The Role Of Purchasing Function In The Nigeria Industries (A Case Study Of Nigeria Breweries Ltd, Ibadan, Oyo State, Ibadan, Oyo State)
The Role Of Purchasing Function In The Nigeria Industries (A Case Study Of Nigeria Breweries Ltd, Ibadan, Oyo State, Ibadan, Oyo State)
Abstract
This study investigated the role of purchasing function in the Nigeria industries of the Nigeria Breweries Ltd, Ibadan, Oyo state. The study based on the assumption that proper inventory management, procurement monitoring, procurement controls, procurement planning, as well as training of workforce can result to better organizational performance. Descriptive research design was followed. The target population of the study was the employees working at the department of procurement from which primary data was collected using structured questionnaire. Data analysis was done using descriptive and regression methods. The study established the Nigeria Breweries Ltd, Ibadan, Oyo state had adopted purchasing function to a moderate extent. It further found out that procurement planning and training workforce are important in influencing the organization’s performance. The study concluded that application of the purchasing function in the organization is founded on proper planning and training workforce. Therefore, recommends that the key procurement actors should come up with viable ways of managing purchasing process. Revitalization of the entire purchasing process should be a requirement as it can help in ensuring that organizations embrace modern technological ways and trends in handling and addressing procurement issues.
Chapter One
Introduction
1.1 Background
Purchasing function are vital functions in the public sector, since purchasing process is generally a critical part of open spending in organizations. Carr and Smeltzer (1997) states that purchasing function comprises of the actions taken by the purchasing organization to navigate and integrate its performance in order to increase productivity by reducing cost and time. The linkage of purchasing function to organizational performance in particular, makes the embracing of best practices important to present organizational success. Procurement is found to be practiced in many industries around the world (Hussein & Shale, 2014). Kabega, et, al. (2016) reiterated that various public organizations both in developing and developed countries have instituted procurement reforms which involve laws and regulations but the main challenge has been inadequate regulatory compliance. Public organizations are found to be big spenders and that they deal with massive budgets (Roodhooft & Abbeele, 2006). In addition, Mahmood (2010) restates that public procurement was estimated to represent 18.42% of the world Gross Domestic Product (GDP). Public procurement is recognized as essential in service delivery and it accounted for a high proportion of total expenditure (Basheka & Bisangabasaija, 2010).
The theories guiding the research are the principal-agency theory (PAT) and the legitimacy theory (LT). The PAT concerns with the understanding that is put in place for an individual or entity (agent) to act in another’s interest (principal). The legitimacy theory asserts that an organization has the mandate to explain its activities to the stakeholders, especially, if it is a public entity and should state how society will benefit from it.
The existence of integration of purchasing function in various organizational operations and support functions, harmonizing production with new orders, purchasing with demand, scheduling and shipping with customer requirements, has contributed significantly to the performance of many public organizations (Baily, 2011). Application of appropriate purchasing function strategically, has the potential impact to the performance of organizations and national economies in general (Keith, Vitasek, Manrodt, & Kling, 2016). However, Singhal (2011) observed that disruptions in purchasing function at any level devastate organizational performance. Poorly coordinated purchasing function do long-lasting damage to organizations’ stock prices and profitability and need to be more thoroughly addressed by supply chain continuity planners (Thai, 2010). For leading public organizations like the Nigeria Breweries Ltd, Ibadan, Oyo state to respond to the current dynamic purchasing environment, it is required to embrace procurement. Since the entire purchasing processes can work well in the improvement of the responsiveness of the Nigeria Breweries Ltd, Ibadan, Oyo state procurement systems.
1.2 Problem Statement
Procurement is deemed to be part of principles of management of plans that focus on effective achievement of performance efficient in public organizations as well as growth of the nation. In practice, when purchasing process is well planned and implemented, it can act as an economic instrument for guaranteeing national development (Keith et. al, 2016). Many of the third world countries are challenged by dynamic procurement revolution and this gives them difficulty on the functioning of procurement and performance together with the inside and outside dealings (Wambui, 2013). The purchasing function are fragile and predisposed to regular discontinuities (Jeppesen, 2010). Karanja and Kiare (2015) indicates that the vulnerabilities in the public and private sector evidenced in the erratic shedding and re-employment of staff when faced with downstream and upstream linkage discontinuities, affect organizational performance. Jibrin, Ejura and Augustine (2014) noted that the major problem in the current procurement industry is not on the limited regulation models but because of noncompliance and pitiable execution process.
