Impact For Efficient Negotiation In Purchasing Function In Manufacturing Company

Project and Seminar Material for Purchasing and Supply PS

Impact For Efficient Negotiation In Purchasing Function In Manufacturing Company

Abstract

The objective of this study was to ascertain the impact of efficient negotiation in purchasing function in manufacturing company at Rokana Industries Limited Nekede Owerri Imo State. The research design was suitable for the study as the research was designed for the purpose of determining the impact on the quality of negotiation purchasing function. The design was geared towards exploring the academic relationship between classroom theory and what is practically attainable in industries and government establishment thus the carefulness in choosing the research topic. The primary significance of the study is for partial fulfillment of the requirements for the award of Higher National Diploma (HND) in purchasing and supply. The secondary significance is also geared toward exploring what is practical obtainable in industries. The third significance of this project is to help and guide the younger ones on what to do when writing project or carrying out any research. This study demonstrates the positive effects of purchasing strategies on manufacturing performance reflected by this third world nation. Purchasing professionals need to be included in strategic planning so they can learn more about their company and the future of their industry, to analyze cost drivers to enable improved cost management, together with considering risks and rewards to improve manufacturing excellence.

Chapter One

1.0 Introduction

1.1 Background of the Study

Negotiation is seen as a vital element as well as one of the most interesting topic in purchasing and supply chain management. It applied in purchasing so as to arrive at a fair and reasonable business contract.

Consequently, upon recent shortages of materials, high prices and galloping inflation, general unfriendly supply market as well as the get-rich quick syndrome of some supplied it will be suicidal for a business firm and indeed government agencies to ignore negotiation exercise in its purchasing activities making process of planning, reviewing and analyzing used by the buyer and seller to reach acceptable agreement or compromise on all aspects of the business transaction.

In purchasing of material, some measures of trust exist between the buyer and the seller when negotiation begins identically, there would be equally of information on cost and estimates between parties involved, as a basis for negotiation, but this is rarely attained except in government’s research and development (R and D). The negotiation is thus usually a dialogue between the buyer and seller to produce a contract, which is at least acceptable to both parties. The name of the company is Rokana Industries PlcNekede and it as incorporated on September 1978 as a private limites liability company.

The nature of the business is manufacturing and it was founded by Engr. Charles Ugwu, a British trained industrialist/Engineer in 1978.

The managing-Director is Chief Ekemma Geophry now while Engineer Charles Ugwu is the Chief Executive of the company.

The factory is divided into three basic areas namely: Administration, Marketing/sales and promotion. It has a branch in Lagos as their registered street off 52 Ogundanastreet Allen Avenue Ikeja Lagos. Over 80% of the raw materials for the production of the product are imported.

They also have sales outlets 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 existing manufacturing units.

The Cosmetic Units:

This unit undertakes the production of the tooth paste, baby-care cosmetics, skin lotions, cream and oiltment.

The Plastic Units:

This unit produces tooth brush, dental stick, plastic folders, plagues for the Areosol production.

Aerosol Unit:

This unit produces insecticide air fresheners, perfumes, furniture polish, deodrant etc.

The LPG Unit:

This unit refills domestic cooking gas cylinder, provides unstauncheal gas,as propellant to the aerosol production line.

1.2 Statement of Problem

Strictly, this project is a case study of the impact for efficient negotiation in purchasing function in manufacturing company at Rokana Industries Limited Nekede Owerri Imo State.

The impact for efficient negotiation in purchasing function in manufacturing company can not be over stated. This is because when fairly in contract management result from poor negotiation.

The problem of the study therefore are as follow:

  1. Firms or organization fair to see the element of pricing and negotiation as a vital element in contract management.
  2. Most firms adopt the concept of I will” when you loose attitude this result into poor project execution.
  3. Most people involving in purchasing of capital and mangement do not possess the right skill and knowledge of negotiation.
  4. The economic situation of the country has serious effect on the quality of negotiation purchasing function in manufacturing company firm attempt.
  5. There is no serious attempt on the part of firms to empower negotiation contract managers.

1.3 Purpose

In the light of the statement of problem this study aims at achieving the following objectives.

  1. To create serious awareness in the mind of firms and their employees on these serious impact for effective contract negotiation, pricing and contract implementation.
  2. To make people appreciate the importance of effective negotiation which emphasizes win-win negotiation.
  3. To create the necessary awareness on the importance of empowering those who are involved in contract negotiation pricing and management through treating seminars etc.
  4. To investigate the impact of the economic on contract negotiation pricing and execution.
  5. To see whether negotiation contract management and pricing can be improved through empowerment.
  6. To suggest other ways of improving negotiation contract pricing and management.

1.4 Scope of the Study

This study would have taking the researcher to all firms that are engaged in contract negotiation, pricing and management in Nigeria but for obvious reason the researcher is constraint to concentrate on the negotiation activities of Rokana industrial limited Owerri. The researcher beliefs that this would give her a fair situation position in other similar organizations.

