PROCUREMENT PRACTICE ON A SMALL SCALE INDUSTRY (A CASE STUDY OF EASY LIFE SUPERSTORE PORTHARCOURT)
INTRODUCTION OF THE STUDY
Procurement has seen a lot of growth leading to the formation of procurement related bodies such as the Nigeria Institute of Supplies Management and the Chartered Institute of Purchasing and Supply. There has been increased pressure for the merging of procurement procedures and objectives with the organization’s goals. The supply chain has been directly linked to the overall company performance and this has therefore made procurement practices vital to company success. Procurement practices positively impact an organization’s financial performance, the success of a new product depends on procurement and supplier involvement. Most organizations use a substantial amount of their income in procurement and therefore recognize the importance of strategic procurement practices Carr and Pearson (2002). Directors and heads of procurement department greatly influence supplier evaluations and the drafting of specifications to ensure the organization gets the best value for its money.
1.2 Background of the Study
Massive changes are occurring in the operating models and marketing strategies of public sector organizations. Procurement greatly impacts how an organization achieves its objectives. According to Leenders et al (2008), purchasing adds value to the organization. Procurement practice is an area that can be improved to further contribute to organizational performance. Organizations tend to choose procurement procedures that are familiar to them; they should instead choose the ones most suited and most beneficial to their organizations success. Narasimhan and Kim (2002), states that there has been increased pressure for purchasing integration. Purchasing integration links purchasing practices to organizational performance Gattorna, 2006). The direct link of operational efficiency and supply chain to organizational performance therefore means that the adoption of procurement practices is crucial to organizational success. Consolidation of the entire procurement process leading to the implementation of procurement practices such as, green purchasing, just in time delivery (JIT), total quality management (TQM) and e-procurement is necessary so as to boost the overall organizational performance. Streamlined procurement systems lead to efficiency and increases the confidence of employees, customers and stakeholders of the organization. Procurement is no longer a process but a strategic function in the organization, it reduces cost and achieves maximum savings for the organization. Organizations should always benchmark against the ‘best in class’ and implement continuous improvement in its processes (Guth, 2010). Some of the procurement practices that organizations can engage in include: commitment to green purchasing, commitment to just in time delivery, commitment to total quality management and e-procurement. Organizations must broaden their view of productivity from the predictable company oriented view to a dual company – customer perspective.
Procurement should be deeply involved in the design and implementation of Sustainable Procurement Policies focusing on how Environmental issues and issues relating to other aspects of Society and Economy can be integrated in the procurement process activities (Hsu Hu, 2008). Considering a wide variety of performance measures is important when defining organizational performance. Organizational performance should be measured under various perspectives; these include quality, efficiency, productivity, profitability and sustainability. Procurement practices should be looked at as part of organizational strategy. Procurement should be involved in the budgeting process, supplier choice and consolidation, concern for the environment and issues touching on quality and technological advances. Stakeholders are increasingly demanding that organizations should address and manage the environmental and social issues that impact their organization (Carter, 2011). Procurement managers are best positioned as they can positively or negatively impact social performance and the environment through performance evaluation and supplier selection. East African Portland Cement Company Limited plays a vital role in Nigeria’s economy by creating employment for a large number of citizens. The government should therefore provide incentives for them to have better and profitable working environments. These may include advancement of long term working capital at subsidized interest rates and provision of cheap raw materials for their manufacturing sector.
1.3 Statement of the Problem
An organization’s purchasing department remains under pressure to achieve financial savings through efficient and coordinated service delivery. Organizations are nowadays increasing their professionalism and efficiency in the procurement process. Hassanzadeh and Jafarian, (2010), noted that procurement practices are strategic and are intended to increase the organization’s productivity, identify better sources of supply and reduce raw materials prices and costs. Procurement practices lead to improvements in information and material flows, and are viewed as strategic functions that work to improve the organization’s profitability, identify better sources of supply and reduce raw material prices and costs. Environmental pollution has led procurement to further realign its functions so that it can be able to conserve the minimal resources available. Green procurement’s idea is to minimize or completely eliminate unsafe discharges and excesses across the supply chain, Hervani, Helms, and Sarkis, (2005). East African Portland Cement Company Limited should embrace the use of procurement practices such as electronic procurement and the employment of professionals as they focus on achieving competitive advantage. Organizational performance is improved when Information Technology is implemented in procurement. Factors that may hinder this implementation may include; employee resistance to change, failure by top management to allocate the required resources and lack of finances. The business environment is changing at a very high rate because of technological advances and procurement managers have to go along with the pace and ensure that all manner of procurement is environmentally friendly. EAPCC faces challenges that include, the high cost of electricity, raw materials that are being depleted day by day and the environmental issues caused by the mining of raw materials. The key polluting substances are dust and carbon dusts. Madhavaram and Hunt (2008), high degree of procurement best practices leads to cost reductions, better material flow, improved inventory, financial performance, better customer service and new product development. EAPCC has integrated cement production with biodiversity enhancement. They believe in the need to bring back nature to what they have removed, so as to strike a mutual balance between nature and development. EAPCC has initiated greening programs which are aimed at rehabilitating the mined out quarries and establishing green zones to act as buffers for dust trapping and carbon sinks for gaseous emissions.
1.4 Objectives of the Study
1.4.1 General Objective
The specific objectives of the study were:
- To establish how supplier selection procedures affect organizational performance within the public sector in Nigeria.
- To analyze the effects of buyer-supplier relationships on organizational performance within the public sector in Nigeria.
- To evaluate the role of e-procurement on organizational performance within the public sector in Nigeria.
- To establish the effects of green purchasing on organizational performance within the public sector in Nigeria.
- To investigate the effects of total quality management on the performance of public organizations in Nigeria.
1.5 Research Questions
This research was aimed at giving solutions to the following questions:
- How buyer-supplier relations affect organization functioning of government owned companies in Nigeria.
- How supplier selection procedures affect organizational performance within the public sector in Nigeria.
- How e-procurement contributes to overall organization performance of publicly owned enterprises in Nigeria.
- How green purchasing affects the performance of government owned enterprises in Nigeria.
- How total quality management implementation enhances organizational performance of publicly owned enterprises in Nigeria.
1.6 Significance of the Study
The research examined the effects of procurement practices on organizational performance, and how management formulated strategies that enhanced efficient procurement practices.
The government as a shareholder benefits in terms of increased organizational performance. The results and proposals of the research will create value in the organization’s products and services and the procurement departments will gain insight on how to identify hindrances and loop holes to the achievement of their objectives.
End users will benefit from the variety of products and services offered that satisfy their needs and also from the enhanced consistency. It will also be easy to detect procurement malpractices.
The study findings will be used to introduce positive reforms in procurement within the public sector and will also assist in rationalizing the acquisition of raw materials. This study will also assist academic researchers do further studies on how to enhance organizational performance by improving procurement efficiency and effectiveness.
1.7 Limitation of the study
The research limits itself to information provided by the staff in the procurement and finance departments. This information will be used as the accurate information reflecting what exactly happened when undertaking the project. Confidentiality regarding data to be collected was also another hindrance in conducting the research. The researcher did as much as he could to encourage the members of staff to disclose the information.
PROCUREMENT PRACTICE ON A SMALL SCALE INDUSTRY (A CASE STUDY OF EASY LIFE SUPERSTORE PORTHARCOURT)