Regardless of the effort by the private and public organizations in Nigeria to improve performance of the procurement function, poor implementation and non-compliance to procurement regulations still pose as key challenges (Hussein & Shale, 2014). They are burdened with delays and occasional inability to deliver the goods to the designated organizations (World Bank, 2010). This problem has precipitated to a decline of procurement/supply performance of enormous public organizations (Schiele, Horn &Vos, 2011). With the present estimated spending of about 70% in purchasing and the importance of functions of procurement in contribution of profitability of a firm by over 25%, it will be essential for organizations to come up with a decision on how practices of procurement could assist in meeting organizations goals (Jibrin, et al, 2014).
There are various studies conducted on the topic of procurement and its relation to organizational performance which have given different findings. For instance, Nantage (2011) found out that strategic procurement management has a direct impact on the financial performance of Banks in Uganda. It is necessary to carry out similar study in a different setting and find out if the same suggestion holds in the Nigerian public organizations specifically, Nigeria Breweries Ltd, Ibadan, Oyo state. Kabega et al, (2016) study was on effect of purchasing function on performance of public projects in Rwanda. In their study, they did not include purchasing function like inventory management, procurement controls, procurement monitoring and training workforce of which this study intends to examine. It is also essential to test if procurement planning has an influence on the performance of the Nigeria Breweries Ltd, Ibadan, Oyo state.
A study carried out by Makabira and Waiganjo (2014) on the practices of procurement and corporate organization performance in Nigeria with focus on Nigeria national police service, indicated that procurement controls, procurement planning, procurement monitoring and training workforce in purchasing function have a great role in the performance. The study did not examine how inventory management affects performance which is one of the practices under investigation in this study. Similarly, Oyuke and Shale (2014) did a research on the purchasing function strategies and performance of organization and a unit under investigation was the office of national audit in Nigeria. The findings of this research revealed that most of the respondents lacked training on management of records, and that employee training on management of records affected performance of procurement. This study clearly shows that purchasing function specifically, inventory management is a significant function that lead better organizational performance. Therefore, this study aims to investigate inventory management in conjunction with procurement planning, procurement controls, procurement monitoring and training workforce. A study on strategic purchasing function and procurement performance among commercial banks in Nigeria by Masiko (2013) suggested that the current practices of procurement needed revision as well as strengthening to consequently improve performance of procurement in the commercial banks. However, it is crucial to find out the existing purchasing function among the Nigerian universities with focus on Nigeria Breweries Ltd, Ibadan, Oyo state.
Several researches have been carried out on the role of purchasing function in the Nigeria industries. However, most of them were done in different countries focus on different aspects other than the role of purchasing function in the Nigeria industries. In addition, it was evidenced from this studies that the purchasing process still fail in many public entities. Therefore, the aim of this study was to fill this knowledge gap in literature guided by the following research question: What is the role of purchasing function in the Nigeria industries of the Nigeria Breweries Ltd, Ibadan, Oyo state.
1.3 Objectives
The main objective of this study was to establish the role of purchasing function in the Nigeria industries of the Nigeria Breweries Ltd, Ibadan, Oyo state.
The specific objectives were:
- To establish the extent in which Nigeria Breweries Ltd, Ibadan, Oyo state has adopted purchasing function.
- To determine the relationship between the role of purchasing function in the Nigeria industries in the Nigeria Breweries Ltd, Ibadan, Oyo state.
- To establish the challenges faced in the adoption of purchasing function at the Nigeria Breweries Ltd, Ibadan, Oyo state.
1.4 Research Questions
- What is the extent in which Nigeria Breweries Ltd, Ibadan, Oyo state has adopted purchasing function?
