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THE IMPACT OF PURCHASING AND SUPPLY DEPARTMENT ON THE OVERALL OPERATION OF BUSINESS ENTERPRISE

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

In every business organization, the prime concern is to maximize profit after the deduction of all expenses and to make it a going concern. To maximize profit, there must be adequate and proper planning in all departments of the organization including purchasing and supply departments and co-ordination by management.According to Evans (2011), Purchasing, supply and procurement management are used interchangeably to refer to the integration of related functions to provide effective and efficient materials and services to the organization. Thus, purchasing or supply management is not only concerned with the standard steps in the procurement process: (1) the recognition of need, (2) the translation of that need into a commercially equivalent description, (3) the search for potential suppliers, (4) the selection of a suitable source, (5) the agreement on order or contract details, (6) the delivery of the products or services, and (7) the payment of suppliers.

Purchasing and supply is the daily routine of business organizations. Every organization needs suppliers. No organization can exist without suppliers. Therefore, the organization’s approach to suppliers, its acquisition processes and policies, and its relationships with suppliers will impact not only the performance of the suppliers, but also the organization’s own performance. No organization can be successful without the support of its supplier base, operationally and strategically, short- and long-term.

Supply management is focused on the acquisition process recognizing the supply chain and organizational contexts. Special emphasis is on decision making that aligns the supplier network and the acquisition process with organizational goals and strategies and ensures short- and long-term value for funds spent. There is no one best way of organizing the supply function, conducting its activities, and integrating suppliers effectively. This is both interesting and challenging. It is interesting because the acquisition of organizational requirements covers a very wide and complex set of approaches with different needs and different suppliers. It is challenging because of the complexity and because the process is dynamic, not static. Moreover, some of the brightest minds in this world have been hired as marketing and sales experts to persuade supply managers to choose their companies as suppliers. It is also challenging because every supply decision depends on a large variety of factors, the combination of which may well be unique to a particular organization.

The supply function continues to evolve as technology and the worldwide competitive environment require innovative approaches. The traditionally held view that multiple sourcing increases supply security has been challenged by a trend toward single sourcing. Results from closer supplier relations and cooperation with suppliers question the wisdom of the traditional arm’s-length dealings between purchaser and supplier. Negotiation is receiving increasing emphasis as opposed to competitive bidding, and longer-term contracts are replacing short-term buying techniques. Organizations are continually evaluating the risks and opportunities of global sourcing. All of these trends are a logical outcome of increased managerial concern with value and increasing procurement aggressiveness in developing suppliers to meet specific supply objectives of quality, quantity, delivery, price, service, and continuous improvement (Evans, 2011).

1.2    Statement of Problem

The purchasing process can be obstructed, creating bottlenecks and other problems. Most suppliers lack the technical expertise to dispense their duties. This may lead to situations where the supplier selected cannot meet the capacity and logistics requirement of the company. Another problem is inadequate supplier selection and this is one of the most important decisions in the purchasing process. There is also the problem of lack of good contractual arrangement and a clear description of the product or supplier requirements may not be available. Also, there are delivery problems. Suppliers deliver too late, deliveries are not complete, products are damaged or may not meet quality requirements, packaging of the product is not sound and information labels in most cases cannot be read. The reason for this can be traced back to unclear specifications or careless supplier specification. The purchasing and supply department of many business organizations lack clear rules and guidelines with regard to procurement and supply governance. It is in view of these problems that this research study is carried out to examine the impact of purchasing and supply department on the overall operation of Business Enterprises in Nigeria.

1.3    Objectives of the study

The following are the objectives of the study;

. To find out the impact of purchasing and supply department on the overall operation of business enterprises.

. To examine the problems faced by purchasing and supply department.

. To find out the ethical practices for effective purchasing and supply management by business enterprises.

. To find out the strategic importance of purchasing and supply department to the operations of business enterprises

. To proffer solutions to the problems of purchasing.

1.4    Research Questions

The following research questions were formulated to achieve the objectives of the study; What is the impact of purchasing and supply department on the overall operation of business enterprises. What are the problems faced by purchasing and supply department. What are the ethical practices for effective purchasing and supply management by business enterprises. What is the strategic importance of purchasing and supply department to the operations of business enterprises What solution if any to the problems of purchasing in an organization

1.5   Significance of the study

The following are significance of the study; It will make known the impact of purchasing and supply department on the overall operations of business enterprises It will help in identifying the problems faced by purchasing and supply department in business enterprises. It will make known the ethical practices that will aid the management of purchasing and supply department of business enterprises. It will bring to light the strategic importance of purchasing and supply department The study will also serve as a useful reference material to other researchers seeking for information on the subject

1.6   Scope/Limitations of the study

This study covers the impact of purchasing and supply department on the overall operation of business enterprises in Nigeria. Using Champion Brewries, Uyo as a case study. In the course of carrying out the research, some challenges were encountered by the researcher that stood as limitation to the study and they include, limited time given for the completion of the study and financial challenges due to rising cost of text books, internet browsing, etc. the researcher could not visit different libraries to gather relevant information due to high cost of transportation. Also, some respondents could not provide their own opinion for reason of being busy.

1.7   Definition of Terms

Purchasing: This has to do with all the activities necessary to bring the goods into the shop and it includes all the processes of conducting marketing research, buying of the required quantity and quality, price and transportation.

Profitability: This refers to the ability of a firm to make its total revenue to exceed total cash. And it determines the firm’s reinvestment in the business for future growth.

Profit Planning: This involves deciding in advance what the business wants to achieve in a given time and expressing them in financial terms.

Supply: This is directly related with the price as the higher the price, the higher the quantity supplied or given. It is the amount of goods that a company pays money to be delivered or itself gives out.

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