Project Materials

EVALUATION OF THE PURCHASING STRATEGIES OF A PROFIT ORIENTED ORGANIZATION

ABSTRACT

This study sought to improve the purchasing methods of a profit-oriented business by using the Nigerian Bottling Company (NBC) Owerri as a case study. The study looked into the management and employees of the Nigeria Bottling Company. Relevant data were acquired using a questionnaire and oral interviews designed to extract valuable information for this purpose. The main conclusions were that: 1. Purchasing methods play a considerable effect in the profitability of a profit-oriented company. 2. The Nigeria Bottling Company buys raw materials rather than producing them. 3. Nigeria Bottling Company follows a centralised purchasing policy. 4. Centralised purchasing generates more profit. The purchasing policies of Nigeria Bottling Company are cost effective. Based on the results of the investigation, the following recommendations were made: 1. The corporation should reconsider its purchasing strategies. 2. They should make the purchasing department more professional. 3. They should be flexible in their purchasing decisions.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

A few years ago, there were significant disagreements regarding what purchasing strategies meant as a specialised instrument for profitability. These disagreements emerged among planners, students, corporate leaders, and many other people. Those who recognised purchasing functions concluded that they had existed since the emergence of man.

To begin with, the term purchasing is frequently used in industry, commerce, public enterprises, and management to denote the act of acquiring materials, supplies, or services. It entails spending money, whereas the phrase purchasing merely reflects the act of buying.

It include establishing the material requirements, identifying suppliers, negotiating the appropriate price or order, and following up to assure proper delivery. It also requires an understanding of the nature of market forces, such as demand and supply.

The 19th century saw purchasing take on the role of place management. The purpose of purchasing is to ensure the supply of raw materials, products, equipment, components, spares, fuel and power consumables, and services for use or resale by an organisation in the appropriate quantities, quality, location, time, and at the appropriate economic cost in order to increase profitability.

Other purchasing tactics include determining requirements, making procurement decisions, bidding, vendor supplier selection, negotiation contracting, other processing expecting delivery, material handling, storage, and distribution within the organisation.

Furthermore, purchasing strategies include supplier development, value analysis, and harmonious relationships with other functional units such as manufacturing, design, engineering, inspection, maintenance, finance, marketing, personnel, and transportation departments.

Purchasing employs some administrative tools, such as planning, coordination, organising, directing, and regulating, to achieve its goal of providing an unbroken or continuous supply of commodities to suit the needs of user departments.

This raises the possibility that the task is extremely difficult, requiring large-scale planning and organisation, coordination of a diverse variety of specialists, technical and other services, and day-to-day business management issues.

Some organisations have a vague understanding of what purchasing entails, viewing it as a function associated with clerical responsibilities and a services role whose primary goal is to spend the corporate budget. Because of this assumption, the role is typically pushed to the background by placing it under the supervision of the chief accountant or treasurer, so limiting the active performance of purchasing practitioners.

It is not the purpose of this article to enquire as to why it has taken so long for the general adoption of all of these vital functions. However, those concerned with the growth of purchasing effectiveness as a major component of the business system must recognise that they now have a better opportunity than ever before to make their argument.

In between the two extremes, the researcher discovered an important area to investigate: what purchasing methods have to justify them as a management activity, as well as their contribution to organisational profitability.

The researcher discovered that the latter school of thought wrong in the majority of their postulations, and the work goes on to demonstrate how, using empirical evidence.

It was discovered that given the appropriate organisational status and framework to challenge bogus specifications, the right to define corporate resource strategy, and the ability to forecast and make top management decisions regarding material supply at the corporate level, purchasing strategies have a greater potential to contribute to the probability drive and growth of any organisation.

As a beverage maker, Nigeria Bottling Company Plc’s manufacturing of Coco-Cola bottles is deemed ideal for analysis. This corporation has its corporate headquarters at LPP House Ebute-metta in Lagos, with twenty

According to the maiden issue of APASS Journal, the purchasing technique offers a high potential for profitability if properly investigated. He went on to say that uniformed generals should not be allowed to continue purchasing in areas where they could trespass because they had been exposed to some components of the buying function or industrial management linked to purchasing and supply.

Because most CEOs lack knowledge, the share of labour costs decreases while the cost of materials management increases. There is an issue with effective scheduling and specification, as well as inventory control, which will reduce the quality of incoming material management.

Also, improvements in production equipment tend to shorten the life of capital equipment, increasing the frequency of such purchases. There is also the issue of efficiency in jobs in an organization’s profit maximisation. It is then necessary to determine the following.

1. Conduct an important study finding into existing industries or organisations to assess their level of expertise and begin bringing this into focus in terms of purchasing jobs and their contribution to profitability.

