Sourcing Decision And It’s Effects On Material Availability

Sourcing Decision And It’s Effects On Material Availability
Abstract
This study was carried out on sourcing decision and its effects on material availability in 7up bottling company plc Kaduna plant. To achieve this 5 research questions were formulated. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprise of the entire staff of 7up bottling company Plc. Kaduna Plant. In determining the sample size, the researcher randomly selected 60 respondents and all were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using mean and standard deviation. The result of the findings reveals that; the use of financial capability of supplier as a criteria will determine whether the supplier will perform well when he is awarded the contract, previous performance of supplier is an appropriate criteria to consider when selecting suppliers, in determining suppliers to select, they have to consider the plant capacity of the supplier in order to avoid late delivery of materials in the organization, supplying managerial skills and technical know how should be used as a yardstick for selecting suppliers, to mention but a few. The paper recommends that the organization should establish a purchasing department and allow them to authorize purchase of goods for the organization. This is because when competent procurement personnel are used to carryout procurement activities, they will ensure that the organization joys all the 7 rights there by reducing cost and increasing profit for the organization, the organization should source for the materials both locally and internationally so that in the event of shortage locally, the required quantity and quality can be gotten across, national border that way there will not be shortage of materials in the organization, idle time for both machines and labourers, name it, the organization should ensure that inspection department be established in the organization so they can inspect incoming and outgoing materials for quality to avoid accepting sub-standard materials into the organization and supplying low quality output to suppliers so they can continue to enjoy brand loyalty from their numerous customers.The company should use both single and multiple source of supply depending on the nature of material and how urgent the material is needed by its consumers.Rather than buying all its machines outrightly, it should lease some because of the continuous advancement in technology we are witnessing now so they won’t end up using money they would have used for other projects to buy one machines that can become obsolete in no time.
Chapter One
Introduction
1.1 Background of the Study
Supplier selection is a procurement planning activity which allows managers to search for and find credible sources of supply that can ensure the availability of materials, equipments, fools, components, protects, consumables, and services at the right price, quantity, at the right tine and place.
In order to ensure contritely of supply purchasing officers must spend tine and effort in investigating and evaluating prospective sources or suppliers and continuously appraising the performance of current suppliers in order to aund the problem of overstocking, under stocking, or complete non availability of material in the organization.
In order to ensure accuracy in supply, uninterrupted flow of materials in and out of the organization, purchasing manager have to decide the kind of product or service that best fit needs, decide whether to but what they require or of produce (make or buy decision) whether to buy locally, nationally, or internationally, whether to use singly or multiple source of supply, whether to enter into partnership or reciprocity agreement, whether to engage in negotiation or bidding whether to buy from distributors or directly from the manufacturers. All these issues attract diligent and efficient decision that will aid the organization to attain its full potential.
1.2 Statement of the Problem
Sourcing decision is very important because it properly conducted can move the organization to a greater height. Right sources of supply in most cases ensure steady availability of the right quality and quantity of materials in the organization. However, it the right source of supply is not contracted due to corruption personal interest or negligence, it may result in delay in supply of materials. This delay may result in pnice buying which may likely lead to purchase of low quality materials or making such purchases at an exorbitant price. This delay might also result to absohilte stock out of materials in the organization.
Thus could result to break down of production activities in the organization other problems such as production of poor quality output, idle time labourers and machines, fall in sales turnover, diminished profit and name it. Will be experience in the organization for the organization to be able to address these problems, they have to decide the criteria for supplier selection, and the sourcing policy I decision to employ that will ensure steady availability of materials in the organization, that can improve their chances in the soft drink industry or probably make them leaders.
1.3 Objective of the Study
This research work is aimed at determining sourcing decision and its effects on material availability in 7up bottling company plc Kaduna plant. The study is specifically designed to study ways of ensuring continuous availability of the right quality and quantity of materials in the organization at the right time and place in order to avoid shortage in supply and even complete stock out of materials in the organization.
The following are the objective of the research work:-
- Identify the criteria in use by the organization for supplier selection
- Examine the method employed by the organization
- Examine the method employed by the organization in evaluating suppliers.
- Examine the challenges the organization usually face when sourcing for materials.
