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General Purchasing Conditions: Frank Mubiri L5346 David Businelli N8841 Tristan Fonck N8842

The document provides a summary of general purchasing conditions (GPC) used by companies to outline standard terms and conditions for supplier agreements. It examines GPC examples from Apple, Airbus, and ArcelorMittal, finding similarities in structure around delivery timelines, pricing, warranties, and safety compliance. The document also introduces contract theory and hierarchy of contracting documents. In conclusion, the examples studied align with the description of GPC in the source article analyzed.

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David Businelli
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75 views8 pages

General Purchasing Conditions: Frank Mubiri L5346 David Businelli N8841 Tristan Fonck N8842

The document provides a summary of general purchasing conditions (GPC) used by companies to outline standard terms and conditions for supplier agreements. It examines GPC examples from Apple, Airbus, and ArcelorMittal, finding similarities in structure around delivery timelines, pricing, warranties, and safety compliance. The document also introduces contract theory and hierarchy of contracting documents. In conclusion, the examples studied align with the description of GPC in the source article analyzed.

Uploaded by

David Businelli
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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General Purchasing Conditions

Frank Mubiri L5346


David Businelli N8841
Tristan Fonck N8842

Report of Purchasing Management


April 2020
School of Business
Degree Programme in International Business
1

Contents
1 Introduction of contract theory..............................................................................2
2 Example of general purchasing conditions (Apple, Airbus and ArcelorMittal).......2
3 Article summary and conclusion.............................................................................6
4 References...............................................................................................................7
2

1 Introduction of contract theory

The key objectives of a contract is to ensure that business agreements and


commitments reached during the negotiation among two parties (typically Buyer and
Seller) put down in written form are legally valid, binding and subsequently
enforceable in case of a dispute. (Degraeve& Roodhooft 1999.)

There are several contract types, this report will focus on what is called General
Purchasing Conditions (GPC) also known as Standard terms and conditions. The
general purchasing conditions are the base conditions which are set up by a company
upon which both the seller and buyer must comply with. All the purchasing orders
will be issued based on these purchasing conditions. This does not include any other
terms and condition based on the same subject matter. The supplier also agrees that
its own terms and conditions do not apply (Insight, 2020).
If there are any changes made in the conditions, they only apply if both parties agree
with them before an order (CWT, 2020).

Moreover, like in many other businesses there has been lot of effort to try to create a
“standard” list of conditions and we have found an international association called
IACCM (International Association of Contract&Commercial Management)
(www.iaccm.com )that is trying to establish such a standard.

2 Example of general purchasing conditions (Apple, Airbus and


ArcelorMittal)

Some explanations should be given to better describe the words “general” and
“standard”. GPC are considered “general” since they are “generally” applicable to
commercial relationships independently from the specific object of the contract.
Each contract is specific, i.e. contains certain provisions which refer to the type of
purchase considered, for example a contract to buy a standard product (like a PC, a
pump, a car) can be different from a contract to buy a very customized service or
3

equipment or a complex work like building a chemical plant.( Degraeve & Roodhooft
1999.) Also the industry where the company operates may give a different
flavor/accent to the specific clause: we have selected three example from very
different industries (high tech/electronics, steel and aerospace& defense) and found
similarities and differences related to the very specific nature of the
environment/business where the company is operating .

It should also be noted that there might be several contracting documents since, as
we said before, the expectations/requirements are specific of the
product/service/equipment considered and, in case of multinational companies,
there might be the need to include some local country specific provisions.

Regarding the practical application there is typically a hierarchy of documents in the


sense that there is one prevailing over the other in case of differences or conflicts.
(Enel.com 2018)
For example, what can be found is the following hierarchy (top is the prevailing
document):

1. Purchase Order/Order Letter which is specific for the product/service


purchased and will contain all the terms, technical specification etc. which
have been agreed with the supplier during the negotiation phase
2. Other addendums/annexes which typical consist of detailed technical
specification/scope of work, pricing schedule/price list/pricing rule
3. GPC sometimes localized to some country specific requirements
4. GPC and other corporate documents like Supplier Code of Conduct,
Sustainability. Health & Safety standards etc.. which the supplier will be asked
to countersign for approval and acceptance.(ibid.)

Some companies may also print GPC on the back of the PO: by sending the order
acknowledgment the supplier explicitly approves and accepts the terms and
conditions.
4

The GPC reflect more or less the typical contract structure but in general terms
defining the following elements:

a. Product/Service (where it is applicable)


b. Delivery
c. Payments
d. Price

and in addition, provide clauses that address specific risks and make clear the
responsibilities of the supplier plus a series of legal elements.

We have analyzed 3 different GPC from respectable sources, that can be easily found
on the web: Apple (US) the manufacturer of iPhone and laptops, Airbus (Germany) in
the aerospace and defense (A&D) business and Arcelor-Mittal the steel
manufacturer based in Luxembourg. The structure of the GPC is quite similar with
some specifics related to the type of industry where the country is operating. We
will describe few of the common structures and highlight the peculiarities. We will
use the following abbreviations for company names: APL (Apple), AM (Arcelor Mittal)
and AB (Airbus).