- What is the relationship between the role of purchasing function in the Nigeria industries in the Nigeria Breweries Ltd, Ibadan, Oyo state?
- What are the challenges faced in the adoption of purchasing function at the Nigeria Breweries Ltd, Ibadan, Oyo state?
1.5 Significance of the Study
The outcomes of this study are beneficial to the managers of the procurement department in the Nigeria Breweries Ltd, Ibadan, Oyo state as this research provided insight on how purchasing function affect the organization’s performance. It also helped them to realize how to best deliver in order to improve the profitability, productivity, and image of the University. The approach of this study was also of great benefit to other higher learning organizations as they will be able to scrutinize on how the organizational purchasing function contribute to their performance over and above identify the loop holes that may hinder performance. This can be done in line with the legitimacy theory.
The study is important to policy makers since the findings will assist them have an insight on how the government can control public purchasing function leading to greater achievement and improved performance of public sector organizations seen as a vital plan to increase in growth of economy in Nigeria. This research further provided them with vital information of which they can build on in effort to regulate and align public purchasing process appropriately.
The findings of this study are as well of great value to researchers and academicians as this research added to other scholars’ literature and knowledge gap in purchasing function and filled the existing gaps as far as organizational performance is concerned and therefore, avail them with option for further research in relation to performance based on purchasing function.
1.6 Scope of the Study
This study sought to examine the role of purchasing function in the Nigeria industries. The study focused on the Nigeria Breweries Ltd, Ibadan, Oyo state.
1.7 Limitation of the Study
The researcher encounters some constrain which limited the scope of the study;
a) Availability of Research Material:
The research material available to the researcher is insufficient, thereby limiting the study
b) Time:
The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
c) Organizational Privacy:
Limited Access to the selected organization makes it difficult to get all the necessary and required information concerning the activities.
Chapter Five
Summary, Conclusion and Recommendations
5.1 Introduction
This chapter provides the summary of the study findings and conclusion is made in relation to the findings. The chapter as well provides the recommendations of the study and suggestions for further study.
5.2 Summary of the Findings
The summary of the findings were presented based on the study objectives which were to: establish the extent of adoption of practices of procurement at Nigeria Breweries Ltd, Ibadan, Oyo state, determine the relationship between practices of procurement and organizational performance of Nigeria Breweries Ltd, Ibadan, Oyo state, and ascertain the challenges facing purchasing function at the Nigeria Breweries Ltd, Ibadan, Oyo state. The study reported a response rate of 69 percent. 61.8 percent of the respondents were male. On the other hand, 38.2 percent of the employees investigated were female. Most of the respondents (50%) were found to within the age bracket of 36 – 45 years. 52.9 percent of the respondents in the procurement department at the Nigeria Breweries Ltd, Ibadan, Oyo state had undergraduate degrees while 26.5 percent of the employees interviewed had attained postgraduate degree. 38.2% of the respondents had worked at the Nigeria Breweries Ltd, Ibadan, Oyo state’s procurement department for a period of between 3 – 4 years. 26.4% indicated that they had served at their respective workplace for a period of between 5 – 6 years.
Procurement planning in the Nigeria Breweries Ltd, Ibadan, Oyo state was practiced to a moderate extent through assessment of needs which is practiced by the top level managers of the department for required goods and services (Mean = 3.8) and funds being availed based on the budget reported (Mean = 3.7). Top management was also found to involve in the procurement planning (Mean = 3.6). The respondents agreed to a moderate extent that losses are prevented through continuously checking the purchase processes (Mean = 3.7), procurement bids are evaluated by an independent committee (Mean = 3.7), and invoices are checked against the local purchase order and delivery note before payment (Mean = 3.6). Procurement is monitored to a moderate extent through close supervision of purchases being done as a way of controlling costs (Mean = 3.7) and corrective actions being taken once discrepancy is identified in the purchasing processes (Mean = 3.6). To a moderate extent (Mean = 3.5) training in practices of procurement improved the performance of employees. In addition, training in practices of procurement had improved staff knowledge and skills (Mean = 3.4). Majority of the respondents strongly agreed that the procurement department had put in place systems and processes that identify inventory requirements. Generally, the findings given on purchasing function show that the Nigeria Breweries Ltd, Ibadan, Oyo state had adopted them to a moderate extent.