1.4 Significance of the Study
The importance of this research will rest on the benefit that will be derived by venous section of the society including the organization under study and the researcher. This research work will increase the researcher’s knowledge of the topic. The researcher hope that 7up bottling company Plc Kaunda plant will be provided with meaningful and useful source of supply. Those who wish to research on this qeld will also benefit from this research work, as it will serve as a road map for them to write their own. Research work. Most importantly, it is a pre-requisite for the award of Higher National Diploma in purchasing and supply.
1.5 Scope of the Study
This research work will focus on the effect of sourcing decision on material availability in 7up bottling company plc situated at Kakuri industrial area Kaduna plant .The study will focus on production and store department of the organization .The researchers scope will be limited to sourcing and supplier selection process, criteria for supplier selection ,sourcing decision, methods of supplier selection performance evaluation and management of supplier relationship.
This research work was conducted using deceptive and case study design because it is the most situation for a research work for this nature and because questionnaire was use as an instrument for data collection. The population of this research work is 100 staffs of store and production departments of the organization. And 60 questionnaires was administered out of which 30 was given to senior staff of the department and remaining 30 to the senior staff out of which 45 questionnaires was return and valid for the research work.
The researcher made use of documentary data, close-ended structured four point scale questionnaire and interview method for data collection. Random sampling technique was employed to conduct this research work. The technique was chosen because everybody in the population has equal chance of been selected. The research analyze data collected from respondents to the research question and interview using simple mean cut off point.
1.6 Research Question
The research questions that were adopted for this research work are:
- What are the criteria in use for selection of suppliers in 7up bottling company plc?
- What is the sourcing policy in use by the organization?
- What method is employed by the organization in evaluating suppliers?
- What are the challenges faced by the organization when sourcing for materials?
- When strategies the organization adjourned to be the most effective in managing supplier relationship.
1.7 Definition of Terms
Sourcing:
Is a process through which buyers seeks, survey and evaluate suppliers, and determine policies relating to those who will most suitably meet the requirements of the organization.
Core Competence:
Is the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies.
Insourcing:
Is the process by which an organization takes responsibility for providing services and conducting its operations in-house and in other location but by its own staff.
Outsourcing:
Is a process by which an organization contracts our services and operation that are usually done n-house to another firms that can be done them better, cheaper or faster.
Negotiation:
Is the art and science of arriving at a common understanding through bargaining on the essentials of contract, such as price, quality quantity, delivery time, terms and conditions of service etc.
Bidding:
Is a purchasing procedure by which potential suppliers are invited without collusion to present to an organization, a firm, a clear offer of price, terms and conditions which upon acceptance shall be the basis of the subsequent contract for the supply of the intended goods and services or the execution of projects.
Quality:
Kotler and Armstrong (2004) define quality as the ability of a product or service to perform its functions, which includes overall durability, reliability, precision, ease of maintenance and repair and other customer valued attributes.
Quality:
Kotler and Armstrong (2004) define quality as the ability of a product or service to perform its functions, which includes overall durability, reliability, precision, ease of maintenance and repair and other customer valued attributes.
Quantity:
This entails having the right amount of materials, tools components, parts required for replenishment of the store and production purposes.
Performance:
This relates to product’s operating/features and how well the product is able to the task it was originally designed to and how it is able to satisfy intended needs.
Material:
Is anything that can be offered to the market for attention, acquisition, use or for consumption purposes which might be capable of satisfying needs.
Leasing:
Leasing is a contract by which one party (lessor) gives another party (lessee) the use and possession of an asset or property for a specific period of time and for fixed payments.
Chapter Five
Summary, Discussion, Conclusion and Recommendation
5.0 Introduction
The summary of the research findings, discussions, conclusion and recommendation are addressed in this chapter.
5.1 Summary of Procedure
Form the study, it was revealed that in ensuring the continuous availability of materials in the organization, the right decisions has to be taken. This covers areas such as deciding on the right quantity and quality of materials to purchase, determine the right source that can efficiently and effectively supply us such materials. This decision is taken by no other but purchasing managers. This becomes very important for them to take such decisions because the main function of the purchasing department is to ensure continuous flow of materials in the organization at the right quantity, quality, price, time, place date and from the right source.
The entire research work rest on the buyer’s ability to take the right decision on sourcing policy to use such as single or multiple sourcing, buying nationally, locally or internationally whether to insource or outsource, buy directly from manufacturers are to use channels and so on. If the right decision is taken at the right time, it can move the organization to a greater height. It therefore becomes necessary for all organization that many manufacturers or even buy anything they require for their daily activities especially 7Up Bottling Company to have purchasing department as their presence in the organization will ensure reduction in cost and increase in profit. Because they are profit contributors to the organization.
