Assessment On The Importance Of Purchasing Procedures In An Organization

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Assessment On The Importance Of Purchasing Procedures In An Organization


Abstract


The research study main aim was to determine the effects of purchasing strategies on organisational performance a case study of Goshen children hospital Owerri with specific objectives being to examine how quality management affects purchasing strategies at Goshen children hospital Owerri; to establish how supplier optimization affects purchasing strategies at Goshen children hospital Owerri; to examine how vendor development affects purchasing strategies at Goshen children hospital Owerri; to establish how risk management affects purchasing strategies at Goshen children hospital Owerri. The findings were the reference point to other researchers in the same field and the knowledge generated by this study will enable scholars to improve and develop a better understanding on the subject. The study was anchored on the following theories goal setting theory, institutional theory and expectancy theory. The study variables are quality management, supplier optimization, vender development and risk management. The study adopted a research design that is descriptive with the target population being 100 respondents comprised of senior managers, middle level managers and non-management that were randomly selected. Stratified proportion sampling was involved in order to get a suitable unit of representative of analysis.

Questionnaires were administered as the main data collection tool. Questionnaires were pilot tested before being administered to the target audience. Analysis of data has been described with the aid of descriptive statistics and analysis was done using SPSS, statistics and quantitative methods. The study established that quality management influences purchasing strategies at Goshen children hospital the way suppliers are identified and developed. The study also established that purchasing strategies at Gertrude children hospital are very effective and affects performance and also vendor development, supplier optimization affects purchasing to some extent but not as much as risk management. The study recommends that Total quality management schemes should be adopted by the Management of Goshen children hospital. To ensure quality management is enhanced throughout the processes of purchasing in the organization. By so doing the organization will be better placed for better performance and be very competitive and the procurement department should quarterly review their operational and strategic policies; the process should involve all the staff members, section heads, main suppliers and board of trustee to enable sound decision making.


Chapter One


Introduction

1.0 Introduction

This section reviews the research study background, problem statement, objectives, research study questions, significance and scope of the study which to determine the effects of effects of purchasing strategies on organisational performance a case study of Goshen children hospital Owerri.


1.1 Background of the Study

According to Terpend, Dooley and Krause (2011) describe. There is a direct connection between purchasing strategies and organization strategy. In other words purchasing strategies, purchasing decisions and purchasing practices are commonly used interchangeably to express decisions that are considered at various stages of the purchasing process (Van Weele, 2010). With reference to operation management purchasing strategies is referred to as decisions on quality purchased, number of suppliers and supplier optimization strategies among others. According to Cannon and Perreault (2009) organizations continue to struggle with strategies in relations to suppliers and buyers. They further indicate that it’s the buyer who decides on what to purchase or not and they have outlined numbers of constructs such as information exchange, operational linkage and legal bond.

Terpend, Dooley and Krause (2011) explain that purchasing strategies are practiced in most organizations based on trial and error that have affected the business environment. Research has shown and identifies several factors that affect and determine the choice of purchasing strategies such as the market, the product, the industry or the portfolio model. According to Caniels and Gelderman (2010) portfolio model is the most cited model where buyer and supply market strength is considered while Cox (2013) focuses specifically on the power of his portfolio model which classify buyer supplier power into four aspects; the buyer might have dominance, the supplier might have dominance, they might be independent of each other and they might be mutually interdependent. The buyer can leverage supplier’s performance on cost and quality and to maintain only normal returns for the supplier this occurs when the buyer is on a dominance position. While in the interdependence position all the parties have resources that require them to closely work together. But within the independent position where none of the partners has leverage, it’s suggested that all the parties must accept the existing quality levels and price (Cox, 2013). He further suggests that the situation to slightly favour the buyer when the supplier have few chances to increase leverage. And finally when the supplier is in a dominance position, the supplier is required to incorporate market strategies against the potential competitors to increase more than normal returns and the buyer is expected to be the receiver of quality and price. The ideal position of suppliers would be monopoly ownership on the in-imitable resources subject to transaction and highly valued in the supply chain. For buyers on the ideal position is to have monopsony power in being able to source from suppliers in highly economical markets (Cox, 2013).

