Make Or Buy Decision As An Important Tools For Profitability In Manufacturing Organization (A Case Study Of Global Soap Detergent Industry Limited, Ilorin)
Make Or Buy Decision As An Important Tools For Profitability In Manufacturing Organization (A Case Study Of Global Soap Detergent Industry Limited, Ilorin)
Abstract
This project has been specially written to cover “make or buy decision as important tool for profitability in a firm” with particular reference to global soaps and detergent industries Ltd, Ilorin. The term “purchasing” is used in industry to denote the act of the functional responsibility for procuring materials, supplies and services.
However, in a narrow sense an considering the topic make or buy decision as an important element for profitability, the term supply describes the process of buying and in a broader sense, the term determine the need, selecting the supplier, arriving at proper price, terms and conditions, issuing the order, follow up to ensure proper delivery.
This project work is divided into five (5) chapters.
- Chapter one of this project discussed the introduction of the subject matter, statement of general problem, rational behind the study, scope and limitation of the study, historical background of the organization and definition of the term used.
- Chapter two contains details of different type of literature review on the subject of make or buy decision.
- Chapter three entails the research method used, instrument used in data collection, research population and sample size, sampling procedures used, statistical techniques used in presenting and analyzing data setting of hypothesis.
- Chapter four deals with presentation and analysis of data, interpretation of data, reason behind make or buy decision at global soap and detergent industries ltd, Ilorin, benefit of make or buy decision to Global soap, and detergent industries Ltd, Ilorin and testing of hypothesis.
- Lastly, chapter five comprises of summary of finding, conclusion and recommendation as considered necessary for implementation and recommendation.
Chapter One
Introduction
1.1 Background of the Study
The decision to either make or buy material required for production processes and other purpose is very paramount most especially in manufacturing companies such as global soap and detergent industry limited Ilorin. Many organizations consider it profit ability o manufacture (make) the material required in he house, if here are enough facilities to embark on such, while the decision to make materials in house is considered wrong by some organization due to their lack of enabling facilities or simply says they are not aware of the benefits there in.
The decision has regard to make or buy should not be handling with levity. These is so because, failure to make appropriate decision here is the beginning of failure. Many organizations are facing problems today just because they take the decision that is most profitable for their concern. However this decision often seems to be taken as required by design, production and purchasing department.
In considering these decisions it is worth not things than 50% of company’s annual budget spends by the purchasing department, and millions of naira is lost annually as a result of purchased items. It would therefore be more economical to decide whether to make or buy material required.
(A) Cost:
The cost associated with manufacturing needs materials in house and the current cost f purchase, if material must be bought, it determine which one is cost effective.
(B) Availability of Product Capacity:
The firm should consider whether there is enough person machinery and technical know how that would be place then, the firm ma embark on “make” decision and if otherwise, it has to locate right source a supply form who to buy.
1.2 Statement of Problems
The common problem that faces many organization including global soap and detergent industries limited Ilorin. Toda is how to make appropriate decisions concerning whether to make or buy materials required in organizations out of the race, while some fail to record substantial profit in their business endeavors.
The inability for their inability for their organization may lead to production stoppage if the required materials are not in a place at the right time or it may lead to loss of profit as a result of excess investment on inventory.
All these problem needs to be systematically investigated. To know the possible causes so that lasting solution may be prefer.
1.3 Rational for the Study.
The research study is directed toward the practical approaches of make or buys decision as an important tools for profitability in global soap & detergent industries limited Ilorin.
This study is aimed at giving the global soap and detergent industries limited Ilorin an insight into the essential steps to making or buying and how best the company profit could be maximized.
The evaluation of making or buying of items used in global soap and detergent industries constitute a purpose of this study. The interests of the research in the manufacturing sector lies in the fact that make or buy decision constitute the most important part of current asset of manufacturing firms.
1.4 Scope of the Study
The scopes of this research works in centered on make or buy decision as important tools for profitability in manufacturing industry limited.
In carrying out he research, the research in make of buy decision. It will also review briefly the factor to be considered in make or buy decision. It will also review who determine what to make or buy and the effect of these decision on each department in the organization.
