Sourcing For The Most Suitable Supplier For Raw Materials In Manufacturing Organizations (A Case Study Of Nigeria Bottling Company Ilorin)

Sourcing For The Most Suitable Supplier For Raw Materials In Manufacturing Organizations (A Case Study Of Nigeria Bottling Company Ilorin)

Chapter One

Introduction

1.1 Background of the Study

Good supplier can be referred to as a tangible asset to manufacturers. It would not be possible to operate without supplier; this can be viewed for the aspect of division of labour or batch production process whereby the successful completion of one process depends on another. Therefore, I supplier fails to deliver materials especially raw materials at the right time of the operation is bound to paralyze.

Sourcing by definition is a management effort which is aimed at tie location or selection of effective and efficient supplier who are willing to respond to the needs of a manufacturing concern in the area of reliance supply of its raw materials, components and parts, quality insurance with reasonable price.

Selecting suitable supplier is one of the purchasing manager’s function or responsibility. The selection of supply source must be critically examined by the purchasing manager. The buyer must find the supplier who will furnish him with the optimum combination of good suppliers’ factors.

Sourcing involves much more than picking a supplier for each other in isolation. It involves continuing relationship both with preferred sources which are actually supplying goods and services and with the potential sources which may have been passed over for the present but are still in existence. There is no way a purchasing function could be carried out without paying special attention to the source of suppliers within and outside the environment with effective evaluation of such supplier.

One the problems facing most manufacturing organization in Nigeria are how to source for the right supplier and the rating of their performance. ‘The careful planning of the buyer and production planning can be jeopardize by a poor sourcing or sources selection, It is already on cord that without knowing the source for the right supplier, the end product cannot be of good and right quality because the inputs which are the raw material may not be up to standard required for their production.

It is also on record that many organizations have to reduce production or close down entirely due to lack of source of supply of their raw materials (input) that will be processed to form the output or the ultimate product that will be offered for sale.

However, it reflects that the extent to which buyers search for supplier have received considerable attention in this days of economic instruction. Every organization has to find ways of getting adequate sources of materials for their operation.

1.2 Statement of Problem

This study or research work is aimed at finding out the number of problems facing purchasing officers during the process of “SOURCING FOR THE RIGHT SUPPLIERS’. There are certain problems which usually faces the purchaser which ranges from determination of where source either internal or external (i.e. local or international market), to determination of who is best supplier and what system to be used in approving and rating them.

Another problem usually encountered while sourcing for suppliers include the situation where the purchasing officer find himself in the monopoly market where there only one seller who as all the power to exploit purchaser because there is no competition between seller.

1.3 Rationale for the Study

First, the research work is carried out in partial fulfillment of the requirement for the .award of ordinary national diploma (OND), in business studies; Institute of finance and management studies (IFMS) Kwara State Polytechnic, Ilorin, Kwara State.

This area of project work has also attracted researchers because of the role it plays in any business. In view of the stated problem area of the project, the basic objectives of the study are stated as follows:

1. Find out the nature of the problem facing purchasing officers when sourcing for their inputs.
2. To find out the importance attached to “sourcing” as one of the five principles of good purchaser

1.4 Scope and Limitation of the Study

The scope of the study is to focus on how manufacturing organization for their supplier for raw materials which is the life-wire of any ion concern.

The research is therefore limited to Nigerian bottling company Plc, Ilorin Kwara State as a case study and also to other areas considered as important to the topic in question. At the end of this project it is hoped that sourcing for the most suitable supplier for raw materials would be dearly understood

1.5 Limitation and Constraints of the Study

The study of project is limited to Nigeria bottling company Plc, Ilorin, Kwara State.

Researchers in Nigeria are often faced with number of problems which are inherited in the society. The researcher here was not exempted and so had a fair share of these constraints. These limitations are mainly environmental problems some of which are described below:

Respondent Perception

While some of the respondent to oral interview were very cooperative and made the researcher’s project others were un-cooperative.

The un-cooperative behavior range from failure to keep dates h researcher, to outright refusal, to grant oral interview or giving flimsy excuses. These acts of un-cooperative attitude constituted a serious limitation to this project.

The attitude of the company as regards provision of necessary data and records on has they go about their sourcing for supplier was not all that encouraging enough and when investigation was conducted on this (project) it was learnt that the company regard some of the information as top secret which they may not want to pass to their competitors. The research is also constrained by distance, time and insufficient finance.