1.1.1 Organizational Performance

Organizational performance is a major factor that maintains efficiency and effectiveness of organization that makes a company to be more competitive at the market place. Establishments are formed with employees, for that reason executives have to determine the causes that lead to deteriorating of performance. Therefore it’s important to understand internal forces as well as external forces affects performance of companies in general (Green & Heywood, 2007). According to Pinder (2008) efficiency of organization performance can be determined by natural aptitude that the organization acquires over time. The reason why a person is motivated to perform certain tasks but he does not have the required knowledge for the job which they are required to do; work can still be affected due inadequate skills required. According to Kreitner and Kinicki (2011), workers’ ability in determining the effectiveness of performance is crucial for the organization, although staff with high motivational level can still perform-well if they possess sufficient skills. In order for staff to remain relevant at the work place their skills and ability to do carry out in any assignment given to them by their employers. Individual performance can be identified by role perception (Locke, 2011).

1.1.2 Profile of Goshen children hospital

The hospital was established in 1947 with land donation from Colonel Ewart Grogan in memory of his loving wife Gertrude Edith. Goshen children hospital is a charitable trust which implies that all profit are ploughed back in the hospital. The organization is managed by board of trusties who offers their services voluntarily in running daily activities of the hospital and they are also responsible for all policy decisions and they don’t receive any rewards or emoluments for the charitable work they do. The monies the hospital receives are used for hospitals routine management. In April 2008 the hospital marked its Diamond Jubilee which also marked as formal opening of new outpatient department that included Accident and emergency unit and the Doctors plaza. The means that the hospital can know offer one stop paediatric center that can provide all available treatment that a child can require.


1.2 Statement of the Problem

Procurement departments are under considerable pressure to deliver performance improvements in order to achieve financial saving through more efficient and coordinated service delivery. Organizations are in demand of increasing professionalism in the procurement process. Procurement practices such as risk management, planning and supply performance influence organization in achieving communication and collaboration capabilities and at the same time maintaining the flexibility and responsiveness capabilities of market-oriented governance structures. Procurement best practices help organization in achieving cost reduction, new product development, improved inventory management, information management, improved customer service, material flows and improved performance in the organization. According to Hassanzadeh and Jafarian (2013) best practices are viewed as a strategic function working to improve the organization profitability reduce raw material prices and cost and identifying better sources of suppliers.

Several studies have been conducted on best procurement practice and organization performance such as Lee (2009) conducted a study on procurement best practices as measure for improving efficiency, quality and delivery performance of suppliers. Another study conducted by Mark, Wilson and Ram (2010) to investigate the implementation of lean procurement among SMEs. In Kenya there are few organization have successfully embraced procurement best practices like a study conducted by Gitahi (2011) on e-procurement and employment qualification of procurement staff at Cadbury Kenya ltd. Goshen children hospital like most organization are affected by changes in the external environment that include trading blocks, inadequate free movement of goods, increasing cost of inputs, increased competition and improved customer awareness. Despite all the measure put in place the organization still have challenges with its procurement process there are concerns with regards as it was suspected that some brokers are being selected to provide services at children hospital. And there is a need to examine how the different vendors are selected and how their selection has an implication on their performance of the organization. This means measuring output in terms of time and quality of delivery as per laid down standards it’s in this light that current study intends to determine the effects of purchasing strategies on organisational performance at Goshen children hospital.


1.3 Objectives

The underlying study objective is to determine the effects of purchasing strategies on organisational performance a case study of Goshen children hospitalOwerri.

1.3.1 Specific Objectives
  1. To examine how quality management affects purchasing strategies at Goshen children hospitalOwerri.
  2. To establish how supplier optimization affects purchasing strategies at Goshen children hospitalOwerri.
  3. To examine how vendor development affects purchasing strategies at Goshen children hospitalOwerri.
  4. To establish how risk management affects purchasing strategies at Goshen children hospitalOwerri.

1.4 Research Questions

  1. To what extent does quality management affects purchasing strategies at Goshen children hospital Owerri?
  2. Does supplier optimization affects purchasing strategies at Goshen children hospital Owerri?
  3. To what extent does vendor development affects purchasing strategies at Goshen children hospital Owerri?
  4. To what extent does risk management affects purchasing strategies at Goshen children hospital Owerri?

