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APPRAISAL OF PURCHASING PROCEDURE PROBLEMS AND SOLUTIONS IN SERVICE INDUSTRIES

ABSTRACT

This research work is on an “Appraisal of Purchasing Procedure, Problems and solutions in service industries”. A case study of Links Hotel Owerri. The researcher in carrying out his research work listed the procurement procedures which he also analyzed views from different literatures of similar topics. In carrying out the research work, the researcher used questionnaire and oral interview in his data collection which chi-square was used in testing the hypothesis to decide its acceptability. After which recommendation was made for the Hotel based on information gathered from the findings.

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Purchasing as a management function has last long before the large organizations appeared with its functionally specialized department, people has been buying and selling, and that is buying goods and services in return for a price. Every organization that purchases goods or services has standard procurement procedures, the methods they use to acquire those things. These procedures cover all aspect of the procurement cycle including the following: 1. Selection of supplier 2. Contract negotiation 3. Order placement
4. Processing the order 5. Receipt 6. Inspection 7. Documentation and payment.

Above all these, one imperative thing is that there must be a requisition for the raw materials of component part by the user depart before the order can be processed but this only in some cases where organizational needs are not specified and certain need may arise which the purchasing officer must meet up with its procurement to ensure continuity and the achievement of organizational goals and objectives. The primary driving force for the department of procurement procedures is to control spending. The actual procedures used can vary slightly but will be similar. In the art of procurement, the purchaser encounters certain problem, those problems may not be pernicious but they can go a long way to interfere with the procedure. In this research work, the researcher will x-ray the problem and proffer solution in the service industry using Links Hotel Owerri as a case study.

LINKS HOTEL OWERRI: Links hotel is a popular hotel known especially in the eastern state of the country (Nigeria). It is a hospitality and service industry that provides desirable services to those who require those services. Links Hotel was established and opened on the 18th day of January 2008. The hotel is located at plot 5043 new Owerri commercial area behind Imo state house of Assembly Owerri Imo State Nigeria. The hotel has approximately one hundred and fifteen employees (115) ninety eight junior staff (98) and seventeen senior staff (17).

The hotel has the following facilities: 1. A standard swimming pool 2. Cyber café 3. Gymnasium 4. A befitting restaurants 5. A kitchen 6. Laundry 7. A large parking space for cars 8. Bush bar 9. Executive bar 10. Snacks bar 11. Pool bar 12. A very big reception hall and other categories of halls.

LINKS HOTEL ALSO HAS THE FOLLOWING DEPARTMENTS:

1. GENERAL MANAGER: He oversees the general affairs of the hotel and every department is responsible to him which also includes recruitment.
2. Security Department
3. Accounting Department which includes stores and food and beverage (F & B) department.
4. Electrical and Plumbing Department
5. House Keeping Department.

1.2 STATEMENT OF PROBLEMS

For years most hospitality industries in Nigeria in particular links Hotel Owerri have not recognized the importance of an efficient and effective purchasing department due to the fact that they still believe purchasing function can be carried out by anybody. It is therefore on this basis the researcher attempts to highlight and critically analyses some of the bottlenecks and problem militating against the free flow of procurement activities in Links Hotel Owerri. Like in Links Hotel Owerri, every department have authority to purchase their need which is suppose to be the general function of the purchasing manager.

The major problem being “buying syndrome” that is the syndrome whereby those in authority example the general manager, accounts department which includes store, food and beverage units, electrical department just to mention but a few are authorized and allow the “mediocre” employed to purchase materials and services without reference to purchasing specialist who already has the prerequisite experience and knowledge. According to Alijan in his speech delivered at a training workshop meeting in Umuahia for all stores officers/keepers in April 1999, the purchasing executive is the custodian of the firm’s purse. Also Uzor in a discussion in one of his lectures said that purchasing department is the life wire of every organization which should not be ignored. Therefore the first and foremost obligation of a purchasing manager is value for money in every purchase made and integrity in spending organizational funds. The purchasing department should be seen as the legally authorized representative of the company in dealing with the firms supplying materials and services.

Though this has been emphasis nowadays or let’s calls them old generation managers are yet to be convinced of the need of effective and efficient centralized purchasing function. The problem generally associated with purchasing therefore is that of neglect. Purchasing as a functional department in an organization has not been given its pride of place. Another problem is that of inadequate purchasing personnel, lack of specialist in the field of purchasing has resulted to in incompetence and inefficiency in the buying or required or specified items. It is therefore necessary to employ specialist with adequate and required knowledge and skill which can also be applied scientifically during negotiations.

1.3 OBJECTIVES OF THE STUDY

The main purpose of the research study is to identify the procurement procedures, its problems and proffer solutions to the management of links Hotel Owerri in order to expose a hidden fact about the need for and the important of purchasing department and to distinguish purchasing from other discipline. But it is disheartening and unbelievable that ministries do not want to accord the practice its full recognition and function in most organization and its function are still performed by the general manager, the accounting or marketing manager which often leads to the wasteful spending of organizational resources. The problems are also:

a. To attempt to examine the problems encountered by the organization, that is the general buying attitude being employed by the organization in purchasing function.

b. The issue of some personnel seeing purchasing function as a place where greedy people who are not professionals in the field.

c. Avoiding misrepresentation in the general objective of the purchasing profession.

d. Seeking for a way geared towards improving the entire purchasing system in all service industries in Nigeria and in particular links Hotel Owerri.

