Sourcing Decision And Its Effects On Material Availability

SOURCING DECISION AND ITS EFFECTS ON MATERIAL AVAILABILITY


CHAPTER ONE

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:-

i.                   Identify the criteria in use by the organization for supplier selection

ii.                 Examine the method employed by the organization

iii.              Examine the method employed by the organization in evaluating suppliers.

iv.              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:

i)                   What are the criteria in use for selection of suppliers in 7up bottling company plc?

ii)                What is the sourcing policy in use by the organization?

iii)              What method is employed by the organization in evaluating suppliers?

iv)              What are the challenges faced by the organization when sourcing for materials?

v)                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.