1.5 Significance of the Study

To management of Gertrude’s hospital, scholars and individual researchers who used this study as basis for conducting research in the same area to identify gaps in this study. The board of directors and management can identify areas of weaknesses and the need to seek strategies to know the importance of having efficiency of supply of products and how to improve them.

Procurement department at Gertrude’s was able to see suppliers who ensure operations are being performed in a manner that is appropriate as it applies to their ethical, legal, environmental and social responsibilities, from the study findings for the important information the study shall obtain from the field will help in policy formation and better management of funds allocated to strategic purchasing.


1.6 Scope

The research was confined to Goshen children hospital head office located in Owerri. This study was conducted in the month of May to July 2018. The researcher sampled employees in all level of management and non-management staff in providing needed research information. The study targeted 250 employees at Goshen children hospital.


1.7 Chapter Summary

The chapter provides study background information the much need information needed to place the study problem in proper context and understanding, the chapter includes the outlines the background of the study, statement problem, study objectives, significance and study scope. Therefore this chapter guided as the as the norm which study variables are reviewed and study is conducted in order to achieve the main research objectives and determine the effects of effects of purchasing strategies on organisational performance a case study of Goshen children hospital Owerri.


Chapter Five


Summary, Recommendations and Conclusion

5.0 Introduction

The section of the study covers summary of the research findings, study recommendations and conclusion that is based on the study findings in relation to study variables with the aim of determine the effects of purchasing strategies on organisational performance a case study of Goshen children hospital Owerri.


5.1 Summary of Findings

Out of 100 distributed questionnaires 85% were full filled and return and 15% were not returned or were not fully filled. The valid sample that was used in the study represents 85% response; the female respondents were the majority while the male were deprived. Female were at 59% while the female respondents who participated in the study made 41%. The respondents were required to indicate their marital status. A majority of the respondent at 61% were married, 25% were single, 7% were separated while 2% were widow (er) and 5% were divorced. They were also respondents were required to indicate their age bracket 8 % indicated 18 years to 25 years, 34 % indicated 26 years to 30 years, 25% indicated 31 years to 35 years while 15% indicated 40 years to 45 years and 18 % were 46 years and above. Respondents were required to indicate their highest level of education and the majority at 49 % indicated degree, 34 % indicated master level of education and 11% indicated collage level education while 6 % were pursuing PhD or had as their heist level of education. Respondents were required to indicate how many years they have been in service. 14 % indicated 1year – 5 years, 38 % indicated 6 years – 10 years while 31 % indicated 11years – 15 years and finally 18 % indicated 16 years and above. The research findings indicated that the respondents had worked in the organization 80 % had worked for over 5 years in the organization the respondent had long experience in service; among the respondents were required to indicate their jobs ranks 11% indicated senior level management and 26% were middle level management while 64 % indicated non-management staff. This shows that all categories in the organization were well presented in the study.


5.1.1 Quality Management

Respondents were required to indicate if quality management affects purchasing strategies at Goshen children hospital; 88% agreed that quality management affects purchasing strategies and 12% disagreed that it doesn’t affect. Respondents were asked to what extent does quality management affects purchasing strategies at Goshen children hospital. 33 % indicated very great extent, 35 % indicated great extent, 12 % indicated moderate extent while 6 % indicated very little extent and 12 % indicated very little extent. Respondents were asked to indicated how effective are purchasing strategies at Goshen children hospital; 35 % indicated very effective,33 % indicated effective , 12 % indicated its moderate while 14% indicated little effective and 6 % indicated not effective. Respondents were asked to what extent does purchasing strategies affects organisation performance at Goshen children hospital. 33 % indicated very great extent, 35 % indicated great extent, 12 % indicated moderate extent while 6 % indicated very little extent and 12 % indicated very little extent.