2. To emphasise these shortcomings for the benefit of those whose ignorance must be eradicated by enlightened measures.

3. To investigate aspects of purchasing techniques that are similar to managerial activities.

4. To demonstrate its impact to profitability using genuine and collected information.

5. This research endeavour also proposes, through a survey of current literature, to determine whether there are twenty-one (21) different plants in Nigeria that offer a variety of product lines for the learning customer.

1.2 Statement of The Problem

The researcher gathered materials and facts from an organisation and appropriately analysed them due to the fact that purchasing is still not recognised in Nigeria as a management activity that should be handled by competent and experienced experts who report solely to top management.

This function is still being handled by inexperienced purchasing professionals. Whether or whether exposure has taken place in this direction. Stock control, sourcing, managing buy requisitions and orders, tendering, and other related issues.

As a result, it is dissatisfying that this noble job is still delegated to the chief accountant or treasurer in most public organisations, notably local government, higher educational institutions, ministries, parastatals, and quasi-bodies, which are mismanaged by functionaries.

All of the concerns listed above must be addressed in order to prevent both the public and private sectors of the economy from collapsing due to their ignorance and inability to recognise the benefits of purchasing.

1.3 PURPOSES OF THE STUDY

The classical definition of the purchasing objective is to purchase materials and services of the correct quality, quantity, price, source, and timing. Given the lack of knowledge among most top management executives and the unpredictable nature of the corporate environment, fall appreciation of purchasing methods as strategic.

1.4 RESEARCH QUESTIONS

From the beginning of purchasing plans until the present day, most profit-oriented organisations have not deemed them beneficial. It is too disturbing to see such a level of neglect on the part of management in relation to this profitability strategy as has been demonstrated by the majority of organisations. However, the researcher is disturbed by the following questions:

1. Do purchasing tactics have any substantial impact on the profitability of a profit-oriented organisation? like (Nigeria Bottling Company) (NBC).

2. Whether the Nigerian Bottling Company (NBC) produces or purchases their products.

3. Whether the NBC adopts centralised purchasing practices.

4. Which of the Nigerian Bottling Company’s procurement policies is the most profitable. (NBC)

1.5 Statement of Hypothesis

Ho: The Nigerian Bottling Company’s (NBC) purchasing strategies have had no positive impact on the company’s sales growth.

Ho: The Nigerian Bottling Company’s (NBC) purchasing policy is ineffective.

1.6 Significance of the Study

This study anticipates that every organisation will gain from it in terms of management provided the purchasing strategy is implemented correctly. It should add to profitability while also facilitating management processes. This role purchasing strategy will improve the technique of issuing purchase orders, purchase requisitions, and identifying the appropriate vendors.

It will go a long way towards determining the proper vendors. It will help to solve the problem of mismanagement in industries by increasing efficiency and effectiveness, allowing it to cooperate with other associated departments such as accounts, personnel, production, quality control, and so on, and ultimately leading to profitability.

Managers of various businesses will benefit from this research because it will now serve as a foundation for success or profit in their respective fields. Planners and decision-makers will also benefit from this research because it will serve as the foundation for their organisations’ future forecasts.

This research will aid in the best selection of suppliers in industries, as well as the effective development of new products to improve revenues while lowering expenses.

If the role of purchasing strategy is fully recognised, the company’s cost structure, appropriate quality/value balance, and efficient and intelligent purchasing methods will be implemented.

1.7 SCOPE AND DELIMITATIONS OF THE STUDY

No single field of study can claim to have all of the answers to all issues. Containing humanity. The initial goal of this study is therefore cognitive. Its dimension, however, is never veiled; it seeks to transform the policies and procedures required by upper management into practical guidance.

To take advantage of the significant contributions that purchasing techniques provide to profitability. This study cannot claim to have completely explored the subject matter’s conclusions because the necessary statistical data either did not exist, had incorrect or biassed information, or were withheld by staff members.

Another issue was time, which exacerbated the researcher’s inability to collect responses from as many companies as required. The researcher found it extremely difficult to secure funds for the research due to the economic downturn.

1.8 Definition of Term

It is necessary to define the majority of the terminology used in this article.
1. PROFITABILITY: The ability to contribute to an organization’s profitability.

2. PURCHASING: These terms are used interchangeably but refer to a similar process.

3. INVENTORY CONTROL: The ongoing arrangement of receipts and issues such that stock balances are used to maintain the current rate of consumption in relation to the economy.

4. MANAGEMENT ACTIVITIES: Activities related to management, such as direct planning, organisation, strategy, and coordination.

5. SOURCING: Finding or developing suitable sources of supply.