1.6 Historical Background of Nigerian Bottling Company Plc, Ilorin Kwara State

Coca-cola bottling company first came to Nigeria in 1953, when it’s first it was located in Lagos. It was the beginning of an exciting story of the growth and development particularly during the past ten years.

Nigerian bottling company is today Nigerian’s number one bottler of soft selling more than six million (6,000,000) bottles per day, a figure which is still growing with the continuous expansion of the existing eighteen plant and with the opening of brand new plant in various part of federation.

Fanta is by far the best seller in the orange segment and Sprite, the most widely sold lemon lime drink in Nigeria. Other products bottled by Nigeria bottling company include fanta ginger ,Fanta tonic, Fanta Soda and Crest, bitter lemon.

The success of Coca-cola has brought about the development of a number of sister industries all contributing to the growth of the Nigeria economy. The Delta glass company in which supplies millions of bottle required to keep a large bottling company in operation and grown products factories in Ijebu-Ode and Kano which manufacture the metal crown to seal the bottles, the Benin plastic company which manufactures the plastic crates for distribution of the bottles.

In addition, the trucks which have a familiar sight in many part of nation delivering drinks to more than eighty thousand (80,000) supplier are also assembled in Nigeria. Nigeria bottling company is also the largest manufacturer of Carbon-dioxide used to carbonate soft drinks in the country. The Nigerian bottling company employs over (6,000) six thousand workers who are Nigeria in all fields of operation. The manufacturing process of Coca-cola is based on proper measurement of it content like sugar, water and concentrate. The same standard is maintained all over the world.

The headquarters of Nigeria bottling company is at Leventis building, lddo house, Lagos Island. The various plant sited all over the Federation have currently been divided into four different region, the west, East, South and Northern regions. Our case study is an example of the Northern region “ILORIN’.

Ilorin plant was constructed and installed in 1979 and it was commissioned by his Honorable Excellency Connell S.C. Ifere. It was the tenth establishment among the eighteen plants of the industry.

The very plant is neatly located along Old Asa- Dam Road, Ilorin. The Coca-Cola bottling company is one of the multinational companies in the country which is well known to be owned by Leventis Group of company now made up of share-holders.

1.7 Administrative Organisations

The administrative organization of Nigerian Bottling Company Plc is composed of the executive Chairman which is mostly appointed by the share holder, next is the executive director who is the overseer of the company, the General manager and the regional executives or managers. After this are divisional executives who come from each overall department in the Federation.

The branch plant is headed by a plant manager who is the head of the plant and other managers like factory manager, sales manager quality control manager, plant or branch accountant, the microbiologists and the personnel manager, under them are the superintendent and Supervisors officers.
A clear administrative organization is better shown on the administrative chart.

Nigeria bottling Company Plc, it’s general organization chart.

1.8 Definition Of Terms

Sourcing:

The identification or development of suitable sources of supply, the systematic investigation and comparison of such sources, the sourcing decision, which help supplier to patronize, how many to use on a given item, how to allocate available business, what term to do business on.

Right Sources:

This is the supplier that can meet the requirement of the buyer at any period time.

Procurement:

This term is defined as a whole process whereby all classes of resources (materials facilities and services) required are obtained.

Supplier Development:

This is the process where the buying company assist small or new supplier for them to be able to supply product it’s required in the correct quantity, quality and correct delivery schedules.

Carrying Cost:

This comprise of all cost that are incurred in holding a given level of inventory.

Order Cost:

This is the total cost incurred in the process of acquiring a given level of inventory.

Acquires Cost:

This comprises of cost of carrying stock and cost of placing order.

Processing:

Sometimes called expediting, chasing or follow-up. An important part of the suppliers management task is to ensure that goods and services are received as at when required.

Many delivery problems can be avoided by sound selection, even the most careful selected sources sometimes prove unreliable in meeting agreed schedule.

Lead-Time:

This is the time when an order is fully recognized to the time when the goods are delivered. We have internal and external lead- time.

Price Analysis:

This is the process of examining of seller price without evaluation and examine of separate elements of the cost and profit making up the price.

Published Price List:

Is a form of quotation that provides prices of standard commodities treated.