5.2 Discussion of Findings
In response in table 1, variable1, the use of financial capability of supplier as a criteria will determine whether the supplier will perform well when he is awarded the contract.
In table 1 variable 2, the mean score of respondents is 2.9 which shows that previous performance of supplier is an appropriate criteria to consider when selecting suppliers.
In table 1 variable 3 has a mean score of 3.1, it shows that respondents agrees that in determining suppliers to select, they have to consider the plant capacity of the supplier in order to avoid late delivery of materials in the organization.
In table 1 variable 4 with a mean score of 2.8 shows how important manpower or labour activities are to any organization, because if the suppliers frequently experience crisis in their site because labourers are demotivated, it will affect 7Up Bottling Company Plc and as such it must be added as a criteria to selecting suppliers that can satisfy the needs of the organization.
In table 1 variable 5 was accepted by respondents because you cannot select a supplier to supply any organization without determining or considering whether it has the required quantity and quality of material the organization requires for its operations.
In table 1 variable 6, Respondents agrees, that supplying managerial skills and technical know how should be used as a yardstick for selecting suppliers because it has a mean cut off point of 2.8.
Table 2 has 10 variables which shows the acceptable, figures by 7Up Bottling Company Plc because their mean cut off points are 2.5 above 2.5. the variables includes: Direct sourcing, indirect souring, insourcing, outsourcing, international sourcing, national sourcing lease buy, outright purchase, single sourcing and multiple sourcing.
Table 3 has 5 variable,s they were all accepted by the respondents in 7Up Bottling Company Plc, Kaduna plant because they all have cut off point which is above 2.5. The variable includes: adoption of cost-base method of evaluation, the weighted point evaluation system, regular visit to suppliers site, use of past record of performance, categorical plan method.
Table 4 has 5 variables, they are all accepted by the respondents in the organization (7Up Bottling Company Plc, Kaduna plant) because their mean cut off score is above 2.5. The variables: major source is monopoly, lack of professional procurers, financial incapability of 7Up Bottling Company Plc, Kaudna plant, inadequate source of supply locally, inadequate quantity and quality of materials required by the organization.
Table 5, this also has 5 variables with cut off point above 2.5, shows that the variables were accepted by respondents as a means of ensuring effective management of relationship between the organization and suppliers. This improved relationship will ensure the supply of the right quantity, quality of materials in the organization at the right time, place, date and price, for enhanced productivity and efficient and effective service delivery.
5.3 Implication of Findings
This entails the difficulties and benefits derivable from this research work. The positive implication of the finding to 7U Bottling Company includes:
- If the organization can select suppliers base on their past performance and reputation, they will be doing themselves good because the right source will be the ones responsible for supplying the needs of the organization.
- It will help the organization to determine the most effective and efficient method of sourcing decision to use at any given time.
- It will also help them to know how to maintain the relationship between them and their suppliers for increased productivity and continuous availability of materials in the organization.
Negative Implication of Findings
If they refuse to work to work with the results of findings might face the following problems:
- Stock out of materials because suppliers were not chosen based on merit but base on self interest.
- The organization decided to make use of monopoly to supply a crucial material, it might lead to delay in supply, increase in cost of production and a corresponding increase in sales of finished product.
- The organization might end up producing low quality material because the right decision was not taken.
5.4 Recommendations
In view of the findings, the researcher now recommends the following:
- The organization should establish a purchasing department and allow them to authorize purchase of goods for the organization. This is because when competent procurement personnel are used to carryout procurement activities, they will ensure that the organization joys all the 7 rights there by reducing cost and increasing profit for the organization.
- The organization should source for the materials both locally and internationally so that in the event of shortage locally, the required quantity and quality can be gotten across, national border that way there will not be shortage of materials in the organization, idle time for both machines and labourers, name it.
- The organization should ensure that inspection department be established in the organization so they can inspect incoming and outgoing materials for quality to avoid accepting sub-standard materials into the organization and supplying low quality output to suppliers so they can continue to enjoy brand loyalty from their numerous customers.
- The company should use both single and multiple source of supply depending on the nature of material and how urgent the material is needed by its consumers.
- Rather than buying all its machines outrightly, it should lease some because of the continuous advancement in technology we are witnessing now so they won’t end up using money they would have used for other projects to buy one machines that can become obsolete in no time.


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