Receipt of Goods, Inspection of Goods, Delivery, and Freight
Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager
During a recent consulting engagement, the issues of warehouse and inventory management arose. The client was eager to organize its operations and address centralized and decentralized purchasing and warehousing functions.
My consulting practice usually finds trouble with these supply chain practices.
Four significant issues affecting warehouse and inventory operations were noted: Receipt of Goods, Inspection of Goods, Delivery, and Freight. Each of these is the subject of Uniform Commercial Code(UCC), the controlling authority in the US in the matter of the purchase and sale of goods.
Receipt of Goods
Under the UCC, Receipt of Goods occurs when buyer takes physical possession of the goods. In most cases, receipt takes place when customer unloads the delivery vehicle. Receipt could also take place at the supplier’s facility when a customer vehicle picks up the goods.
The UCC imposes some duties of due diligence on the receiving party. The receiver must immediately observe the physical condition of the crates, packaging, pallets, etc., before signing a written receipt for the delivery agent, either supplier’s driver or third party transportation supplier A “clean receipt” with no comments about condition make it difficult to file damage claims later.
Any apparent damage should be noted on the receipt and co-signed by the driver of the delivery vehicle. Multiple photographs should be taken immediately on the receipt site of and emailed to the supplier with a copy to CI Purchasing. Include a photo of the label which should bear the P.O. number, item or part number, bar codes, and other relevant data. The P.O. time stamp memorializes the day, date, and time of receipt.
Returning to Terms and Conditions (T’s & C’s), the phrase of “Receipt of goods is subject to final inspection.” should be made part of the boiler plate that should apply to purchase of all goods. For paper bound suppliers, the receiver should have an inked stamp for paper receipts issued by the shipper or third party transportation firm stating, “Receipt of goods is subject to final inspection.”
Inspection of Goods
Once the apparent undamaged condition of packaging is determined, the next step is Inspection of Goods. In addition to a detailed assessment of physical condition, questions to address are:
- Did the supplier fulfill all of its commitments
- Were the specifications met
- Are the quantities correct
- Is the entire shipment of uniform quality
- Was the order over or under shipped
The right of the buyer to inspect goods is virtually inalienable. Sometime before the buyer is required to legally accept the goods, there must be an opportunity to inspect, according to Section 2-513(1) of the UCC.
In most businesses, it is usually impossible to suspend other operations in order to immediately inspect the goods. Moreover, the supplier or third party driver must depart to make other deliveries. Without wandering off into the tall grass, it is best to require inspection before and as a condition of payment. This requirement should be made explicit in your T’s & C’s.
Should you buy goods subject to rejection due to temperature variations, impact energy, or positional changes, Temperature Watch, Shock Watch, and Tilt Watch are options to explore.