However, the researcher will concentrate on the following department or units within the organization:-

  1. The cosmetic unit
  2. The plastic unit
  3. The Aerosol unit
  4. The LPG unit

1.5 Research Hypotheses

One important thing a researcher of this nature impact s to achieve is to provide the subject matter of the study. It therefore become necessary to formulate research hypotheses on which the answer would be based and are as follows:

  1. H0: negotiation and pricing are not a basic element of contract.
    H1: negotiation and pricing are basic element of contract.
  2. H02: poor contract administration is not tractable to poor pricing and negotiation.
    H2: poor contract administration is tractable to poor pricing and negotiation.

1.6 Significance of the Study

The primary significance of this study is for partial fulfillment of the requirements for the award of Higher National Diploma (HND) in purchasing and supply.

The secondary significance is also geared towards exploring the academic relationship between classroom theory and what is practically attainable in industries and government establishment thus the carefulness in choosing the research topic.

The third significance of the project is to help and guide the younger ones on what to do when writing project or carrying out any research.

The fourth significance of the project is to guide industrial purchasing s to effective and efficient negotiation to enable them to obtain the “best buy which is the ultimate goal of the purchasing function.

1.7 Limitation of the Study

Infact, there cannot be any successful research of this magnitude without encountering some difficulties. This project work is surrounded by some limitation, which indicated that it was not hitch free.

The following were some problem that was encountered in carrying out the following work.

  1. Difficulties in securing some vital documents containing some valid information relating to the subject matter of the research.
  2. The lukewarm attitudes of some offices who were supposed to attend and give reasonable response. Some of those interviewed failed to give adequate information believing that it will reveal their lapses and loopholes.
  3. The degree of time consumed at the expenses of lectures and other important assignments. This cannot be over emphasized.
  4. Finally, finance was another constraint for the researcher. Normally, a considerable amount of money for the gathering of information, typing of manuscripts.

1.8 Definition of Terms

The terms here are some of the terms used in this project work necessary because these terms have their own professional meanings in purchasing other than 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 objective of helping its profitability or service provided.

2. Negotiation:

Is a process of planning reviewing and analysis used by a buyers and seller to reach acceptable agreements or compromise includes all aspects of the business transaction not just price.

3. Negotiator:

Is a person authoritatively appointed to represent his/her organization for negotiation. He must be skillful and broad business experience.

4. Vendor:

An outside supplier or raw materials suppliers equipment or service impact ed in the operation of an organization.

5. Procurement:

This includes duties perform by purchasing a well as additional function materials supervision and management, inventory control, receiving inspection and salvage operation.

6. Price:

This may includes all the sacrifice made to acquire a given product both monetary and non monetary.

7. Pricing :

This is the activities involved in setting the price for which a product will be said. or deciding how much to change for something. ie we say that it is an on going activities that can hardly be completed.

8. Strategy:

It is the determination of the basic longterm objectives of an enterprises and adaptation of course of action and allocation of resources necessary to achieve these goals on the organization presented mean or approach to achieving it’s objectives.

9. Purchasing:

It us that function of management, lease or other legal means equipment materials supplies and services required by an undertaking for use of production.

10. Cost:

The total amount of money that impact to be spent by a business. it is also the amount of money that you impact in order to buy, make or do some things.

1.9 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the impact of efficient negotiation in purchasing function in manufacturing company.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of negotiation in purchasing function of a manufacturing company.

5.2 Summary

The study demonstrates the influence of purchasing strategies on manufacturing performance. The result from this research also consists of the strategic value of purchasing department and purchasing professional whom align the purchasing strategies towards manufacturing performance. Traditional role of buyer who fill out purchase order, send out request for quotation (RFQ) and possessing paper work must be eliminated in the view of changing purchasing function into strategic approach. Purchasing professional need to be strategically align with firms cooperate and business strategic goal in gaining the knowledge about the company and industry future, obtain the best product and services, analyzing the cost drivers on effective total cost management by evaluating the rewards and risk associated in order for manufacturing performance excellence. Manufacturer able to managed to obtain optimal inventory levels and production capacity in multiplant operation such as MNCs’ which can maximize the use of working capital (Ndubisi et al., 2005). In addition, building value added relationship both with external partners and internal units will be the influential for all strategic relationship goals. Cooperative communication, confidential information sharing and commitment in meeting firms request able to address the ability of the supplier to be a reliable partner.

5.3 Conclusion

The study clearly illustrates the positive effects of purchasing strategies on manufacturing performance reflected by this third world nation. These were: effective strategic use of cost management, relationship between buyer and supplier and negotiation to improve manufacturing performance. Other studies in first world countries were verified in this different geographical milieu, and this gives further validity to them all. It reinforces for management the strategic value of their purchasing personnel and demonstrates the need for their further training. These purchasing professionals need to be included in strategic planning so they can learn more about their company and the future of their industry, to analyze cost drivers to enable improved cost management, together with considering risks and rewards to improve manufacturing excellence. Negotiation skills enable information sharing, cooperative communication and build trust so the supplier becomes a reliable partner. In a competitive environment of uncertain demand alert top management could extract an increased advantage from the purchasing functions.

5.4 Recommendations

Haven successfully completed the study, the researcher therefore recommends that the purchasing team should have a good relationship so as to give room for negotiation, the manufacturing firm should take endeavor to pay on their supplier on time so as to enable them take advantage of the purchase discount made available by the seller.

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