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THE IMPACT OF SOURCING AS A SUPPLY CHAIN FUNCTION ON THE PROFITABILITY OF A COMPANY

ABSTRACT

A visit to most production company as shows that sourcing now have a great impact on the profitability of a company. Such as lowering cost structures, maintaining the product quality of a company, ability to meet customer requirements, and lot of other benefits. This study attempts to evaluate the impact of sourcing in the profitability of company using ZARTECH LIMITED as a case study. It seeks to examine the responses of the procurement department on how suppliers are selected during the process of procurement of materials, which will eventually help to increase the company’s profit. This study drew literature on sourcing strategies and its benefits from several sources. Data were gathered from Zartech limited and also from other sources like internet, text books, journal e.tc. Results of analysis of the data collected show that the company contacted are convinced that sourcing is a necessity for the profitability of any company however they agreed that sourcing strategies should be effectively carried out. Other facts were elucidated by the study but generalization of the study findings cannot be total, due to certain limitations.

CHAPTER ONE

1.0     INTRODUCTION

Over the years, procurement function contains activities that have attracted the attention of many researchers and companies worldwide. However, most studies conducted focused only on the manufacturing industries and associated with functional indicator. This research presents and discusses some key points and noticed important changes recording the ways business are carried out. In connection with the market worldwide process managerial models have been customer constantly reviewed and improved, as well as new concepts and paradigms, such as the contemporary business and mass customization, have quickly emerged. It is this competitive context that the supply chains management (SCM) should be understood.

A supply chain can be represented by a group of integrated logical process that originates from source of raw materials and comprises several companies, until products are delivered to final customers in form of goods and aggregated services. In the past, every layman in Nigeria were ignorant of what exactly purchasing and supply is all about. Most people believe that procurement of raw materials is non-task or a non-issue matter. Foremost, most manufacturing companies of which ZARTECH LIMITED MAYA happens to be one of them, dispose more than half of its income on materials, supplies and services. We would bear in mind that intensive sourcing is the rudiments of purchasing. Sourcing comprises of the identification or development of suitable sources. Sourcing decision indicates which supplier to patronize. How many suppliers are needed to supply a given item?

How to allocate available business and in what term to do the business, the continuing relationship both with preferred sources which are still in the running although they have been passed over for the present. For its proper performance, sourcing requires supply market research. This is often undertaken informally by the buyers as part of their buying work, when they interview salesman, visit exhibition, read trade journals, obtain catalogues and research the market before placing an order. It is sometime undertaking formally by research personnel, in a purchasing services section as a support function to the buyers. Supply market research identifies the set of actual and potential supply sources which contribute the market, investigates their capabilities analyses the structural features of the market trends and long term supply prospects, and generally keep on ear to the ground.

Purchasing does not mean buying raw materials Only, but it involve determining the needs, selecting the supplier (S), arriving at affordable price, terms and condition issuing the contract or order and following basic elements involved in performing the purchasing function which are: Obtain the procurement of materials, goods and services of the right quality, in the right quantity, from the right source at the right price and at the right time. Infact, purchasing was formally regarded purely as function, where the purchasing department acts on behalf of all department in its organization which requires an item to be purchased, and also hand all contracts and orders between its organization and the supplier. But now, purchasing is seen as a major impact on profitability. Expediting action in finding better or cheaper new sources of purchasing and quality responsible for the entire ranges of materials and commodities required by the company for efficient maintenance of adequate stock levels at the central store.  From the above introduction, it is clearly shown that it is impossible for any organization to achieve its full goals objectives without a successful sourcing and procurement activities. Therefore, the success of business enterprises greatly depend on sourcing and procurement of raw materials for the organization’s objectives.

1.1     OBJECTIVE OF THE STUDY

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