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THE
IMPORTANCE OF EFFICIENT PURCHASING IN A MANUFACTURING ORGANIZATION
CHAPTER ONE
INTRODUCTION
BACKGROUND
OF THE STUDY
Purchasing
is concerned with the “process of defining the organization needs, selecting
suppliers, agreeing terms, placing order and receiving goods and services. It
is by it’s nature of service” function oriented to providing a complete supply
service for users within the organization.
Purchasing
according to Oyeoku (1993) is referred to as function of business that enters
into contracts with the organization suppliers and the final places orders with
them. Where the function of procurement is emerged with that of store, the
receive and pay for the goods and service in other to receive on behalf of the
organization. purchasing can also be define according to oyeoku (1993) as the
act of accomplishing through identifying and comparing the suppliers as well as
their supplier that are available to organization through the process
of negotiation with the sources available to
them with sole intention of arriving at an agreed term in order to limit
cost and improve the organization
profit.
According to
Lyson (1984) he defines organizational purchasing as that function that is
responsible for obtaining by purchase, equipment, material, lease or other
legal means, supplies and service required by an undertaking for production
use.
In this
definition, the word purchasing has been used in an economic sense of
definition the function of creating utilities goods and service that satisfy
human wants.
Purchasing
does not confined to manufacturing output but also applied to even
distributing, and services organization.
The
importance of efficient purchasing to
manufacturing organization cannot be
over- emphasized, ‘that is’ it is to created efficient supply of equipment, fuel raw materials, component,
power and other consumable service for use by industries.
Long ago
buyers where employed to buy production material without a proper research on
market to obtain the right quality at the right price, and with a high increase
of profit to organization.
Today
purchasers are trash to have organization need in an efficient economical and
wiser from for equipments to organization. This approach was only successful
when services or goods are not many substitutes, when there was an abundant
material and when many managers took resources for granted.
According to
Baily (1987) organizational purchasing is the
process by which organization
define the needs for goods and
services, and compare the supplies and suppliers available for
them, and arrive at agreed terms of
trading and make contracts and place orders, also accept, revise and pay for
the goods and service supplied.
The numerous
diverse item that are constantly needed and when the quality of material
influences the cost of manufacturing the final product, then an
organization purchaser function becomes
particularly very important and this demand close attention.
Therefore
manufacturing organization should realizes the fact that the buyers is the
custodians of organization purser and hence economists are derived purchasing
provide direct saving on cost and contribute to cash increase flow
According to
the institute for supply management purchasing is defined as a major function
of required material service and equipment.
1.2 HISTORICAL BACKGROUND OF THE STUDY
AREA
A case study
of Nigeria bottling companying coca-coca plot 82 industrial layout transamdi
PH The Nigeria bottle company also know
as coca-coca situated at 82 plot industrial layout transamdi (ph) manufacture training of soft drink generally called
coca-coca product and produce Eva water ,the soft drink are in both cans and
bottle. the company are manager by professionals and expertriates with wealth
of experience, the class range of the company is from professional to the
casual workers, the product from the company have been approved by NATIONAL
AGENCY FOR FOOD,DRUGS ADMINISTRATIVE AND CONTROL(NAFDAC) the company have
varieties of product in the Nigeria
market.
1.3 STATEMENT OF PROBLEMS
In recent
years, it been notices that purchasing has not been accorded the statue which
it deserve in organization.
The major
problem lies on the fact that in an organization everybody wants to buy in
purchasing decision. It is also surprising that departmental manager or heads
contract for the purchase of raw material even as furniture and the general
manager apart from the part he play when
capital items are concerns is interested to know the particular vendor to whom
the contract is awarded to the selfish interest.
Company
executives are not convincing of the procurement or service of an efficient and
effective service render by purchasing department and the full benefit through
purchasing department.
In some
manufacturing the purchasing departments is not constituted with qualified
people and therefore are not competent enough to tackle the trends in
purchasing function.
1.4 OBJECTIVES OF THE STUDY
The
researcher undertaking the study of the importance of efficient purchasing in
manufacturing organization.
It highlight
the functions of purchasing which centers on the co-ordination and control of
material costs and maximizing profit therefore the purpose of the study with
special interest and the manufacturing organization is narrowed down in the
following point .
