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ANALYSIS OF PURCHASING CONTRIBUTIONS TO PROFITABILITY

ABSTRACT

Purchasing has been one of the major important functioning activity in industries. Its existence started from the early time of life though it was not notice until when division of labour and specialization became practicable. Efficiency of purchasing contributes much to profitability but its efficiency is determined by various factors life sourcing, determination and price and availability etc. Purchasing contribution to profitability could be traced from the purchasing of the raw materials; when the right raw material is bought and delivered at the right price and time. It enhance productivity and at the short run it contributes to the manufacturing of the right finished product thereby increasing the gross profit of the company. Manufacturing companies like the Rokana industry Owerri and star paper mill Aba need increase in profitability of which purchasing is one of the profit making centres. But this can only by achieved if the management will appreciate the function of purchasing and allow it to carryout its responsibilities effectively through employing efficient and skilled purchaser.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Purchasing has its origin from the early men when goods were exchange for goods. It grew from the stage and past through the exchange of goods for money and finally at the present day stage of the modern and formal purchasing. In manufacturing organization, any activity you can think of starts with purchasing and the sole target is profit making. Therefore, there is no profit making without purchasing. In this study, the nature of the purchasing effectiveness, its need, efficiency and management will be examined. The proper performance of purchasing function-efficient purchasing will show the vitality purchasing to the smooth operation of other departments of the industrials sector with particular reference to the Rokana industry Owerri and star paper mill Aba.

A close and meticulous look at most industrial sectors, show that materials purchases represent the largest element in operational expenditure. It follows therefore, that the exercise of prudence and good judgment in securing the best possible, ultimate value for money expended is one of the purchasing man’s “harvest” burden of responsibility. This cannot be achieved without strict adherence to purchasing techniques, and ethics which is best practiced by men of the profession who are really trained in the field. In this research work, the researcher has taken bold step in finding out why most industrial sectors need a purchasing department and what leads to its inefficiency, particularly as it relates to Rokana industry Owerri and star paper mill Aba.

1.2 STATEMENT OF PROBLEM

i. poor identification of the need for efficient purchasing management

ii. Low level of understanding on how to apply purchasing contributions to profitability and scramble for purchases

iii. Management inability to continue purchasing contribution to profitability and authority for purchasing

iv. Poor relationship between management and workers that affect the level and profitability of the firm

v. Poor contributions of purchasing in achieving management profitability in the industry.

1.3 OBJECTIVE OF THE STUDY

The objectives of the study includes the followings:

1. To identify the need for efficient purchasing management

2. To find out the purpose for scramble for purchases 

3. To find out the absence of responsibility and authority of purchasing

4. To find out the cadre and quality staff responsible for the purchase of goods and services within the organization or industry.

5. To find out to what extent purchasing has contributed in achieving management objectives in the organization or achieving profitability in the industry

1.4 SCOPE OF THE STUDY

The study of purchasing is very vast and the function is very important in an organization. As a result of this, work will be narrowed down on how purchasing in done, who and what department(s) is /are responsible for purchasing and above all the extent to which this have been contributing to the achievement of purchasing profitability a case study of Rokara industry and star paper mill Aba. This is to understand the efficient and effectiveness of purchasing function in an organization or industry

1.5 RESEARCH QUESITON

In the process of the research, the researcher used the following questions to carryout her research.

1. Do you have purchasing department?

2. Do your organization achieve efficient buying?

3. Does your organization have any/some purchasing contribution to profitability which they want to achieve?

4. Have purchasing been helping your organization to achieve its purchasing contribution to profitability?

5. Should purchasing department be established and give a rightful place in various organization?

1.6 HYPOTHESIS

The research stands to clearly prove the subject matter of discussion, which will serve as a stepping stone for potential researchers, planners, image-maker a regards to what is obtainable in the Nigerian. Context. As a result of this, there is need to make some hypothesis from which conclusion will be drawn. There include the followings;

Ho: there is no relationship between availability of purchasing contribution to profitability of small scale firms

H1: there is a relationship between adequate purchasing contribution to profitability and small scale firms

Ho: Sources of purchasing contributions available to small scale firm owners do not have any effect on the success of small scale firm and profitability of small scale firm

H1: Sources of available purchasing contributions to small business owners have effect on the success and profitability of the small scale firm

1.7 SIGNIFICANCE OF THE STUDY

i. This study will help the researcher and the selected business within Owerri and Aba to know the analysis of purchasing contribution to profitability of small scale firms in Nigeria 

ii This study also be of relevance to students who in their future will have the desire to make similar research.

iii To the government, it will serve as guild for advancing better policies toward improving and encouraging small scale firms in the state and nation at large.

Iv This study helps an organization to know its material inputs for manufacturing effectively in order to contribute to the productivity and profitability of an organization.

v. This research helps in increasing globalization of our business as well as that of our suppliers

vi. This study provides good knowledge and intelligent about the supply market which enables an organization to acquire its materials inputs for manufacturing effectively.

vii. This study helps in ensuring the desired quality and competitiveness of our products as well as improving of financial margin.

1.8 LIMITATIONS OF THE STUDY

In Carrying out this research, the researcher was faced with a number of limitations. These includes lack of finances, lack of text-books, unwillingness to responds to the research question by the respondents, some that would answer would give wrong answers, etc Another activity that posed a problem to me was the issue of visiting the case study and other organization in order to get the needed information. This proved very difficult due to the problem of finance and also time which was very short to meet up with the demands of the research. The researcher also had problem of attending other lectures and exams that took most of the time that would have been used for the research.

1.9 OPEATIONAL DEFINITION OF TERMS

Its important to define some of the terms used in this research, as it would go a long way to clarify issues.

1. Management: the act of running and controlling a business

2. management objectives: The goals, which an industry aims to achieve profitability

3. ind: short of writing industry

4. org: short form of writing organization

5. sample: a set of items from a population chosen for measurement when conduction survey-involving population

6. purchasing and buying: a function in an industry responsible for the provisioning of item in an industry 

7. sourcing: identification or development of suitable source of supply

8. purchasing function: activities carried out by the purchasing department to achieve efficient buying (purchasing function)

9. purchasing department: the department responsible for the effective procurement activities

10. quacks: those that does not have the knowledge of efficient purchasing functions

11. mgt: short form of writing management.

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