Purchasing Function In The Procurement Of Capital Equipment
(A Case Study Of Jacob’s Wine Limited Mgbidi)
In procurement, the purchasing function plays a critical role, particularly in the acquisition of capital equipment. This function encompasses various strategic activities, including sourcing suppliers, negotiating contracts, and managing supplier relationships, all aimed at obtaining the necessary equipment at optimal terms and conditions. Effective purchasing involves meticulous planning to identify the specific requirements of the organization, considering factors such as quality, cost, and delivery timelines. Additionally, it entails conducting thorough market research to assess supplier capabilities and identify potential risks. By leveraging purchasing expertise, organizations can streamline the procurement process, mitigate risks, and maximize value from investments in capital equipment, thereby enhancing operational efficiency and competitiveness in the market.
Precisely this piece of work which concerns itself with the topic” purchasing function in the procurement of capital equipment has it in details as chapter introduced us to the topic, chapter two obviously tells us all we need to known about the topic while the proceedings chapter relates about the data used as the sources of information. The fourth chapter served as a personal interview with the manager of Jacobs wine Limited and the fifth chapter the summary, conclusion and recommendation was drawn.
Title Page
Approval page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE
1.0 Introduction
1.1 Background of the study
1.2 The Statement of the problem
1.3 The Objective of the study
1.4 Research questions
1.5 Significance of the study
1.6 Scope of the study
1.7 Limitations of the study
1.8 Definition of terms
CHAPTER TWO
2.0 Literature Review
2.1 What is capital equipment
2.2 Attribute of capital equipment
2.3 Purchasing function in capital equipment procurement
2.4 Service as a factor in capital equipment purchase
2.5 Procedure for purchasing capital equipment
2.6 Purchasing of used equipment
2.7 The challenge of procuring capital equipment
2.8 Buying capital equipment
CHAPTER THREE
3.0 Research design and methodology
3.1 Introduction
3.2 Research design
3.3 Sources /methods of data collection
3.4 Population and sample size
3.5 Sample techniques
3.6 Validity and reliability of measuring instruments
3.7 Methods of data Analysis
CHAPTER FOUR
4.0 Presentation, Analysis of data
4.1 Introduction
4.2 Presentation of data
4.3 Analysis of data
4.4 Interpretation of result(s)
CHAPTER FIVE
5.0 Summary, Conclusion and Recommendations
5.1 Introduction
5.2 Summary of findings
5.3 Conclusion
5.4 Recommendation
References
Appendix
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Purchasing has a very vital function to play here as the buying of capital equipment differs substantially from the purchase of production materials and supplies.
The purpose of this work is to conduct an in dept research on the function played by purchasing in the procurement of capital equipment in Jacobs wine limited. To star with, we have to understand what capital equipment procurement is and how it is done at Jacobs wine limited. Capital equipment procurement therefore, is the purchasing of those items of machinery and equipment whose long life and high value require that they be carried on the balance sheet and depreciates over a period of time.
Specifically, therefore, the purchasing department in Jacobs wine, limited plays a distinctive function in the acquisition of capital equipment (items) as compared with the acquisition of production materials. In the procurement of capital items the purchasing department acts primarily in a service capacity as it gathers information, a contract administrator and acts as purchasing consultant to management.
The focal point of this research work is on Jacobs wine limited Mgbidi that is why the research want to know the purchasing function in the procurement of capital equipment Jacobs wine limited, a wine distilling firm is located in Mgbidi, Imo state it was established in 1985 by Dr Jacobs Frank (Phd) and was later incorporated in 1989. The company is committed to integrating suppliers into their long-term business process, this is done by early improvement of their supplier into their business plan to encourage good buyer/suppliers relationship.
Jacobs wine is involved in large scale production of pineapple based wine. Their winery remains the first and only commercial pineapple winery in Africa and second in the worlds.
The company has the following range of products, Jacobs pineapple wine Jacobs red candid wine Jacobs while candid Jacobs candid pineapple and Jacobs Topman wine while the spirit include addles dry gin and top brandy. The company’s production capacity perineum is 1.09 million liters.
As a matter of policy, Jacobs wine Mgbidi, is committed to giving its numerous customers both in Nigeria and across the shores, good value for their money. Right from inception, the company’s watch word is: “quality” a policy which it has maintained which has made the product to enjoy consumer preference and high patronage in the face of competition.
