item and shows how much of each item you hold and what it is worth at any time.
Three-way match
Three-way match is the check done before paying a vendor: the purchase order (what you agreed), the GRN (what you actually received and accepted) and the vendor's invoice (what they are billing) must agree on item, quantity and rate. Any difference is resolved before payment.
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