The research can cover the advantage and disadvantage of make or buys decision in an organization and weather the quality or product rises and falls with make or buy decision at global soap & detergent industries limited, Ilorin.
Therefore, the suggestion and recommendation made as a result of this study will be of benefit to management to the limited mentioned above on make or buy decision.
1.5 Limitation and Constraint
During the process of the research works encounter numerous problems among which are:-
- Finance
- Time
- Attitude of respondents.
This research work was faced with so many obstacles and problem it was difficult to obtain the co-operation of personnel in charge of vital document containing information about the topic. There was the need to travel o collect information or the other, and in most cases, here will be no tangible result, the researcher only being asked ask o come back.
Another problem faced by the research was finance. The researcher often found it highly impossible to travel to the firm location.
The research also found out that it is not easy to combine the normal class lecture with written of these project work management invariably become a watchword for the researcher.
1.6 Historical Background of the Organization
The global soap & detergent industries limited is a member of the Doyin group of companies, and the firs worthy indigenous soap and detergent manufacturing company in Nigeria. It was incorporated on 8th October 1984 with hand in Lagos and factory situated along Asa-dam road, Ilorin Kwara state capital, the company is operated, managed and directed by full blooded Nigeria.
Own by courageous and experienced industrialist Prince (Dr) Samuel Adedoyin who has for many years been championing indigenous technology background integration and use of Local raw materials in Nigeria Global soap and detergent Industries was established in response to the call of the Kwara State Government and indigene of the State to join hands with the state government in industrialization Kwara State.
Despite the economic downturn at time the factory metamorphosed tremendously from its one Detergent factory and a pioneer staff strength of 40 in1985 to a conglomerate of (7) seven factories in 1994 with a strong belief in self reliance and resourcefulness, sourcing about 40% of its raw materials locally.
This is one way by which Global Soap and Detergent Industries has contributing significantly to the country’s economic rehabilitation and industrial revolution.
The company has consistently paired up with existing multi national detergent manufacturing company in competition toward enhancing the growth of the Nigerian economy operating through the under mentioned plants.
|
S/N |
NAME OF PLANT |
CAPACITY |
PRODUCT |
|
1 |
Detergent plant |
10 ton/hour |
200g flash bold(10kg,5kg,
2kg, 1kg) wash rite (10kg, 5kg, 2kg, and 1kg). |
|
2 |
Scourer plant |
1 ton/day |
Hi-clean scourer in poly canisters. |
|
3 |
Soap plant |
2 ton/hour |
Toilet soap, vogue, grand H-clean. |
|
4 |
Sulphonation plant |
1.0 ton/hour |
Sulphonic acid (raw materials for production of soap $ detergent). |
|
5 |
Glycerin evaporation plant |
|
99% glycerin (raw material for production of pharmaceutical cosmetic. |
|
6 |
Silicate plant |
10 tons/day |
Silicate raw material for production of detergent soap. |
|
7 |
Detergent plant |
1.0 ton/hour |
Detergent bar. |
Besides the infrastructural enhancement of Kwara state, Global soap $ Detergent industries limited existence has provide handsome business and employment opportunities for thousand of Nigerian such as suppliers, manufacturers, contractors, transporters, and distributors e.t.c.
The company is blessed with most modern technology available and the plants are ably manned by qualified personnel.
Presently, the company has an entirely indigenous labor strength 1,000 (one thousand) workers in different grades. The company gives priority to industrial safety and good keeping. Hence solid wastes are periodically lifted by sanitary inspectors from the Kwara state environment protection agency (KWEPA), thus generating revenue to the state government.
The company’s range of product has continued to enjoy good patronage from Nigerian due to their consistently high quality. It was recorded that global soap and detergent industries is the first company to have received the certification mark for quality within its first 3 years of operation.
As a way of reaching the nooks of cram my of the country, the company has 17 sales depots scattered all over the federation such as Aba, Abeokuta, Benin, Enugu, Gombe, Ibadan, Ilorin, Ilupeju , Jimeta, Jos, Kaduna, Kano, Maiduguri, Ondo, Onitsha, Sokoto, and Uyo. In addition, necessary machinery has been put in place and negotiations have also reached as advanced stage to introduce the company’s products to countries within the ECOWAS. Sub-region as a way of mobilizing foreign exchange into the country.