1. Preamble: describes the applicability of the terms to product/services and


works. AB highlights at the very beginning the fact that subcontracting must
be authorized. This is quite common practice in Aerospace since products are
complex and typically the supply chain consist of several steps/suppliers
organized in multiple tiers so the visibility of the entire chain is paramount
since traceability is a must and has to be at single component level.
2. Delivery: all the three companies work typically on a specific assembly
schedule so timely delivery is fundamental. Delivery dates are binding and
there are penalties for late deliveries or possibility to cancel the PO or refuse
the shipment if early. Supplier must notify promptly the buyer in case of
problems. Included in the delivery chapter are the standard INCOTERMS (DAP
for AB and DDP for AM) which may be superseded by the specific PO terms.
5

Attention is also placed to proper labeling (including country of origin),


packaging, etc. and to the compliance with export regulation and restriction.
This last element is very sensitive for AB since in the defense industry some
countries may be blacklisted (example IRAN or North Korea). It is also clear
that since the transfer of title happens when the buying company takes
ownership at point of shipment, the supplier is liable for any damages that
may be incurred before.
3. Price/Payments: price is generally considered fixed and all inclusive (except
VAT); payments require an invoice (usually one per PO) and supplier must
diligently keep records of the transactions (system and paper for audit
purpose). AB reserves the right to withhold payments in case of disputes over
defective products/service. Also, if the buyer decides to repair the defects,
supplier must reimburse all the incurred costs. This is also a common practice
in A&D industry since lead times are long and there might not be the
possibility to wait until the new shipment comes in. Payment terms are not
specified (this would be on the PO) but is capped the maximum interest (if
any) for late payments.
4. Warranty/liabilities: this is a very important chapter for every company but
could be very expensive if the defective product causes damages/issues to
the final product and/or if there must be a recall (example the Samsung
phones where batteries were catching fire). AM holds supplier responsible to
warrant the conformity to specification for 2 years and to provide free
replacement for defective products. AM focus on the right to inspect goods
before shipment and to inspect supplier facilities during complex products
manufacturing. There is no quantified liability but as we will see later,
supplier must have valid insurance to cover for this risk. APL specifically
mention that they have no liabilities whatsoever.
5. Safety: AM has a specific where the supplier warrants that goods do not
constitute hazard and provide material data sheets and environmental
standards. AB just mention the need for the supplier to abide EU safety,
health and environment statutory regulations. Inspections at the supplier site
may be carried on checking compliance.
6

3 Article summary and conclusion

As stated in the previous section and presented the examples on how and where
they are used, general purchasing conditions contract falls in its own category. In the
article (General Purchasing Policy) it dictates the rules the contract follows and
through that, we complied the examples for the various organizations above and
examined them with the policies in the article and indeed quite a lot hit on the spot.

Moreover, to fully understand how general purchase conditions is implemented, we


looked at the article from the French Atomic Energy and Alternative Energy
Commission (CEA) in short. In their report they have step by step the ways of how
they use GPC, the report has fourteen chapter detailing the contract. Few of the
areas tackled were; liabilities, safety and confidentiality. We analysed the parts
regarding the examples given in previous section and found many similarities.

It is good to mention that finding articles specific on GPC has been a bit of a
challenge, either to the fact that the contract has not been research much or to the
fact that the contract is the most standard used contract.
7

4 References

Airbus.com. (2018). Accessed on 30 March 2020. Retrieved from


https://www.airbus.com/content/dam/corporate-
topics/publications/suppliers/General-Purchasing-Conditions-Airbus-Defence-and-
Space-EN.pdf

Apple.com. (2018). Accessed on 30 March 2020. Retrieved from


https://www.apple.com/legal/procurement/docs/OL-APAC-AP_v.1.0.pdf

Applicability, I.I., Policy 2.121 General Purchasing Policy.

Arcelormittalsa.com. (2015). Accessed on 30 March 2020. Retrieved from


https://arcelormittalsa.com/Portals/0/SUPPLIER%20GUIDE%20-%2020150415.pdf

CEA. From research to industry. (2020). Accessed on 5 April 2020. Retrieved from
http://www.cea.fr/english/companies/Documents/general-purchase-conditions.pdf

CWT. (2020). Accessed on 5 April 2020. Retrieved from


https://www.mycwt.com/for-suppliers/suppliers-general-terms-conditions/

Degraeve, Z., & Roodhooft, F. 1999. “Effectively Selecting Suppliers Using the Total
Cost of Ownership”. Journal of Supply Chain Management, 35, 5-10.

Enel.com. (2018). Accessed on 30 March 2020. Retrieved from


https://globalprocurement.enel.com/content/dam/enel-gp/documents/contractual-
standards/general-contract-conditions-basic/ed1/official-versions/GCC-Basic-
General-Part_EN-_-1-Edizione-V3.pdf

Insight. (2020). Accessed on 5 April 2020. Retrieved from


https://www.uk.insight.com/information/trading-terms-and-conditions

Iaccm.com. (2020). Accessed on 30 March 2020. Retrieved from


https://iaccmportal.s3.eu-central-
1.amazonaws.com/downloads/IACCM_Contracting_Principles_2020.pdf

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