1.2 THE STATEMENT OF THE PROBLEM
There are several ways in which statement of problems are being stated in purchasing department in Jacobs, wine limited Mgbidi.
1. It is work mentioning that unpredictable number of requisitions and changes in quality specifications of actual amounts and time of delivery as specified by the department hinders the progress of the department (lead time).
2. The ideal of employing those that are not qualified or technically intellectuals also hinders the progress of the department hasty decisions often lead to problem of ill-fated investment and poor technical output of equipment in production use.
3. The process of not passing through quality control is the most crucial situation because before any product can be said to be of good quality and standard, the idea of weighing and knowing that quality of the product is encouraging.
4. Also, due to lack of adequate knowledge of purchasing most executives unknowingly reduce some proportion of cost associated with labour, there by increasing the cost concerned with materials management, which usually affects final price of their product.
5. The research intend to ascertain the purchasing function in the procurement of capital equipment under review, i.e. Jacobs wine, which is a wine distilling firm is faced with the problem of how to plan, manage and develop a sound supply base, that will ensure steady supply the raw- materials needed for production
1.3 OBJECTIVE OF THE STUDY
The purchasing capital equipment for manufacturing becoming more complex. As north American manufacturers strive to compete in a global compete the in new equipment takes on a more important role. Business leaders are now looking beyond the machinery itself in the purchasing process in order to uncover advantage. Companies now evaluate everything that surrounds the machine tool in addition to the normal productivity and cost savings calculation already commonly need and intended use of the machine, this is normally a starlight forwards analysis of capacity both for today and projected planning along with the resulting productivity increases expected from the new machine. It is rather easy if the intended use is identical to the process already in place.
Labour is perhaps the most important factor in justifying a new piece if production equipment, productivity of the factory worker is for certain taken into consideration, nut how far? How easy is it for the operator to learn the new machine? Long will it take the operator to “master” the machine function so the full benefits that are purchased are finally realized?
So therefore, the purchasing department in Jacobs wine limited can also play a wonderful role in the procurement of capital equipment.
Basically, the success of a business enterprise depends in every bit as much on the purchasing executive who administers the other functions of the business.
Therefore, with this frame of work one should be able to identify capital equipment procurement.
1.4 RESEARCH QUESTION
The research questions intend to elicit comments from both management and staff of Jacobs wine Mgbidi in how purchasing function affects their organization and the function played by purchasing staff in the organization. Hence, the following question.
1. How does the purchasing department in your organization in plays a tremendous role in the procurement of capital equipment?
2. How cash one identify capital equipment and the function of purchasing department in the procurement of capital equipment in your organization with this frame of work?
3. Is the purchasing function actually understood by your company?
4. How does the understanding or lack of it affect the general performance of the organization?
1.5 SIGNIFICANCE OF THE STUDY
The study will be of benefits to the following.
1. The writer or researcher it is a equipment for the award national diploma in purchasing and supply.
2. To other students who may be faced with familiar problems – it will serve as a data bank from which they can make references.
3. To the firm of case study Jacobs wine, to measure their performances as far as capital equipment procurement is concern.
4. Also, buyers and decision makes in other organization will gain from this research as this will help them in their own suppliers (s) selection that will also increase profit reduce costs.
1.6 THE SCOPE OF THE STUDY
The study of the function of purchasing covers a very complex are.
But in the case of our study capital equipment in Jacobs wine limited Mgbidi, Imo State.
1.7 THE LIMITATION OF THE STUDY
Since the purpose of this study is to look into the efficient function- played by the purchasing department in Jacobs wine limited Mgbidi. Therefore, the scope of the study would be limited to such areas.
The main limitations encouraged in the course of carrying out this study were time and finance.
Due or the work involve in classes, it was not easy to squeeze out adequate time to complete the project so quickly and also the availability of money to take care of the financial aspect, the collection of data was not constant and so as a result of all these, the project look longer than necessary.
1.8 THE DEFINITION OF TERMS
(A) PROCUREMENT
This is the aspect of obtaining equipment and this obtaining of equipment can be made through cash, credit, cheque etc,
(B) VENDOR
This expatiates in the ideas of selling and buying and the person those suppliers goods to the buyer is the vendor.
( C) NEGOTIATION
This is a conference with another person with a view of reaching to an agreement. Larmarlee and Dober (1983 see negotiation as a process of planning, reviewing and analyzing used by buyer and sellers to reach acceptable agreement or compromises.
