Project Materials

IMPACT OF EFFICIENT NEGOTIATION IN PURCHASING FUNCTION IN MANUFACTURING COMPANY

Chapter one

INTRODUCTION

1.1 General Background of the Study 

Negotiation is regarded as an essential component as well as one of the most fascinating topics in purchasing and supply chain management. It is used in purchasing to ensure a fair and reasonable business contract.

As a result of recent material shortages, high prices and galloping inflation, a general unfriendly supply market, and the get-rich-quick syndrome of some suppliers, it would be suicidal for a business firm or government agency to ignore negotiation in its purchasing activities.

Negotiation is the process of planning, reviewing, and analysing used by the buyer and seller to reach an acceptable agreement or compromise on all aspects of the business transaction. (Lee When purchasing materials, some measure of trust exists between the buyer and the seller.

When negotiations begin, there should be equal information on cost and estimates between the parties involved, as a basis for negotiation, but this is rarely achieved except in government research and development (R and D).

The negotiation is typically a dialogue between the buyer and seller to create a contract that is acceptable to both parties.

1.1.1 Brief History of the Company

The company’s name is Rokana Industries Plc Nekede, and it was established in September 1978 as a private limited liability company. The company specialises in manufacturing and was founded in 1978 by Engr. Charles Ugwu, a British-trained industrialist/engineer. Chief Ekemma Geophry is now the managing director, with Engineer Charles Ugwu serving as the company’s CEO.

The factory is divided into three main areas: administration, marketing/sales, and promotion. It has a branch in Lagos, with the registered street address 52 Ogundana Street Allen Avenue Ikeja Lagos. Imported raw materials account for more than 80% of the product’s production.

They also have sales locations in Abuja, Kaduna, and Lagos. The company is hundred percent Nigerian owned while Union Bank Nigeria Plc own 40% shares of the company product produce. Rokana currently maintains four established industrial units.

1. The Cosmetic Units: This unit undertakes the production of the tooth paste, baby-care cosmetics, skin lotions, cream and oiltment. 2. The Plastic Units:

This unit manufactures tooth brush, dental stick, plastic folders, plagues for the Areosol production. 3. Aerosol Unit: This unit generates insecticide air fresheners, fragrances, furniture polish, deodrant etc. 4. The LPG Unit: This unit refills home cooking gas cylinder, providing unstauncheal gas,as propellant to the aerosol production line.

1.5 STATEMENT OF THE PROBLEM

Strictly, this research is a case study of the impact for efficient negotiating in purchasing function in manufacturing organisation at Rokana Industries Limited Nekede Owerri Imo State. The effect for efficient negotiation in purchasing function in manufacturing organisation can not be over emphasised.

This is because when fairly in contract management originate from inadequate negotiation. The problem of the study consequently are as follow: 1. It is fair for firms or organisations to view pricing and negotiation as critical components of contract management.

2. Most businesses use the concept of “I will”; when you lose attitude, it leads to poor project execution.

3. Most people engaging in acquiring of capital and mangement do not possess the necessary talent and expertise of bargaining.

4. The country’s economic state has a significant impact on the quality of the negotiation purchase function in a manufacturing company firm effort. 5. There has been no genuine attempt by corporations to empower bargaining contract managers.

1.3 PURPOSE OF THE STUDY

In view of the problem statement, this study intends to achieve the following objectives.

1. To raise serious awareness among enterprises and their employees about the significant implications for effective contract negotiation, pricing, and contract implementation.

2. To make people understand the value of effective bargaining, which focusses on win-win situations.

3. To raise awareness about the necessity of empowering people involved in contract negotiation, pricing, and management through seminars, etc.

4. To explore how economic factors influence contract negotiation pricing and implementation.

5. Determine whether negotiation contract management and price may be improved through empowerment.

6. To recommend further methods for better negotiation contract pricing and management.

1.4 SCOPE OF THE STUDY

This study would have taken the researcher to all enterprises involved in contract negotiation, pricing, and management in Nigeria, but for obvious reasons, the researcher is only able to focus on the negotiating activities of Rokana Industrial Limited in Owerri.

The researcher believes that this will provide her with a fair standing in other similar organisations. However, the researcher will concentrate on the following department or units inside the organization:-

1. The cosmetic unit

2. The Plastic Unit

3. The Aerosol Unit.

4. The LPG unit

1.5 RESEARCH QUESTIONS.

One crucial goal for a researcher of this nature is to supply the study’s subject matter. As a result, it became necessary to establish research questions on which the answer would be based. These questions are as follows:

1. Are negotiation and pricing fundamental components of contracts?

2. Is poor contract administration linked to poor pricing and negotiation?

3. Does your organisation value proper negotiation before placing orders?

4. Does your company receive any efficiency gains as a result of successful and efficient bargaining through efficient purchasing?

1.7 Significance of the Study

The major purpose of this study is to partially fulfil the requirements for the award of a Higher National Diploma (HND) in purchasing and supply.

The secondary significance is also directed at exploring the academic relationship between classroom theory and what is realistically achievable in enterprises and government establishments, necessitating caution in selecting the research issue.

The third significance of the project is to assist and guide younger students on what to do when writing a project or conducting research.

The fourth significance of the project is to guide industrial purchasing managers through successful and efficient negotiations in order to acquire the “best buy,” which is the ultimate goal of the purchasing function.

1.8 Limitations of the Study

In truth, no successful research of this magnitude can be conducted without meeting problems. This project work was accompanied by some limitations, indicating that it was not without flaws.

The following are some of the issues that were encountered while carrying out the work.

1. Difficulties in obtaining some important documents having valid information on the research topic.

2. The tepid attitudes of several offices that were expected to attend and respond appropriately. Some of those interviewed failed to disclose appropriate information assuming that it may uncover their faults and loopholes.

3. The amount of time spent attending lectures and doing other crucial projects. This cannot be overemphasised.

4. Finally, the researcher faced financial constraints. Normally, a significant amount of money is spent on information collecting and manuscript typing.

1.9 Definition of Terms

The terminology employed in this project job are necessary because they have professional implications in purchasing that differ from the grammatical definition.

1. Purchasing: It’s a continuous management process that is responsible for the anticipation, identification, and the provision of goods and services that are required by an organization with the purpose of helping its profitability or service offered.

2. Negotiation: Is a process of planning, reviewing, and analysing used by buyers and sellers to obtain acceptable agreements or compromises that encompass all parts of the business transaction, not just price.

3. Negotiator: A person who is authoritatively appointed to represent his or her organisation in negotiations. He must be knowledgeable and extensive commercial experience.

4. Vendor: An outside supplier or raw material provider whose equipment or services have an impact on an organization’s operations.

5. Procurement: This covers activities associated with purchasing as well as supplementary functions such as material monitoring and administration, inventory control, receipt inspection, and salvage operation.

6. Price: This can encompass any monetary or non-monetary sacrifices made to obtain a specific product.

7. Pricing:- This refers to the processes involved in determining the price at which a product will be offered. or choosing how much to exchange for anything. i.e., it is a continuous activity that is difficult to complete.

8. Strategy:- It is the selection of an enterprise’s primary long-term objectives, as well as the modification of the course of action and allocation of resources required to attain these goals based on the organization’s presented means or approach to achieving its objectives.

9. Purchasing:- It is the function of management to lease or otherwise obtain equipment, materials, supplies, and services required by an undertaking for production purposes.

10. Cost: The overall amount of money that will be spent by a business. It also refers to the quantity of money you spend in order to buy, manufacture, or do something.