GLOBAL SOAP AND DETERGENT INDUSTRIES LIMITED ORGANISATION CHART
1.7 Definition of Terms
1. Make:
It is used to act of producing certain things.
2. Buy:
Is an idea of getting one’s need in return for the money paid or getting by a price.
3. Understanding:
Not giving pleasure or satisfaction from need or desire.
4. Supplier:
One whose responsibility is to supply or make available material for further usage either for production or normal consumption.
5. Capacity:
Ability to contain, hold or get hold of something.
6. Production:
It is the process of producing or making an item.
7. Stabilize:
To make steady or allow to be normal.
8. Delivery:
It the act of delivery goods where they are needed or required.
9. Standard:
Quality description of an item.
10. Investigation:
It is an act of carefully linking in to or through inquiry which must have been raised.
11. Specialization:
To make or ensure that each performs an aspect where in he/she could be better which leads invariably to perfection.
12. Sub-contracting:
It is a situation where in part of the job is let out another contractor to perform.
13. Quality:
Is anything that conforms with one’s predetermine standard.
14. Specification:
Is a definite description of what is wanted.
Chapter Five
5.0 Summary of Findings, Conclusion and Recommendation
5.1 Summary of Findings
It is identified through the application of Make or Buy that the Global Soap and Detergent Industries Limited, Ilorin is able to maximize profit and minimize loss by making raw materials available to the production department uninterrupted and at all time.
Global Soap and Detergent Industries Limited, Ilorin also utilize efficient and effective make or buy program and his attains the substantial benefits that the decision affords its users.
Regardless of the means employed by the firm, the purchasing department occupied an important and central position in the process as shown, through the data collected and the analysis.
However, briefly and the advantages which Global Soap and detergent Industries Ltd, derives from make or buy decision.
- It provides for special requirement.
- It reduces stock holding.
- It stipulates a suitability of purpose.
- It reduces the number of various varieties.
- It reduces the scope of errors.
- It permits interchangeability.
- It increases output.
- It enhance quick stock taking.
- It allows manufacturing cost of quality produced.
- It makes drawing to be fewer especially in design.
Basically, the areas of problems of the operation of the firm as below
1. Staffing
As a matter of policy, purchasing staff should be sent on courses seminars, conferences where their knowledge and skill could be updated. Staff should be encouraged through incentives promotion to stay with the firm rather than buying somebody from the outside boss who have been with the firm. This practice must stop or else, it may lead to frequent changes in the set up since the devil you know is better than the one you do not know.
2. Management
Management, it should introduce the popular management by objectives. The board of directors should be in full support of the operation of the make or buy decision system.
5.2 Conclusion
In conclusion, the researcher intends to mention here that when one observes the pains and the problems involves in make or buy particularly in Global Soap and Detergent Industries Ltd, Ilorin the operations of this firm deserve to be praised considering the magnitude of the operation it carries out.
Also, purchasing techniques like simplification, value analysis, standardization programs can be used to increase the profitability of the firm and in addition, to concentrate in using negotiation in the determination of the right prices. Other methods of determining the right prices are published price list and competitive bidding system should also be tried and use. The researcher is of the opinion that the management of Global Soap and Detergent Industries Ltd, Ilorin will closely observe that implement the recommendation as suggested.
5.3 Recommendation
It is recommended that materials specification should be given to a separate departments or stringent specification.
When specification conflicts arise, the final authority for decision should rest with the department responsibility for the ultimate performance of the product.
On staffing, it should be a matter of priority to send staffs on refresher courses, they should also be considered for seminar and conference relating to the operation of makes or buys decisions.
It is also recommended that management should use proper corporate planning, for if this is not properly utilized, the supplies department will encounter difficulties.
A critical look at the system and operation of global soap and detergent industries ltd, revealed non-existence or misuse of some purchasing techniques coupled with management problem like coordination and communication there is need to address this and communication, there is need to address this issue.
There is need to be engaged in better make or buy decisions of raw materials to improve the profit range of the organization.
Furthermore, it is recommended that other areas where it is necessary maintain accuracy is that stores and purchasing should be managed together.
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