THE EFFECT OF SOURCING IN THE ACHIEVEMENT OF PROFIT OBJECTIVE OF AN ORGANIZATION

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THE EFFECT OF SOURCING IN THE ACHIEVEMENT OF PROFIT OBJECTIVE OF AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The most important thing in the hierarchy of all organizations objectives is profit maximization, and this can only be achieved where organization is able, to meet their customers demand satisfactorily as at when due and for this objective to be met there must be a right source of supply that is, if the correct source decision is made in a particular instance, then the buying company’s need would be met perfectly. In such circumstances it would received the required goods or services at all times. Sourcing thus involves much more than simply picking a supplier or contractor for each requirement in isolation. It involves continuing relationships, both with preferred sources which are actually supplying goods and services, and with potential sources which may have been passed over for the present but are still in the running. It involves decisions about how to do business on. For its proper performance sourcing requires supply market research. This is a normal part of procurement and supply work, undertaken informally by buyers when they talk to representatives, visit exhibitions read trade journals and investigate the market before placing orders. In addition, it is the primary responsibility of purchasing to find out suitable sources of supply and ensure that the right quality and quantity of material is obtained at the right prices, and also spending time and effort in investigating and evaluating prospective supplies and continuously appraising the performance of current suppliers. In such a manner that there will be regular inflow of materials supply to avoid stoppage in production and its attendant costs and for the organization to be able to maximize its customer requirement in order to achieve its profit objective.

1.2 Statement of the Problem

Apparently in many organizations, it is clear to observed the effect of poor sourcing procedure in the award of contracts to the supplier who are not financially and technical capable of meeting the demand or the need of organization. This is often base on irrational decisions of many purchaser, as such the organization always suffer set backs in achieving their profit objective.

Most other problems associated with sourcing ranges from high price of materials, late deliveries, supply of substandard products, mostly traced to inappropriate sourcing decisions.

1.3 Objective of the Study

The objective of this study is to assess role of sourcing in the achievement of the profit objective of organization of Nigeria bottling company Kaduna plant.

Specifically the study is set out to

1. To identify the sourcing policy employed by the organization in the procurement of materials need.

2. To identify criteria for source selection.

3. To identify the criteria used by the organization in rating their suppliers

4. To identify the type of buyer and suppliers relationship.

1.4 Significance of the Study

The research study focuses on role of sourcing in the achievement of the profit objective of organization of Nigeria bottling company PLC Kaduna, therefore the research study will be of benefit to the organization, the executives, the students and other researcher in this field also the research study will be of benefit to the entire Popolance

To the organizations the study will explain in detail what sourcing is all about, it important and benefit they stand to derive if, they give sourcing the necessary any attention required, and also why should be proactively a proactively in the organization thus the study will broaden their knowledge of understanding sourcing.

To the executives the research work will bring to their lime light the various sourcing methods available which they can use when sourcing for supplier in their organization, also the type of relationship needed to be used to foster good relationship with their supplier in order to guarantee timely delivery of material at the right time, price and at the right place.

To the student the study will serve as a study materials and a reference book as well thereby adding valve to the knowledge and to the researcher in this field the study can be use as a guide and a stepping stone for further research.

To the student the research study will help to broaden perspective in what sourcing is all about, is also a requirement for partial fulfillment for the award of higher national diploma in purchasing and supply department Kaduna polytechnic.

1.5 Scope of the Study

The study will be restricted to Nigeria bottling company Kaduna plant. The study will address the sourcing policies and procedures of the organization being studied. The work will also look at the nature of relationship existing between the organization and its suppliers as well as supplier rating or evaluation.

1.6 Research Questions

This study will attempt to provide answer to the research questions below.

1. What are the sourcing policies employed by the organization for the procurement of their materials?

2. What are the criteria used for source selection?

3. What are the criteria used by the organization for rating their supplier?

4. What type of relationship exist between the buying organization and their suppliers?

1.7 Definition of Terms

Sourcing: as the process of identifying, selecting and developing suppliers is a key purchasing activity.

Out Sourcing: May be defined as a management strategy by which major non-core functions are transferred to specialist efficient, external providers.

Partnering: is generic and refer to arrange of collaborative relationships.

Intra-Company Trading: applies to large enterprises and conglomerates where the possibility arises of buying certain materials from a member of the group.

Subcontracting: involves the total restructuring of an enterprises around core competences and outside relationship.

Tactical and Operational Sourcing: is concerned with low risk, non, critical items.

Reciprocity: often referred to as selling through the order book is a policy of giving preference to suppliers that are also customers of the buying organization.

Single Sourcing: describes a situation where the buyers places all order with one single supplier.

Dual or Multiple Sourcing: is a situation where the buyer shares the order among two or more supplier especially where the order is large.

Categorical Plan: the method relies heavily on the experiences and ability of the buyer and the personnel of other departments.

International Sourcing: it means buying beyond national boarders of the buyer or importers country.

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