Role And Contribution Of Purchasing And Supply Management Of Profitability Of An Organization
Purchasing and supply management play a crucial role in enhancing the financial viability of an organization by strategically managing the acquisition of goods and services. This function involves the meticulous coordination of sourcing, procurement, and logistics, ensuring the seamless flow of materials essential for the production process. Effective purchasing strategies, driven by market analysis and vendor negotiation, can result in cost savings, directly impacting the bottom line. Additionally, supply management involves risk mitigation, fostering resilient supply chains to navigate uncertainties and disruptions. By optimizing supplier relationships and ensuring the timely availability of resources, organizations can improve operational efficiency and maintain a competitive edge in the market. The interplay between purchasing and supply management becomes particularly evident in achieving profitability goals, where a judicious balance between cost containment and quality assurance is paramount. Successful integration of these functions is indispensable for sustained financial success, as it aligns the organization’s resource acquisition with its broader business objectives, fostering resilience and adaptability in a dynamic market landscape.
The role and the contribution of Purchasing and Supply Management in the profitability of an organization is an important unit in a manufacturing industry and contribute a lot to the growth and profitability of the industry. For production to be effective and continuous there should be an efficient Purchasing and Supply Management in an Organization.
Title Page:
Approval Page:
Dedication:
Acknowledgement:
Abstract:
Table of Content
Chapter One:
1.0 Introduction
1.1 Background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Research questions
1.5 Significance of study
1.6 Scope of the study
1.7 Limitation of study
1.8 Definition of terms
Chapter Two:
2.0 Literature review
2.1 Introduction
2.2 Purchasing function
2.3 Importance of purchasing
2.4 The need of purchasing
2.5 The effect of purchasing function
2.6 The place of purchasing in an organization
2.7 Duties and responsibilities in purchasing
2.8 Management responsibilities
2.9 Ethics in purchasing
2.10 Purchasing objectives
2.11 Management reason for the study
2.12 Summary of related literature
Chapter Three:
3.0 Research Design and Methodology
3.1 Introduction
3.2 Research methodology
3.3 Questionnaire design
3.4 Sources of data collection
3.5 Data collection method
3.6 Method of data analysis
Chapter Four:
4.0 Presentation analysis of data
4.1 Introduction
4.2 Data presentation
4.3 Interpretation of result
Chapter Five:
5.0 Summary, conclusion and recommendation
5.1 Introduction
5.2 Summary of findings
5.3 Conclusion
5.4 Recommendation
References
Appendix
Questionnaire
1.0 INTRODUCTION
1.1 BACKGROUND OF STUDY
For the survival of any organization, be it public or private the difficult is the most vital factor is therefore means the coordination and maximum contribution from each basic function of the organization such as creation, finance, personnel, conversion and distribution, especially the purchasing, function towards the success of the entire organization.
However, efficient performance or the purchasing function is important to the smooth operation of organization and as a result the role of purchasing is latent and conspicuous.
It is a basic responsibility of purchasing function to obtain material of services to ensure that the flow of production is not interrupted. As has been described “purchasing is one of basic requirement for a company to cut cost and thereby increases profits. When are contemplates that for every sales there must be a buyer and that for every sales there must be a buyer and that other side of coin is buying, one in the public sector stripped. The reason for this stems sometimes aroma the wrong interpretation given to the art of purchasing plays an unquantifiable role in field of management activity and contributes highly to profitability. The words Geoff Lancasters, in the journal of 1984 edition of purchasing should acknowledge its latent role as being much broader in its traditionally recognized role of merely being reacquisition facility.
1.1 BACKGROUND OF THE STUDY
NIGERIAN BOTTLING COMPANY PLC
Nigerian bottling company Plc was originated as a soda function beverage in 1886 selling for five least. Early growth was impressive, but is was only when a strong bottling system that coca-cola because the world famous brand as it is today.