1. To examine the caliber of staff employ for the performance of
purchasing function.
2. To ascertain the extend the purchasing
important have been adopted
3. To find out purchasing contribution of
profitability and efficient running of the organization.
4. To stress the importance of purchasing in
a manufacturing organization
5. To find out the relationship between the
purchasing and other department
1.5 SIGNIFICANCE OF THE STUDY
The importance of the study lies on the
profitability contribution of the purchasing function to a firms operation
especially in a manufacturing organization where material and service account
for about 85% of its total input as it know that 4%saving in purchasing can contribute the same amount and mark- up of
20% on sales.
The
significance of the study derives the usefulness in the following ways.
1. To the company, it will highlight them on
the impact of purchasing in profitability.
2. Students or anybody that does not have an
idea of the role of purchasing function and it’s contributions to
profitability. If come across this project will also gain and have the
knowledge as well. And also use this project as a research book
3. Finally, It is hoped that the findings and
recommendation will help other organization to begin to accord purchasing and
supply function recognition if they must make profit.
1.6 RESEARCH QUESTION
In the bid
to achieve the objectives of this research work, the following research
questions will be treated, thus;
1. Does the role of the purchasing agents
enhances the organizational needs for selecting suppliers, agreeing terms
placing orders and also receiving service?
2. Does the role of purchasing regarding to
negotiation of the right price for the goods influences the productivity of the
organization?
3. Does the function of purchasing involve
ensuring that goods arrived at the right time and place?
4. Is effective purchasing power necessary
for the purchase of raw materials used in the manufacturing industries?
5. Does efficient purchasing ability promote
the profitability and productivity of a manufacturing organization,
6. Does purchasing ensure good source of
supply?
7. Do purchasers help in the evaluation of
potential supplier before dealing with them for agreement into continuous
supply of material to the organization?
1.7 RESEARCH HYPOTHESIS
In the
course of this research work, the following hypothesis will be tested, thus
Ho: There is no significant relationship
between effective and efficient purchasing ability and the profitability of
manufacturing industries.
HA: There is significant relationship between
effective and efficient purchasing ability and the profitability of
manufacturing industries.
1.11SCOPE OF
THE STUDY
The scope of
this researcher work comprises all the factors that ensures efficient
purchasing within the manufacturing organization. For the sake of coherency,
specification, and distinctive, the study has chosen as a case study the
Nigeria Bottling Company coca cola plot 82 industrial layout transamadi Port
Harcourt though the findings can vividly and validly be applied to all the
business organization at large.
1.12LIMITATION
OF THE STUDY
The
important limitation on this research factor is the time involvement in
gathering facts and compilation especially the examinations the researcher are
having other factors include financial problem, lack of text books and as well
as the attitude of respondents in dividing information term as “classified”
1.13DEFINITION
OF TERMS
It is
pertinent to state here that words have meanings and there meanings are
different according to their usage either directly or indirectly
SPECIFICATION
This show
the details description of service materials, parts and components to be used
in manufacturing organization
PURCHASE
REQUISITION NOTE
This is a
document used by an authorized person in a company requesting the purchasing
department to order or purchase particular items, materials stating the require
quantity and quality
LOCAL
PURCHASING ORDER [LPO]
A document
used by a buyer to the supplier for ordering the supply of specified goods and
service are generally specifying the quantity required and the price.
QUALITY
ASSURANCE SCHEME
This means
the process involved in ensuring that right quality materials are obtain in
carrying out purchasing activities.
VENDOR
APPRAISAL
This is act of assessing the supplier
capability to comply with organization specification.
QUOTATION
CHART
This is a chart that shows supplier quotations
on how they are evaluated and in most cases it also show the supplier that won
the contract.
GOODS
RECEIVE NOTE [G.R.N]
This
represents a document that shows the receipts of goods from a supplier
SUPPLY
MARKET
This show
the means on how different sources of supplier desire can be selected
SUPPLY
MARKEY RESEARCH
The process
of examining the actual and potential sources which constitute a supply market.
SOURCING
This entails
a proper identification of suitable source of supply or supplier
CONTRACT
This refers
according to the study that show the agreement reached by an organization
purchaser and the supplier for supply of material component.
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