THE IMPORTANCE OF EFFICIENT PURCHASING IN A MANUFACTURING ORGANIZATION
BACKGROUND OF THE STUDY
Purchasing is concerned with the “process of defining the privet sector 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 privet sector 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 received on behalf of the private sectors. 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 privet sector 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 privet sectors 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 privet sector 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 privet sector purchaser function becomes particularly very important and this demand close attention.
Therefore public sector 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
Taimacon Aluminium MFG. Co Lt started out as an aluminium products manufacturer over 43 years ago, and expanded into other sectors such as food and spices, textiles and more. The group is committed to quality and highly adept in identifying new business opportunities and challenges. After Taimacon Aluminium, its flagship company, Taimacon Aluminium also established a textile unit, Kitex. The ScooBee Day and Trawellday Bags division under Kitex caters to the constant demands for school bags, travel bags and similar products. Saras Spices, launched in 1979, is a major player engaged in the processing and distribution of spices, branded curry powders and masalas. Taimacon Aluminium has always been focused on expanding its possibilities through diverse products and brand portfolio. From fast selling Aluminium utensils to much-in-demand anodized aluminium extrusions, Anna Group is consistently developing its potential. The company’s state-of-the-art manufacturing units produce Aluminium sheets which are in high demand in the construction industry.
1.3 STATEMENT OF PROBLEMS
In recent years, it been notices that purchasing has not been accorded the statue which it deserve in privet sector.
The major problem lies on the fact that in privet sector 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 need for the efficient is purchasing and store management in privet sector.
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 privet sector is narrowed down in the following point .
- To examine the caliber of staff employ for the performance of purchasing function.
- To ascertain the extend the purchasing important have been adopted
- To find out purchasing contribution of profitability and efficient running of the store management.
- To stress the importance of purchasing in an store management in privet sector.
- 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 store management in privet sector 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.
- To the company, it will highlight them on the impact of purchasing in profitability.
- 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
- 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;
- Does the role of the purchasing agents enhances the privet sector needs for selecting suppliers, agreeing terms placing orders and also receiving service in store management?
- Does the role of purchasing regarding to negotiation of the right price for the goods influences the efficiency of store management?
- Does the function of purchasing involve ensuring that goods arrived at the right time and place?
- Is effective purchasing power necessary for the purchase of raw materials used in the manufacturing industries?
- Does efficient purchasing ability promote the profitability and productivity of a manufacturing organization?
- Does purchasing ensure good source of supply?
- 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.
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 trans amadi Port Harcourt though the findings can vividly and validly be applied to all the business organization at large.
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”
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.
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.
This is act of assessing the supplier capability to comply with organization specification.
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.
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.
This entails a proper identification of suitable source of supply or supplier.
This refers according to the study that show the agreement reached by an organization purchaser and the supplier for supply of material component.