Evaluation Of The Purchasing Strategies Of A Profit Oriented Organization

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Evaluation Of The Purchasing Strategies Of A Profit Oriented Organization


This research set out to elevate a purchasing strategies of a profit oriented organisation using the Nigerian Bottling Company (NBC) Owerri, as a case for analysis.

Management and staffs of Nigeria Bottling Company wee considered in the investigation. Relevant data were collected through the use of questionnaire and oral interview designed to elicit useful information for this purpose.
Major findings were that:

  1. Purchasing strategies have much significant roles to playing the profitability of the profit oriented organisation.
  2. Nigeria Bottling Company buy and do not make their raw materials.
  3. Nigeria Bottling Company practice a centralized buying policy.
  4. Centralized purchasing is more profitable
  5. Purchasing policies of Nigeria Bottling Company is cost effective.

Based on the findings of the study, the following recommendations were made:

  1. They company should revise her purchasing strategies.
  2. They should professionalize purchasing department.
  3. They should allow flexibility in their purchase decision.

Chapter One


1.1 Background Of The Study

A couple of years ago, there has existed some controversies about what constituted the purchasing strategies as a specialized tool for profitability. These controversies arose among planners, students, business executives and a lot more people.

Those who recognized the purchasing functions have concluded that it had been existence since the evolution of man. To start with, purchasing is often used in Industry, comer, public corporations and managements to demote the act of material procurements, supplies, and services. It involves for money spend the term purchasing simply describes the buying. It involves determining the material need, selecting the suppliers arriving at proper price, or order and following up to ensure proper delivery. It also involves an understanding of the nature of forces that operate in the market place, that is demanded and supplied.

It was in the 19th century that purchasing took its pride of place management function. The function of purchasing is to ensure the supply of raw-materials, products, equipment, components, spares, fuel and power consumable and service for use or resale by an organization in the right quantities, right quality, right place, right time, and at the right economic cost for increase in profitability. There are other purchasing strategies which involves requirement determination, taking procurement decision make or buy, bidding, vendor supplier selection, negotiation contracting, other processing expecting taking delivery, material handling storage and distribution with in the organization.

Furthermore, purchasing strategies also covers areas like supplier development, value analysis and harmonious relationship with other functional units like production, design, engineering, inspection, maintenance, finance, marketing, personnel and transport departments. Purchasing uses some managerial tools viz planning, co-ordination, organizing, directing and controlling to achieve the objective of its functions of uninterrupted or constant flow of materials to meet the needs of the user departments.

This makes for the contention that the task is one of considerable complexity, involving large scale planning and organization, the co-ordination of a divers range of professionals, technical and other services and daily problems of business management.

Some organizations that have faint knowledge of what purchasing is all about regards it as a function concerned with clerical duties and services function whose concern Is to spend the corporate purse. Because of this notion in mind, the function is usually relegated to the background by attaching it under the supervision of the chief accountant or treasurer thus aimed at curtailing the active performance of purchasing practitioners.

It is not the concern of this write up to question why it has taken so long for the wider acceptance of all this important function. However, the people concerned with the development of purchasing effectiveness as a key element in business system need to recognized that there is better opportunity now than ever before to make their case. In between the two extremes, the researcher therefore found that there an importance area to explore which is to find what purchasing strategies has to justify it as a management activity and equally its contribution to profitability to the organization.

Precisely, the latter school of thought, the researcher found, erred in most of their postulations, hence the work goes to highlight how, via empirical facts. It was found that given the right organization status and frame work to challenge bogus specifications, the right to define corporate resource strategy, to forecast and make top management decisions as regards material supply at corporate level, purchasing strategies by this virtue has greater potential to contribute to probability drive and growth of any organization.

Nigeria Bottling Company Plc, bottles of Coco-cola production, as a beverage manufacturers, is seen as very suitable for a case of analysis. This company has its corporate head office at LPP House Ebute-metta in Lagos with twenty
Purchasing strategy has a great potential of being source of profitability if fully explored according to APASS Journal maiden. He continued and said that the uniformed generals should not be allowed to continue purchasing where they could encroach upon because the happened to have been exposed to some of the aspects of buying function or industrial management relating to some aspects of purchasing and supply.

Because of the lack of knowledge by most executives, there is the effect of reducing the proportion of costs associated with labour, and increasing the cost concerned with materials management. There is the problem of effective scheduling and specification, inventory control, and so the quality of management of incoming materials will decrease. Also, improvement in production equipment will tend to reduce the life of capital equipment and thus increase the frequency of that type of purchase. There also exist the problem of efficiency in roles in an organizations profit maximization.

