AN APPRAISAL OF THE EXTENT OF PURCHASING DEPARTMENT’S INVOLVEMENT IN INTERNATIONAL BUYING IN AGRICULTURAL INSTITUTIONS. (A CASE STUDY OF THE INTERNATIONAL INSTITUTE OF TROPICAL AGRICULTURE I.I.T.A, IBADAN)
TABLE OF CONTENT
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Significance of study
1.5 Research hypothesis
1.6 Limitation of the study
1.7 Definition of terms.
2.0 Literature review
2.1 Purchasing (What is Entails)
2.2 Types of purchasing
2.3 Meaning of International Buying
2.4 Reasons for growth international buying
2.5 Purchasing through agencies
2.6 Pre-knowledge of international buying
2.7 Problems of international purchasing
2.8 Pre-shipping Arrangement
2.9 Understand industrial buying
2.10 Industrial buying process
2.11 Who is involved in the buying process
2.12 The purchasing professional understanding buyers motivation
3.1 Area of study
3.2 Sample frame
3.3 Sample size and procedure
3.4 Instrument for data collection
3.5 Method for data collection
3.6 Method of data analysis
4.0 Analysis and Interpretation of data
5.0 Summary of Findings, Recommendation and Conclusion.
5.4 Research Questionnaire
Often a purchaser tries to survey and search for the most satisfactory
source of procurement. Many are due to discovery that no competent and effective supplier could be found. However, due to this circumstance, a purchaser may resort to buying internationally after realizing that local could not meet organizational requirement, may be owing to the fact that local that the source is substandard or insufficient to size –up with production demand for such materials needed.
However, most countries depend, to some extent, on importing raw materials from overseas, buying from abroad is more difficult than buying locally from indigenous market because of difference in culture, language, currency e.t.c.
Despite all these problems purchase of raw-materials, capitals goods, etc, still depend on sourcing internationally to meet domestic needs. No single nations can claim to be self-sufficient and as such, the concept of comparative advantage makes it possible for nations without required or not enough raw materials and /or finished goods, to import such from other nations.
Therefore, International purchasing is the sourcing and purchasing of goods and services form a neighboring kind across the boundaries of the buyer’s country. Subsequently, the following reasons prompt the urge to buy from abroad.
1. Local Capacity may be inefficient to meet demand importation becomes the only source to make up such lapses. For instance, the consumption of rice in the Nigeria market is something to study despite the large quantities produced by domestic individuals the market consumers still scramble for foreign rice.
2. Specification may not be available domestically. No one country commands monopoly on new technology. A company may be in need of items with special specifications that can only be found in a foreign market.
3. Cost benefits; Generally, off share sources have been able to offer Nigeria buyers lower prices on manufactured goods because of law labour, material and overhead cost, the costs may be cheaper because of better improved productivity, better plant or other facilities.
4. Quality; This factor constitutes one of the reasons for sourcing oversea. Quality in this sense should be regarded as the inherent priority of the materials as distinct from those available domestically.
5. Maintenance of alternative supplier may improve supply security by having a second source in a different country. This helps to maintain continuity in supply of materials for production to be hitch-free. In the light f the above, the purchasing department serves as a means of contributing to the attainment of the general objective of any profit oriented organization as well as success oriented ones. Materials command about 60% of company’s expenditure and so stands a circle chance of determing the success or failure of the whole organization. The purchasing department process all the materials needed to be used in production process at all time. Therefore, it is the purchasing department that goes into the international market to buy when these materials are lacking or inadequate in the domestic market
1.1 BACK GROUND OF THE STUDY
The international Institute of Tropical Agriculture (I.I.T.A) was found in 1967. The Federal government of Nigeria provided land grant of 1,00 hectres Institute. The provided land area carries on it, the institute’s offices, workers residential building and experimental form.
The institute is governed by an international board of trustees. The staff include nearly 200 scientists and professional staff from about countries all over the world, who work at the Ibadan Campus. The international institute of Tropical Agriculture is one of the thirteen non-profit making international research centres in the world and it’s supported by the consultative group on international agricultural research (CGIAR) to run it’s programme body was set up in 1971. The purpose research effort is to improve the quality of and annual production in developing countries.