(D) PURPOSE
What the actually is the prime purpose (aim) of the equipment. This consist of the things the equipment can serve as whether for production or resale
(E) FLEXIBILITY
How versatile the equipment can be used all other purpose other than those fro which it was primarily acquired.
(F) STANDARDIZATION
Is the equipment compatible with any already installed thus reducing cost of holding spares.
(G)LIFE
This usually ropers to the period before the equipment will start to depreciate or become obsolesce. However, it is not necessary to link depreciation to the total life span. It is intended to be disposed before it is obsolete or unusually.
(H) RELIABILITY
This is the ability of a product to service specific conditions within a given period.
(I) DURABILITY
This concerns if the equipment can sufficiently result for its intended use and if equipment will be efficient in doing its jobs.
(J) PRODUCT QUALITY
British standard institution definers quality as the totally of features of product or service that bears upon its ability to satisfy a given need. And defective output proportionally increase the cost per unit of output.
(K) COST OF OPERATION
Cost of power, fuel and maintenance with special labour or addition costs that are incurred during operations.
(L) COST OF INSTALLATION
Does the price of the equipment include cost of installation commission and training of operators?
Purchasing Function In The Procurement Of Capital Equipment:
The purchasing function plays a critical role in the procurement of capital equipment for organizations. Capital equipment refers to long-term assets, such as machinery, vehicles, technology infrastructure, and other major assets that are essential for a company’s operations. Procuring capital equipment involves substantial investments, and effective purchasing is essential to ensure that organizations get the right equipment at the best possible value. Here are key considerations and steps in the purchasing function for capital equipment procurement:
Needs Assessment: The process typically begins with a comprehensive assessment of the organization’s needs. This involves identifying the specific equipment required, its specifications, quantity, and the expected performance and capabilities. Engaging with end-users and relevant departments is crucial to understanding their requirements.
Budgeting and Financial Planning: Determine the budget available for the capital equipment procurement. This includes not only the purchase cost but also ongoing maintenance, training, and any other associated costs.
Supplier Identification: Research and identify potential suppliers or manufacturers of the capital equipment. Consider factors such as reputation, reliability, quality, and pricing. It’s often beneficial to establish relationships with trusted suppliers who can provide ongoing support.
Request for Proposal (RFP) or Quotation (RFQ): Depending on the complexity of the procurement, organizations may issue RFPs or RFQs to potential suppliers. These documents outline the equipment specifications, terms, and conditions, and request detailed proposals or quotations from suppliers. This process helps in comparing offers and selecting the best fit.
Evaluation and Vendor Selection: Evaluate the responses from suppliers, considering factors like price, quality, warranty, service and support, delivery lead times, and the supplier’s track record. Select the vendor(s) that best meet the organization’s needs and budget constraints.
Negotiation: Negotiate the terms and conditions with the chosen supplier(s). This can involve price negotiations, warranty terms, payment terms, and other contractual agreements. It’s important to strike a balance between getting the best deal and maintaining a positive long-term relationship with the supplier.
Due Diligence: Conduct due diligence on the selected supplier(s) to ensure their financial stability and ability to deliver as promised. This may involve background checks, site visits, and reference checks.
Contract Finalization: Once negotiations are complete and due diligence is satisfactory, finalize the contract with the chosen supplier(s). The contract should outline all terms and conditions, including delivery schedules, warranties, and payment terms.
Order Placement: Issue purchase orders or contracts to the selected supplier(s) to initiate the procurement process. Ensure that all parties involved understand their roles and responsibilities.
Monitoring and Performance Management: Continuously monitor the progress of the procurement, including delivery schedules and quality assurance. Establish key performance indicators (KPIs) to track supplier performance.
Delivery and Acceptance: Receive and inspect the delivered capital equipment to ensure it meets the specified requirements and quality standards. Acceptance may involve testing and verification.
Payment: Make payments to the supplier(s) in accordance with the agreed-upon terms and conditions.
Asset Management: Implement an asset management system to track and maintain the newly acquired capital equipment throughout its lifecycle. This includes routine maintenance, repairs, and eventual disposal or replacement planning.
Supplier Relationship Management (SRM): Maintain an ongoing relationship with the supplier(s) to address any issues, obtain necessary support, and consider future procurement needs.
Effective purchasing of capital equipment is critical for an organization’s long-term success and competitiveness. It requires careful planning, thorough research, and diligent execution to ensure that the equipment acquired meets operational requirements while managing costs and risks effectively.