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THE IMPORTANCE OF EFFICIENT PURCHASING IN A MANUFACTURING ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND TO THE STUDY

Purchasing is concerned with the “process of defining the organization needs, selecting suppliers, agreeing terms, placing order and receiving goods and services. It is by it’s nature of service” function oriented to providing a complete supply service for users within the organization. Purchasing according to Oyeoku (1993) is referred to as function of business that enters into contracts with the organization suppliers and the final places orders with them. Where the function of procurement is emerged with that of store, the receive and pay for the goods and service in other to receive on behalf of the organization. purchasing can also be define according to oyeoku (1993) as the act of accomplishing through identifying and comparing the suppliers as well as their supplier  that are  available to organization through the process of negotiation with the sources available to  them with sole intention of arriving at an agreed term in order to limit cost and  improve the organization profit.

According to Lyson (1984) he defines organizational purchasing as that function that is responsible for obtaining by purchase, equipment, material, lease or other legal means, supplies and service required by an undertaking for production use. In this definition, the word purchasing has been used in an economic sense of definition the function of creating utilities goods and service that satisfy human wants. Purchasing does not confined to manufacturing output but also applied to even distributing, and services organization.

The importance of efficient purchasing  to manufacturing  organization cannot be over- emphasized, ‘that is’ it is to created efficient supply of  equipment, fuel raw materials, component, power and other consumable service for use by industries. Long ago buyers where employed to buy production material without a proper research on market to obtain the right quality at the right price, and with a high increase of profit to organization. Today purchasers are trash to have organization need in an efficient economical and wiser from for equipments to organization. This approach was only successful when services or goods are not many substitutes, when there was an abundant material and when many managers took resources for granted.

According to Baily (1987) organizational purchasing is the  process by which organization  define the needs for  goods and services, and  compare  the supplies and suppliers available for them, and  arrive at agreed terms of trading and make contracts and place orders, also accept, revise and pay for the goods and service supplied. The numerous diverse item that are constantly needed and when the quality of material influences the cost of manufacturing the final product, then an organization  purchaser function becomes particularly very important and this demand close attention. Therefore manufacturing organization should realizes the fact that the buyers is the custodians of organization purser and hence economists are derived purchasing provide direct saving on cost and contribute to cash increase flow According to the institute for supply management purchasing is defined as a major function of required material service and equipment.

1.2   HISTORICAL BACKGROUND OF THE STUDY AREA

A case study of Nigeria bottling companying coca-coca plot 82 industrial layout transamdi PH  The Nigeria bottle company also know as coca-coca situated at 82 plot industrial layout transamdi (ph) manufacture  training of soft drink generally called coca-coca product and produce Eva water ,the soft drink are in both cans and bottle. the company are manager by professionals and expertriates with wealth of experience, the class range of the company is from professional to the casual workers, the product from the company have been approved by NATIONAL AGENCY FOR FOOD,DRUGS ADMINISTRATIVE AND CONTROL(NAFDAC) the company have varieties of  product in the Nigeria market.

1.3     STATEMENT OF PROBLEMS

In recent years, it been notices that purchasing has not been accorded the statue which it deserve in organization. The major problem lies on the fact that in an organization everybody wants to buy in purchasing decision. It is also surprising that departmental manager or heads contract for the purchase of raw material even as furniture and the general manager apart from the part he  play when capital items are concerns is interested to know the particular vendor to whom the contract is awarded to the selfish interest. Company executives are not convincing of the procurement or service of an efficient and effective service render by purchasing department and the full benefit through purchasing department. In some manufacturing the purchasing departments is not constituted with qualified people and therefore are not competent enough to tackle the trends in purchasing function.     

1.4    OBJECTIVES OF THE STUDY

The researcher undertaking the study of the importance of efficient purchasing in manufacturing organization.

It highlight the functions of purchasing which centers on the co-ordination and control of material costs and maximizing profit therefore the purpose of the study with special interest and the manufacturing organization is narrowed down in the following point.