1884- a modest start for a bold idea, since the emergence of this organization, it has snifter to market and consumers different types of soda fountain beverages. The number of soda fountain beverages sent to our market by this bottling company plc, in doubt has made tremendous impact on the reduction of the micro economic variables problems in this country through generating to our economy, creation of job opportunities etc the management of Nigeria bottling company plc is a public liability company.
1.2 STATEMENT OF PROBLEM
Business conditions during the recent past placed much strain and pressure and purchasing management function and roles. Critical materials shortage, worldwide inflation and arbitrary action of government seriously interfered with the orderly operation of business. Materialism is the source of out present day Nigeria society and people who are responsible for purchasing function in Nigeria bottling company plc Aba, and other good (public) companies however purchasing management and its allied subject are the newest course read full-time in some higher institution of higher learning and more than seventy percent of firms in Nigeria are yet to embrace this in its most meaningful and realistic dimension.
Much corporate management has been made painfully aware of the shortcomings of the operation of their firms material management function, indeed, it is among the best of the specialized business functions to be centralized and given the responsibility and authority for making profit progress in this area of business management is thus just beginning. The development of purchasing role and function in the (public sector) Nigeria Bottling Company Plc Aba has been badly affected by the “buying syndrome”.
1.3 OBJECTIVE OF THE STUDY
This study is carried out with the following objective.
1. To examine the various role of contribution of purchasing and supply management profitable of an organization available and evaluate their application.
2. To make critical study of problem in the services offered by the firm and suggest solutions to these problems.
3. To formulate the role of purchasing strategies that would be.
1.5 RESEARCH QUESTION
1. Does purchasing department have adequate number of customers?
From the research sampling carried out among customers number (250) one hundred and eighty customers agreed, from (180) (5) disagreed and 20 undecided. Therefore the percentages of the responses are calculated below.
Number of customers Decision arrives Percentage (%)
180 Agreed 72%
50 Disagreed 20%
20 Undecided 8%
Total 250 100%
Calculation of percentage per zone.
180/(250 ) x 100/1 = 72%
50/(250 ) x 100/1 = 20%
20/(250 ) x 100/1 = 8%
Statement: from the above sample 725 of the customers agreed that purchasing department have adequate number of customers, 20% of the customer disagreed with 8% then remain undecided.
RESEARCH QUESTION 2
Do you find out reason why customer waste much time in the company?
From research sampling carried out among customers agreed that much time is wasted that not more than enough time is spent in the company, while 5 of them refused to comment. Therefore the percentage of respondents are calculated below.
Number of customers Decision arrives Percentage (%)
220 Much time wasted 88%
25 Normal time 10%
5 Refused comment 2%
Total 250 100%
Calculation:
The percentage of customers that wasted much time in the company is
220/(250 ) x 100/1 = 88%
88% of the customers wasted their time when transacting business with the company due to nonchalant and indifferent attitude of the staff, 10% of the customers spend not more than enough time in the company, therefore are satisfied with the company service. The percentage is therefore:
25/(250 ) x 100/1 = 10%
While 5 customer refused to comment on the research question the percentage of the customers are:
5/(250 ) x 100/1 = 22%
In conclusion 88% of the customers are not satisfied with the service received from the bank, 10% are satisfied with the level of service rendered to them while 20% refused. Therefore the bank should strive harder to improve its service so as to retain its customers as well as gain more.
RESEARCH QUESTION 3
How was introduction of modern technology such as computer welcome into the system by the staff.
250 staff were interviewed on the before mentioned question, 200 of them welcome it with optimism, 30 among them welcome it with mixed feelings for fear of loosing their jobs to computer while 20 among them rejected the introduction and refused.
Number of customers Decision arrives Percentage (%)
200 Welcome modern technology 80%
30 Received with mixed feelings 12%
20 outright rejected 80%
Total 250 100%
1.5 SIGNIFICANCE OF THE STUDY
This research project in all its tendencies aim at correcting many professional lapses and undue encroachment of unqualified personnel in both private and public sectors. It is intended that the research will keep both the government and industrialists, in setting up their industrial to realize that without efficient purchasing officer the envisaged profit will remain that no previous study was been carried out in purchasing activities in the public sector, but this will in particular reshape the financial profitability of Nigeria.