It is then imperative to determine the following:

  1. To conduct an important finding of research into the existing industries or organization to determine their level of knowledge and start coming with a view of bringing this to focus vis-à-vis the roles of purchasing and its contribution to profitability.
  2. To further highlight these shortcoming to the benefits of those whose ignorance need to be removed through enlightenment means.
  3. To explore areas of purchasing strategies which are akin to management activities.
  4. To prove its contribution to profitability through the use of real and collected facts.
  5. This research work also intends through the review of existing literary works to find out whether an in dept one (21) different plants in Nigeria that produces a variety of product lines for the learning consumer.

1.2 Statement Of Problems

The researcher has drawn materials and facts from an organization and properly analyzed them because of the sample fact that purchasing in yet to be recognized in Nigeria as a management activity which should be performed by competent and veteran professionals who reports only to top management. This function is still on being handled by novices in the field of purchasing. Exposure has been made in this direction or not. Stock control, sourcing, handling of purchase requisitions, and purchase orders, tendering and other problem associated with it.

Therefore, it is dissatisfying that this noble function is still placed under the chief accountant or the treasurers in most public institutions, namely local government, higher educational institutions, ministries, parastatals and quasi bodies are mismanaged by the functionaries. All these problems enumerated have to be corrected to save both the public sector and private sector of the economy from total collapses as a result of their ignorance and inability to recognize the contributions of purchasing.

1.3 Purpose Of The Study

The classical definitions of the purchasing objective as to buy materials and services of the right quality, the right quantity, at the right price, from the right source and at the right time.

Considering the ignorance of most top management executives and the attribute toward the dynamic business environment as regards fall appreciation of purchasing strategies as playing strategic.

1.4 Research Questions

From the inception of purchasing strategies down to the contemporary era, purchasing strategies have not been considered valuable by most profit oriented organizations. It becomes too worrisome regarding such degree of negligence on the part of management with respect to this profitability strategy as has been left by most firms. The researcher however is bothered by these questions as;

  1. Have purchasing strategies any significant role to play in the profitability of a profit oriented organization. like (Nigeria Bottling Company) (NBC).
  2. Whether Nigerian Bottling Company (NBC) makes or buys their products.
  3. Whether the NBC imbibe centralized buying practice.
  4. Which of the buying policy is most profitable of Nigerian Bottling Company. (NBC)

1.5 Statement Of Hypothesis

  • Ho: The purchasing strategies adopted by the Nigerian Bottling Company (NBC) have no positive impact on the sales growth of the company.
  • Ho: The purchasing policy of Nigerian Bottling Company (NBC) is cost ineffective.

1.6 Significance Of The Study

This research expects every organization to benefit from it as far as their management is concerned therefore, if purchasing strategy is used in the rightful manner. It should contribute to profitability and also harness the management activities.

This role purchasing strategy will improve the method issuing purchase orders purchase requisition and sourcing of the right suppliers. It will go a long way to solving of the right suppliers. It will go a long way to solving the problem of mismanagement in industries as it will provide more room for efficiency and effectiveness, it should be able to coordinate with other related department visa:: Accounts, personnel, production, quality control, etc, and it will lead to profitability.

Managers of various business will benefit from this research as it will now be a basis for achievement or profit in their various disciplines.

Planners and decision-makers also will gain from this research, as it will be a basic for their future forecast for their organizations this research will help in the best selection of suppliers in industries, the generation of effective development of new product in order to increase profits and reduce costs. The company’s cost structure, correct quality/value balance and efficient and wise buying procedures will be applied if the role of purchasing strategy is recognized to the fullest.

1.7 Scope  /Delimitations Of The Study

No particular field of endeavour can prove to provide all the needed answers to all problems. Contcostionling humanity. The immediate objective of this research is therefore cognitive.

Its dimension however is never hidden, sit attempts to translate into practical advice to top management the policies and procedures which they need. To adopt the benefit from numerous contributions of purchasing strategies to profitability.

This research cannot claim to have complete exhausted the findings on the subject matter, this stems from the fact that the needed statistical data either non-existed wrong information biased information or staffers unwillingness to release them.

Time factor is another delimitation that compounded the inability of researcher to collect response from so many companies desired.

The researcher found it very difficult to raise money for the research because of the financial crunch in the economy.

1.8 Definition Of Term

It is imperative to define most of the terms used in this write up.

1. Profitability:

Ability to contribute to the profit making of a organization

2. Purchasing:

They are used interchangeably buying but refer to similar process.

3. Inventory Control:

The operation of continuously arranging receipts and issues so that stock balances are used to support current rate of consumption with the regard to economy.

4. Management Activities:

Those activities that are destined to management such as directly planning organization, strategy and coordinating.

5. Sourcing:

Identification or development of suitable sources of supply.

Evaluation Of The Purchasing Strategies Of A Profit Oriented Organization

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