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THE EFFECT OF PURCHASING AND SUPPLY ACTIVITIES IN CONSTRUCTION INDUSTRY

ABSTRACT

This project work titled the effect of purchasing and supply activities in construction industry. Its main objective is to find out if purchasing and supply activities affect the construction industry and also to know if purchasing and supply activities influence another department in the industry. It is apparent that management of purchasing and materials is a vitally important activity in the industry. The value of the goods and service determine the process that the procurement department will follow to create a purchasing order. Astructured questionnaire was drawn and the staff of the industry understands the items in the questionnaire which was designed to elicit response with the option of age, sex, qualification, Yes/No, very satisfactory, not satisfactory etc. It was discovered from the survey that there is a positive policy between purchasing departments with other department in the industry. The study concludes that the company use maximum level in the industry. The study therefore recommends amongst others that the purchasing officers should be part of the decision and making process mostly on matters that affect purchasing.

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

Purchasing departments play a vital role in the survival and growth of any industry. In recent time, purchasing department in industries have improve operator activities due to the high competition in the number of construction industries. Purchasing department involve procurement, which may appear to be a ‘hidden’ function in many organization. In fact procurement is a highly strategic role, all industry need inputs in order to be able to operate.

This might be physical input, such as raw materials, like engine components for a car. It is therefore, that the intention of this study is to know the effect of purchasing department in the industry.

In purchasing departments, there are several methods of acquiring materials, supplies, equipment and service. Purchases are made in different times and for different purposes. The

materials and quantities to be purchased for immediate use are not meant for future use or to maintain stock. In continuous-run-manufacturing, ordering method used and quantities required depend on planned production schedules.

Some items have longer life shelf than others while some appreciate value in stock than others. Also, the acquisition of labour and service is different from that of materials and equipment, hence the application of different circumstances and times.

Purchasing and supply activities involves the acquisition of essential materials, supplies, equipment and service in the right quantity, quality, prices, times and from the appropriate vendor or supplier. Purchasing simply means the process of buying. In a broader sense however, purchasing involves the determination of needs, selection of supplier, determining proper price, condition and terms, issuing the order or contract and proper follow up to ensure delivery of cargo or service etc.

1.2   Statement of the Problem

An inherent problem associated with the construction industry of purchasing and supply department is the cost benefit ratio of such a department when compared to funds expanding in setting up of a purchasing and supply department as an unnecessary expenditure which only increase cost not the need for purchasing activities and only view it as a clerical function, this is a dangerous position because it gives room for fraudulent practices function and obligation. A third problem and most relevant is how the firm would have fared if it did not have a purchase and supply department that is, the fact than an industry has a purchase and supply department is better placed than similar firm in the industry.

The major problems therefore are investigated on the need purchasing department and determine if it is economically justifying the need for the existence of the department: Justifying the cost needed to set up and also critically examine the cost needed to run the department and determine whether such an industry that has a purchasing and supply department has a comparative advantage towards optimum profit realization over firms in the industry

1.3   Research Questions

In view of the subject under study, the research put forward the following research questions

1.     Do purchasing and supply activity affect construction industry positively?

2.     Is there any policies between purchasing and supply departments in the industry?

3.     Does Harland construction company Ltd effectively use the function of purchasing and supply activities unit in 
the industry?

1.4   Research Hypotheses

In other to validate this study, the following hypotheses were drawn in the research work.

Hypothesis One

HO:   There is no significant effect of purchasing and supply activities in the industry

HI:    There is a significant effect of purchasing and supply activities in the industry

Hypothesis Two

HO:   There is nopositively policies between purchasing department in the industry with other department.

HI:    There is a positively policies between purchasing department with other department in the industry.

Hypothesis Three

HO:   Harland Construction company do not use purchasing and supply unit effectively to acquired material.

HI: Harland construction company make used of purchasing and supply unit effectively to bring in material.

1.5   Purpose of the Study

Purchasing and supply activities was initially regarded as a routine, a clerical function and a semi-function which is not really important but it is concern itself on procurement and spending money, that is buying goods and component parts needed for construction industry.

1.     To find out if purchasing and supply activities affect the construction industry

2.     To know if purchasing and supply activities influence 
another department in the industry

3.     To show case that Harland construction company used 
purchasing and supply activities to procure material 
needed in the industry

1.6   Scope of the Study

This study is on the effect of purchasing andsupply activities in construction industry, with particular reference to Harland construction Nigeria Ltd, Auchi. In the light of this, the study will be limited to the benefits and the setting up maintenance of a purchasing and supply activities department in a fairly large industry. 

The area covered among others, to justify the reason for the existence of the purchasing department in an industry.

1.     Objective and analysis of purchasing and supply activities and the function of a purchasing department

2.     Organization of purchasing procedure

3.     Purchasing requisition and quotation

4.     Relationship between purchasing department and other department.

1.7   Significance of the Study

Industries engage in business activities with the aim of optimum profit realization to obtain this, business has to reasonable price for its products in other attract and retain repeat buyers because thrives on repeat buying. In construction industry, profit is aimed by adding value to materials procured before marketing the product, purchasing plays a good role in playing down the initial cost of material required for fabrication (add value) as it is crystal clear that efficient purchasing machines are instrumental to the search for profit maximization.  

The purchasing department is very significant because purchasing and supply activities looks at end modifies procurement policies and strategies which develop in conjunction with technology the meet the increasing activities necessary to keep the industry continually supplied with needed material, sub-assemblies and component parts necessary for it to engage in managerial activities.

1.8   Limitations of the Study

In the course of making up an imperative write up this research, there is no doubt that one is bound to face a lot of constraints. One obvious limitation of this type of study is the problem of finance, issuing of questionnaire, poor response to questions and delay in returning questionnaire.

1.     Finance: This was a major problem in the course of writing this project. Such expense includes preparation 
of questionnaire, distribution of questionnaire, and source of finding materials and typing/ binding of the project.

2.     Issuing of Questionnaire: This has to do with the truth. It was difficult to get the industry workers to give true and fair response to the questions and also recipients give poor feedback to questions asked by creating a problem to research work.

3.     Delay in returning of Questionnaire: If a questionnaire is not returned to the stipulated time it will makes the research work to delay.

1.9   Operation Definition of Term

·                    Purchasing: Purchasing is the process of obtaining the proper equipment, materials, supplies and service at the right time, at the right price and from the right source and delivered to the right place (Idogho & Agbaza, 2009)

·                    Suppliers: Suppliers are individual or companies that provide goods or service needed by producers to produce their goods and service (Igbafe & Aluyor, 2008)

·                    Quality: In purchasing context, quality refers to the suitability of an item for its intended purpose. Hence quality here includes the ability and willingness of the supplier to meet one specification (Hassan, 2009)

·                    Industry: Industries are the economic activity concerned with the processing of raw materials and manufacture goods in factories (Romney, 2008)

·                    Requisition: This form is prepared when a department or stores needs a particular items. It is usually prepared in duplicate, one copy being sent to the purchasing department as authority to purchase, and the duplicated being retained by the originating department for reference and follow up (Obomeghie & Ugbana, 2011).

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