1.6 SCOPE OF THE STUDY
The study of the role and contribution of purchasing of an organization cover a very complex areas. But in the case of our study it is narrowed to soda fountain beverages production.
1.7 LIMITATION OF THE STUDY
In carrying out this research, the research was cooperated with a number of limitations. Due to finance and time constraints the research was unable to examine all the variable in purchasing in all the leading, public and private companies, limitation of the study to a few public enterprise.
1.8 DEFINITION OF TERMS
1. Purchasing: Is the process involving planning and strategy designed to obtain value for money spent.
2. Vendor: This focuses on the knowledge of selling and buying the person that supplies goods to the buyer is the vendor.
3. Negotiation: Is a conference between one party or person with a view to arriving at a consensus.
4. Material handing: This is the process by which materials are being moved, handed and stored with in and around an establishment with the use of hand or mechanical equipment.
5. Organization: An organization is a group of people who from a business with the aim of making profit or achieving an objective.
6. Storehouse: A storehouse is a building designed to keep materials until when there are needed by the users.
7. Storekeeping: Is a systematic procedure of recording transaction in the store, so that at any given time the stock record will show the actual position of each material held with the store organization.
8. Storekeeper: Is a person who keeps or operate the systematic procedure of recording transaction in the storehouse so that materials held in store will be safeguarded.
Role And Contribution Of Purchasing And Supply Management Of Profitability Of An Organization:
Purchasing and supply management play a critical role in the profitability and overall success of an organization. Effective management of the procurement process can directly impact the bottom line in several ways:
Cost Control:
Negotiating favorable terms with suppliers can lead to cost savings, as lower prices, discounts, or better payment terms can reduce the cost of goods and services.
Efficient procurement practices can minimize wastage, excess inventory, and carrying costs, thereby optimizing working capital and reducing costs.
Supplier Selection:
Choosing reliable and cost-effective suppliers ensures a consistent supply of high-quality materials and services, reducing the risk of production delays and defects that can negatively impact profitability.
Supply Chain Efficiency:
Streamlining the supply chain through effective supply management practices can lead to shorter lead times, reducing storage and holding costs, and improving overall operational efficiency.
Risk Management:
Assessing and mitigating supplier-related risks, such as supply disruptions, quality issues, or geopolitical factors, can protect an organization from costly disruptions and damage to its reputation.
Quality Assurance:
Ensuring that suppliers meet or exceed quality standards can reduce product defects, customer complaints, and the costs associated with returns and warranty claims.
Innovation and Value Addition:
Collaborating with suppliers can lead to innovative product designs, cost-effective materials, and improved processes, which can enhance the organization’s competitiveness and profitability.
Demand Forecasting:
Effective supply management involves understanding market demand and trends, which enables organizations to plan their procurement and production more accurately, reducing the risk of overstocking or understocking.
Inventory Management:
Efficiently managing inventory levels through just-in-time (JIT) or other inventory control methods can free up capital, reduce carrying costs, and improve cash flow.
Compliance and Ethics:
Ensuring that procurement practices align with ethical and legal standards can prevent costly lawsuits, fines, and damage to the organization’s reputation.
Supplier Relationships:
Developing strong, mutually beneficial relationships with suppliers can lead to preferential treatment, better terms, and access to exclusive products or services that can enhance profitability.
Cost Transparency:
Transparent pricing and cost breakdowns from suppliers can help organizations make informed decisions and identify areas for cost reduction.
Market Intelligence:
Procurement teams can provide valuable market insights, helping the organization stay competitive by identifying new suppliers, emerging trends, and potential cost-saving opportunities.
In summary, purchasing and supply management are integral parts of an organization’s profitability strategy. By effectively managing costs, risks, and relationships within the supply chain, organizations can improve their bottom line, enhance competitiveness, and ensure long-term financial success.