1.4 SIGNIFICANCE OF THE STUDY

The researcher study is important because it will enable us to ascertain to what extent is the purchasing department if there is any in the organization whether it is performing satisfactorily or otherwise and a view of effecting some organization in the organization to ensure efficiency in the purchasing function. Another significance of this research work or study is that is one of the pre-requisite for the award of Higher National Diploma (HND) in Federal Polytechnic Nekede Owerri. Also the research work tends to suggest for the right professional approach suitable for organizing procurement procedure and make organizations achieve its objectives and goals.

1.5 RESEARCH QUESTIONS

1. Does the hotel recognize the need for purchasing department?

2. Does the hotel recognize the need for procurement procedure and its contribution to cost reduction?

3. How does the hotel source for vendors for the supply of goods and services?

4. Does the hotel allow every department to purchase their requirements and does it seem right?

5. Does the hotel use sourcing policy?

1.6 HYPOTHESIS

In carrying out this research work, the researcher made use of the null (Ho) and alternative (Hi) hypothesis to investigate and find out whether the procurement procedure is carried out in a way it will profit the organization at large and increase profitability. In the cause of trying to evaluate the objective of this research work, it is hypothesized of this research as follows:

Ho- Null hypothesis

Hi- Alternative hypothesis

HYPOTHESIS ONE

Ho- Inefficiency in procurement is not as a result of lack of skills by those involved in the purchasing of goods and services.

Hi- Inefficiency in procurement is as a result of lack of skills by those involved in the purchasing of goods and services.

HYPOTHESIS TWO

Ho- Effectiveness in procurement procedure will help and contribute in cost reduction.

Hi- Effectiveness in procurement procedure will not help and contribute in cost reduction.

1.7 SCOPE OF THE STUDY

The researcher during the research work found it impossible to cover many industries in this study and could only focus the research investigation on Links Hotel Owerri Imo State Nigeria as a case study. However the researcher based her findings on this study and would relate them to other industries in the same area of activity.

1.8 LIMITATION OF THE STUDY

In carrying out this research work, the researcher never saw it easy to cover in detail the departments in the organization though connected with suppliers, problem and solution of procurement with a particular reference to Links Hotel Owerri. This is simply because of the limited time and financial challenges are heavy obstacles upon the researcher. The epileptic nature of our power supply also posed challenges as there is blackout most at times at night. In the case of links hotel protocols were also some major limitation. Outside all these limitations, the researcher have lectures to attend and also serving in the church in the capacity of the peoples warden perhaps took most of the time required to carry out thus work and visit his place of case study which is Links Hotels Owerri.

1.9 DEFINITION OF TERMS

1. SOURCING: This is a process of finding suppliers who are willing and ready to supply the required materials at the right price and quantity. That is providing consistently quality goods and services at a competitive price.

2. LOCAL PURCHASE ORDER (LPO): This is a form bearing all the items to be supplied by the supplier, their various unit cost also the total cumulative cost including the agreed terms and conditions of the supply.

3. PURCHASE REQUISITION: This is requisition from the user department stating the quality and quantity of materials required at a given time which as well help the purchasing officer to know what is required and make order for them.

4. BILL OF LADING: This is a receipt or a document of title and contract between a carrier and a shipper for transportation as well as delivery of goods from a shipping point to the designated point. The bill of laden is sent to the buyer while the goods is on transit for payment to be effected.

5. BLANKET ORDER: This is a type of purchase order that is used to make repeat purchase or a single purchase that will cover a period of time.

6. ADVICE NOTE: This is a document sent by the supplier on the day of dispatch to the buyer informing the buyer of the eventual arrival of the goods.

7. CENTRALIZATION: This is the system of collective responsibility and concentration of authority for buying on the purchasing manager.

8. INVOICE: This is a receipt prepared by the seller bearing the items required and its unit and total cost which shall be paid by the buyer.

9. PURCHASE ORDER FORM: Purchase order form are basic instrument used by the buyer and seller. It describes the items to be purchased and circumstances under which the contract is to be performed and paid for.

10. PURCHASE RESEARCH: This is a systematic investigation of any area influencing purchase performance of a formal organization and also seeking of more advance and better ways to carry out the purchasing function more effectively and efficiently. It is also an objective research for an analysis of information to guide purchase managers in decision making as regards to the purchasing function.

11. DECENTRALISED PURCHASING: This is a situation whereby the purchasing function is shared among managers or personnel from other department in an organization.

12. PROCESSING/ EXPEDITING: It could also be called follow up, it is a process in which the buyer (purchaser) goes to the supplier, calls him on phone, send him messages reminding him of the need of delivering materials at the right time and to also ensure the materials to be supplied by the supplier conforms with specification both in quality and quantity.

13. PROCUREMENT: Is the acquisition of goods and services.

14. NEGOTIATION: This is a process whereby the buyer and the seller agree on price, terms and condition of order delivery.

15. POTENTIAL SUPPLIER: This is an individual or organization that makes available the entire necessary requirement and orders placed by the buyer.

16. EVALUATION: This is the process of assessing all potential suppliers before selecting whom to contract business with.

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