1.To examine the caliber of    staff employ for the performance of purchasing function.

2. To ascertain the extend the purchasing important have been adopted

3. To find out purchasing contribution of profitability and efficient running of the organization.

4. To stress the importance of purchasing in a manufacturing organization

5. To find out the relationship between the purchasing and  other department

1.5     SIGNIFICANCE OF THE STUDY

The  importance of the study lies on the profitability contribution of the purchasing function to a firms operation especially in a manufacturing organization where material and service account for about 85% of its total input as it know that 4%saving in purchasing  can contribute the same amount and mark-  up of  20% on sales. The significance of the study derives the usefulness in the following ways.

1. To the company, it will highlight them on the impact of purchasing in profitability.

2. Students or anybody that does not have an idea of the role of purchasing function and it’s contributions to profitability. If come across this project will also gain and have the knowledge as well. And also use this project as a research book

3. Finally, It is hoped that the findings and recommendation will help other organization to begin to accord purchasing and supply function recognition if they must make profit.

1.6  RESEARCH QUESTION

In the bid to achieve the objectives of this research work, the following research questions will be treated, thus;

1. Does the role of the purchasing agents enhances the organizational needs for selecting suppliers, agreeing terms placing orders and also receiving service?

2. Does the role of purchasing regarding to negotiation of the right price for the goods influences the productivity of the organization?

3. Does the function of purchasing involve ensuring that goods arrived at the right time and place?

4. Is effective purchasing power necessary for the purchase of raw materials used in the manufacturing industries?

5. Does efficient purchasing ability promote the profitability and productivity of a manufacturing organization,

6. Does purchasing ensure good source of supply?

7. Do purchasers help in the evaluation of potential supplier before dealing with them for agreement into continuous supply of material to the organization?

1.7     RESEARCH HYPOTHESIS

In the course of this research work, the following hypothesis will be tested, thus

Ho: There is no significant relationship between effective and efficient purchasing ability and the profitability of manufacturing industries.

HA: There is significant relationship between effective and efficient purchasing ability and the profitability of manufacturing industries.

1.11  SCOPE OF THE STUDY

The scope of this researcher work comprises all the factors that ensures efficient purchasing within the manufacturing organization. For the sake of coherency, specification, and distinctive, the study has chosen as a case study the Nigeria Bottling Company coca cola plot 82 industrial layout transamadi Port Harcourt though the findings can vividly and validly be applied to all the business organization at large.

1.12  LIMITATION OF THE STUDY

The important limitation on this research factor is the time involvement in gathering facts and compilation especially the examinations the researcher are having other factors include financial problem, lack of text books and as well as the attitude of respondents in dividing information term as “classified”

1.13   DEFINITION OF TERMS

It is pertinent to state here that words have meanings and there meanings are different according to their usage either directly or indirectly

SPECIFICATION This show the details description of service materials, parts and components to be used in manufacturing organization

PURCHASE REQUISITION NOTE This is a document used by an authorized person in a company requesting the purchasing department to order or purchase particular items, materials stating the require quantity and quality

LOCAL PURCHASING ORDER [LPO]  A document used by a buyer to the supplier for ordering the supply of specified goods and service are generally specifying the quantity required and the price.

QUALITY ASSURANCE SCHEME This means the process involved in ensuring that right quality materials are obtain in carrying out purchasing activities.

VENDOR APPRAISAL This is act of assessing the supplier capability to comply with organization specification.

QUOTATION CHART This is a chart that shows supplier quotations on how they are evaluated and in most cases it also show the supplier that won the contract.

GOODS RECEIVE NOTE [G.R.N] This represents a document that shows the receipts of goods from a supplier

SUPPLY MARKET This show the means on how different sources of supplier desire can be selected

SUPPLY MARKEY RESEARCH The process of examining the actual and potential sources which constitute a supply market.

SOURCING This entails a proper identification of suitable source of supply or supplier

CONTRACT This refers according to the study that show the agreement reached by an organization purchaser and the supplier for supply of material component.

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