Reciprocity:

When buyers give preference to suppliers who are also customers, they are engaging in a practice known as reciprocity.

Specification:

This is very important. it is the detailed statement providing a complete description or list of characteristic or requirement laid down for materials, components, processed or services.

Negotiation:

This is an agreement procedure aimed at decision making.

Policy:

This is a general statement or understanding which guides or channels the thinking and action of management in decision making.

Right Quantity:

In purchasing, this term refers to the volume, size amount which can be most economically purchased of any item at a particular time.

Vendor:

This means suppliers who: supply: goods or services to the buying company.

Chapter Five

Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

From all indications on this project research, it is clearly understood that all the efforts of the researchers were channeled and completely centered on sourcing for the most suitable supplier for the raw materials in manufacturing organizations. In this research work, the researchers succeeded in stating why it is of paramount importance and necessary to adequately source for supplier(s) this factor too can be only effectively carried out by the purchasing department head, who has or acquired the needed knowledge and skills required for the job whenever and wherever the management concern is trying to look for the best suppliers to do business with.

The researchers were able to state some of the reasons why the company’s understudy as been given due recognition to the need for the purchasing manager of the company to fully part-take in decision and steps to locate dependable supplier of raw material and component they used.

It was further indicated in the research work that the success of a company lies in the effective and efficiency of it’s purchasing department to source and place order with the most reliable supplier around.

The researchers were able to gather that uninterrupted flow of raw materials to production line is as a result of proper sourcing from the purchasing department. Progressing placement of order from suitable supplier can make this a reality. On a final analysis, the researchers emphasized the need for every management in all organizations concerned to give adequate independent to the purchasing department to be able to function effectively and efficiently.

This will make the department to do all its responsibility in which sourcing is one. This will undoubtedly bring about meaningful contribution towards the success of the organization in question.

5.2 Conclusions

The efforts made so far by the researchers on this research work, would be of great assistance or guidance to all manufacturing organizations, which are yet to recognize sourcing for supplier as an important function of purchasing. As a matter of fact, the issue of stock out of raw materials would be completely eliminated if purchasing were duly recognized. This can only be attained through sourcing for the most suitable supplier(s). However, unreliable delivery, poor or unsatisfactory quality, transport inconveniency, extension of lead time and insufficient quality etc. which constituent poor supplier selected will be totally avoided.

Above all when all the recommendation given by the researchers in the next page are critically observed and given adequate and proper attention, it is the believe of we the researchers, that those problems analyzed in the beginning of the chapters would be a thing of the past. It will be improper to claim that the study has offered all the available solutions to the problems that may arise while sourcing for suppliers. The researchers only hoped that this research work (project) will serve as a relevant basis of reference for future researcher in this subject field.

5.3 Recommendation

The purpose of this research is to investigate how manufacturing organization source for the most suitable supplier of their raw materials with particular reference to Nigerian Bottling Company, Ilorin. Also to investigate the likely problems faced by the company in question and after suggested solutions to the company. It is hope that the findings will help the company in solving its problems on sourcing.

During this research, it was discovered that some of the problems being faced by the purchasing manager of Nigerian Bottling Company Plc, Ilorin, was “SPECIFICATION’ problem and this can be overcome by adopting a specific method of ‘SPECIFICATION’ that will include performance, characteristics, control of quality, packaging and protection.

However, it is the researcher recommendation that there should be close supervision of the supplier and there should also be a long-term planning for materials in order to give the suppliers enough time to produce the right quality and deliver them at the right time to meet the production needs. When buying abroad, allowance should always be made for greater risk of delay, strikes, port congestion etc. The recommendation in order to avoid “run out” of stock as a result of this delay it result to carry stock in the country of import at the expense of either the importer or exporter. This should b measured against the effect which a total “run out” of stock would have on the organization. Instability of market trend is also one of the problems identified in the Nigerian Bottling Company Plc, Ilorin.

The recommendation in order to avoid or to cope adequately with market fluctuation is divided into two:

1. To reduce the average paid and the techniques to be used in deliberately timing the volume of purchases by a forward buying policy when the market price cycle is on the downfall.
2. To reduce the financial risk resulting from market fluctuations and the techniques to be used are budgeting of purchases which is done by purchasing in small quantities of materials over were operating periods of equal length and the second technique, is barrier which is use to minimize the risk associated with non-stable market price.

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