The findings are in line with Berry, Zeithaml and Parasuraman (2007) explains perceived quality focuses on the extent in which discrepancy between customer expectations and the level of quality they perceive that have received. Customer perceptions and expectations are both entirely subjective. However they define service quality as perceived by the customers as being a purely individual estimation curtailing from the position of the client. A study by Park and Yoo (2007) established that service quality is the extent to which a firm is capable of effectively satisfaction of customer’s objectives. Quality is what every organization strives to thrive on and it’s a challenge to most organisation. Clients are more informed and increase in demanding quality product and services, they also confirm whether product brand is certified and it’s of good quality. The level of product quality has an impact on organization performance which directly influence and develop trust.

5.1.2 Supplier Optimization

Respondents were required to indicate if supplier optimization affects purchasing strategies at Goshen children hospitalOwerri, 71% agreed while 29% were of a contrary opinion. This can be concluded that supplier optimization is one of the important factors that determining purchasing strategies at Goshen children hospital. Respondents were asked to what extent does supplier optimization affects purchasing strategies at Goshen children hospital. 25% indicated very great extent, 35% indicated great extent, 11% indicated moderate extent while 24% indicated very little extent and 6% indicated very little extent. This can be interpreted that supplier optimization is an important factor that affects purchasing strategies.

Li (2011) established three fundamental factors in supplier optimization based on the documented supplier optimization criteria that is needed to assess supplier service capabilities and as well as buyers managerial and strategies aliment. Tan (2008) encouraged the use of integrated model that combine the analytical hierarchy and grey relation analysis in a single evaluation model. Tan suggested that the model is effective in integrating experience and knowledge in evaluation of suppliers in order to select the best supplier. Supplier optimization is a complex and time consuming process that evaluation criteria that includes cost, quality, delivery system, facilities, and personnel among others. The evaluation of suppliers as complex as it maybe numeral criterial must be considered in the selection and decision making process. However, different criteria are employed by different organization during the process

5.1.3 Vendor Development

Respondents were required to indicate if quality services and goods affects supplier appraisal in the airline industry, all the respondents agreed 100%. This can be concluded that quality services and goods is one of the important factors that help in determining suppliers. Respondents were asked to what extent vendor development affects purchasing strategies at Goshen children hospital. 65% indicated very great extent and 35% indicated great extent while none indicated moderate extent, little extent and very little extent.

Talluri (2010) describe vender development is an economic activity and requires commitment from suppliers and organization. Organization face challenges in effective utilization of limited resources for development relationship with their vendors. Vender developments are considered as important component of supply chain management, that’s plays, a crucial role in performance improvement in buyer supplier relations (Krause and Ellram, 2009). Schmitz and Platts (2014) explain the importance of investigating the area of organization performance while focusing on supplier and buyers relationship. They studied performance measurement within organizations in relations to inter organization performance in order to improve supplier performance. A study by Forlund and Johnson (2009) to identify trust, aligned goals and priorities that needed to overcome performance management effectiveness between suppliers and buyers. According to Handfield (2009) measuring vender performance is not easy because companies find it difficult to evaluate vender contractual obligations fulfilment. Firms need to make decision on what is important for them to measure and how they will allocate the weight to the measure standards.

5.1.4 Risk Management

Respondents were required to indicate if risk management affects purchasing strategies at Goshen children hospital. The responses were as follows 88% agreed that risk management affects purchasing strategies and 12% disagreed that it doesn’t affect. This response can be interpreted to that the risk management influences and determine purchasing strategies at Goshen children hospital the way suppliers are identified and it can be noted that quality management affects purchasing strategies at Goshen children hospital. Respondents were asked to what extent does risk management affects purchasing strategies at Goshen children hospital. 33 % indicated very great extent, 35 % indicated great extent, 12 % indicated moderate extent while 6 % indicated very little extent and 12 % indicated very little extent.

Soyemi (2014) supply chain managers are employed for the purpose of managing organization information system in order to help monitor levels of risk and facilitate timely review of risk plus their exceptions. The recognition of the exact approach to adopt for monitoring risk management squarely depend on each individual organization which depends on a variety of features like size, nature of activities and sophistication of the activities. Monitoring risk has serval components such as internal control culture, effective internal reporting and contingency planning. George (2010) describes the key success of monitoring risk is proper planning (comprehensive, organizes and iterative approach) and aggressive execution. Price Waterhouse Coppers (2009) describes the integrated approach to operational risk management as proactive and representative of best practice compared to dispersed approach. The characteristics include the structure of operation risk management, resource investment, risk culture, and tools and technique. Firms must commit a large budget to setup operation risk system that is able to monitor, measure, identify and control risk that is associated with supply chain management.