The key challenges experienced in the procurement department of the Nigeria Breweries Ltd, Ibadan, Oyo state in the adoption and implementation of practices of procurement were found to be: delays in procurement of urgently required goods/services due to restrictions by public procurement and disposal regulations (Mean = 3.5), existence of inadequate planning by user departments (Mean = 3.4), complex regulations being affected by the public procurement act (Mean = 3.3), procurement costs being high (Mean = 3.3), and department facing problem of interference by university management in the purchasing processes (Mean = 3.1). However, the overall mean indicated that the challenges were a threat to Nigeria Breweries Ltd, Ibadan, Oyo state to a less extent. Purchasing function adopted by the university contribute to users’ department satisfaction (Mean = 3.9), and that practices of procurement adopted by the university had resulted in quality goods/services (Mean = 3.6).
The results of the predictor model on the relationship between the independent and dependent variables indicated that all the factors used in this study put together have an influence on the performance of the organization. The regression model provided anR2 value of 0.480. Which means that the independent variables used in this model can explain 48% in variation of dependent variable. The model output provided an Fstatistics value of 4.252 with a p – value of 0.007. On the coefficient results, procurement planning has a significant influence on the performance of organizations as it provided a coefficient value of 0.444 (t = 2.667) and a p – value of 0.014. Likewise, training workforce indicated a significant effect on the performance of the organisations with a coefficient value of 0.332 (t = 2.071) and a significance level of 0.05.
5.3 Conclusion
Based on the findings the study concludes that the Nigeria Breweries Ltd, Ibadan, Oyo state has adopted the purchasing function to a moderate extent and that there is a relationship between the practices of procurement and organizational performance. Practices of procurement which are followed by Nigeria Breweries Ltd, Ibadan, Oyo state include: inventory management, procurement monitoring, procurement controls, procurement planning, and training workforce. However, only procurement planning and training of staff was found to influence the performance of the university.
The application of the practices of procurement in the organization is founded on proper planning. Through proper procurement planning, a firm can be sure of increasing its performance level in form of productivity, cost cutting, quality of goods and services delivered as well as deliveries being made on time. Training on the modern practices of procurement is as well an important recipe in the formation of solid ground which can lead to better performance of an organization. Employees are able to get more knowledge and skills on procurement subject which can enable them have easy time in their daily operations of offering procurement services.
For an organization to realize an increase in procurement performance, should also put in place ways to tackle potential threats that might hinder its competitive advantage. This study realized that delays in procurement of urgently required goods/services due to restrictions by public procurement and disposal regulations, existence of inadequate planning by user departments, complex regulations being affected by the public procurement act, procurement costs being high as well as high department facing problem of interference by university management in the purchasing processes were among the challenges that face organizations in their effort to improve their organizations’ performance. Organizations should therefore create solutions of tackling any threats posed by this hurdles. This can be done through introduction of new trends in handling procurement activities like modern electronic systems.
5.4 Recommendations
This study therefore recommends that the key procurement actors should come up with viable ways of managing purchasing process. To ensure better performance, organizations should not only focus on planning and training but also on the procurement inventory, control and monitoring. Critical revitalization of purchasing process is a requirement as it can assist in ensuring that organizations embrace modern technological ways and trends in handling and addressing procurement issues. The organization’s management in conjunction with other stakeholders should embrace modern ways in planning and should as well come up with well-tailored training programs on practices of procurement.
5.5 Suggestion for Further Studies
This study examined practices of procurement and organizational performance. It is therefore suggested that further researches should be carried out on this subject but in different areas to build and add more knowledge in the area of procurement to determine the perception on practices of procurement and organizational performance. This research only focused on Nigeria Breweries Ltd, Ibadan, Oyo state; nonetheless, it could be appropriate to carry out more studies on other organizations of higher learning to establish more insights on the subject matter.
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