5.2 Recommendations

Total quality management schemes should be adopted by the Management of Goshen children hospital. This will ensure quality is enhanced throughout the processes of the organization. By so doing the organization will be better placed for better performance and be very competitive. Quality schemes should be implemented whereby standards should be set against which the organization will look for the supplies to see whether the suppliers have met the requirements of the deliveries or not and advice there on. The Goshen children hospital should establish a quality check department that will be equipped with the necessary test equipment in order to check that the supplies meet the expectations of the customer. On a regular interval depending on the receipt of the supplies, the department will be mandated to check the quality of supplies to see whether they meet the customers’ expectations. This should always be done on a regular basis and try to eliminate the products that do not meet the expectations of the customer. In this way the Goshen children hospital will be able to eliminate the incompetent suppliers and be able to identify the most competent supplier who will be able to meet the expectations of the customers.

The management of Goshen children hospital should consider a policy that is set in regards to daily operations of the procurement department in order to give room for effective performance. The management of Goshen children hospital should know that well set and established policy will it easier for effective supplier optimization since the company will have an understanding of which procurement policy fits them. The head of procurement should quarterly review their operational and strategic policies and during the process should include all the staff involved in the department who will provide the required resources to enable sound decision making. The management and board of directors should consider having good procurement policy which should be drafted with consultation with organization staff in order to have understanding of all the key areas which affects operations in the department and will lead to improved and positive results.

The management of Goshen children hospital should adopt risk management on all the goods and services they procure and even retrain all the staff in the department to acquaint them with relevant skills and knowledge. The management should commit more funds on developing staff on job pricing and job pricing methods and also train venders on organization mission and vision. Management should appoint staff that are compliant and should be responsible for monitoring procurement activities in the market and the officers should conduct daily research to establish suitable price for goods and services the organization procure so that the organization to not fall prey to fraudsters . The management of Goshen children hospital should implement systems which are able to enhance effective communication and safe keeping of the organizational data. On the other hand the information technology systems which are able to save time in regard to processing data need to be implemented.

Organization requires current technology to be adopted in most of their operations. Considering that other forms are in the rush to acquire technology which helps to facilitates efficiency parathion hence modern technology helps in reducing work load and promoting efficiency. Adequate funds should be set aside on their quarterly budget so as to meet the needs of changing IT. The officer for IT will be tasked with ensuring regular training of the employees to equip them with the necessary skills for their operations. On a day to day basis, the officer will be required to update the system so as to be in the current conditions in order to avoid wrong delivery of information from the systems.


5.3 Conclusion

The conclusion drawn from the study findings were that, the quality standards established in the organization gives the management appropriate means for effective purchasing strategies and organisational performance since the information about the procurement policy is provided when required. Quality standards enable organization to adopt effective supply strategies therefore, making it possible to identify the supplier that will be able to supply the required products and services effectively. There is a direct connection between purchasing strategies and organization performance. In other words purchasing strategies, purchasing decisions and purchasing practices are commonly used interchangeably to express decisions that are considered at various stages of the purchasing process.The study established that Organizations are in demand of increasing professionalism in the procurement process. Procurement practices such as risk management, planning and supply performance influence organization in achieving communication and collaboration capabilities and at the same time maintaining the flexibility and responsiveness capabilities of market oriented governance structures. Procurement best practices help organization in achieving cost reduction, new product development, improved inventory management, information management, improved customer service, material flows and improved performance in the organization


5.4 Suggestion for Future Studies

It’s highly recommended that the study need to be conducted on this particular area and including organization policy, price, quality and pricing variables in the study, whereby it seek to create more details about this study. The study was carried out on merits determine the effects of purchasing strategies on organisational performance a case study of Goshen children hospital Owerri. Therefore, similar study should be carried out on public hospitals in order to validate the current findings.


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