Also the goal of the (I.I.T.A) is to increase productivity of key crops and to develop substantial agricultural system that can replace bush fallow or slash and burn cultivation in the humid and sub-humid topics.
In the international purchasing, there are difficulties in dealing with sources oversees which is not encountered in the domestic setting. Additionally these prevailing circumstance have prompted this research work to shade more light on the extent of purchasing department involvement international buying.
1.2 STATEMENT OF PROBLEMS
The main objective of this study would be to identify and establish the impact that the purchasing department contribute in the display of witness in the procurement of nationals internationally in the operation of the international of institute of Tropical Agriculture. In the history of industrial function in the achievement attained as a result of constant improved product design.
The inability of the purchasing department to adequately perform its function could be attributed to the following lapses.
1. Wrong purchasing policies
2. Lack of skilled and professional purchasers
3. Lack of skilled necessary incentive to inspire the purchasing functions to high level efficiency.
4. Lack of effective Co-ordination of efforts of different department in the organization.
Having considered these problems and probably their various effects, the researcher would wish to analyse and their after effects and give recommendation for improvement.
1.3 OBJECTIVE OF THE STUDY.
The following are the objectives of this research work analyzed and discussed step by step.
1. To unveil the plague that is covering the functions needed to be performed by the purchasing department, so that the material required by the entire organisation can be made handy-ready.
2. To enable the researcher offer positive can problems encountered in PM-pointing at the impact of purchasing department involvement in international procurement.
3. To design a workable solution to the problems of buying and storage of goods that will conform to standard and specification as given various department under an establishment.
4. To provide suggestions to the management of I.I.T.A towards solving of problems of filling the position of purchasing department with qualifies incompetent and constrained personnel.
Apart from the proceeding objectives, the primary national extends to meeting the pre-requisite for the partial fulfillment of the award of the Higher National Diploma (HND) in institute of Management and Technology I.M.T Enugu.
1.4 SIGNIFICANCE OF THE STUDY
Particularly the purchasing department involvement in international buying will be extensively discussed and the definition of the word ‘purchasing internationally will be viewed along side with the different types of purchasing activities that are usually obtainable in I.I T.A for instance, there s local purchase f material domestically.
The role of purchasing department to meet organization aim is very essential and this will be focussed on this work of research. Another area to be covered in this project will also include the relationship that exist in the organization between purchasing department and others
Therefore, the purchasing functions include the placing of orders, progressing, inspection, and inventory and stock control. It will also embody all details that are needed to be know before is supporting the idea that the purchasing function is having a great impact and role to play in achieving the aims and objectives of the organization.
The research will be limited only the case study chosen which is the international Institute of Tropical Agriculture (IITA) .
1.5 RESEARCH HYPOTHESIS
This is an intelligent quests postulated for the purpose of assisting the researcher in directing his thoughts towards preferring solutions to purchasing problms. As stated earlier in the proposal, the tentative quests will be split into two;
a. The null hypothesis which represent the negative aspect and
b. The alternative hypothesis which represent the positive view.
Ho: Purchasing department involvement in international buying does not
contribute to high productivity and successful operations in the
international institute of Tropical Agricultural.
Hi; Purchasing department involve in international buying contributions in
the high productivity and successful operations in the international
institute of tropical Agriculture.
1.6 DEFINITION OF TERMS
1. Advice Note: document sent by supplier to a consignee in advance of delivery. Some times it moves with the consignment.
2. Bill of Lading; This document is similar to deliver note used in shipping. A copy of it is rationed by the senders, a copy held by the master of the one also for the consignee. It is a memorandum contact of contract of carriage.
3. Bill of Material; This is a list if material including component parts , specifying their quantity and characteristics requires to produce a particular product. The bill of lading or parts list is commonly used in fabrication orientated organizations. When the engineering department list of all materials require for the job is compiled, sent to the purchasing department for necessary action.
4. Average Stock: this is the arithmetic average of a set of materials. For instance, the average monthly inventory can calculated by adding the month-end inventories for a year and dividing such by twelve.
5. Consignment Note: A note accompanying consignment of goods indicating quantify, descriptions and other physical feature of the cargoes.
6. Carrier: This is a company offering the services of transportation of good from one place (the origin) to another (the destination).
7. Consignor: The organization sending the consignment.
8. Cost insurance and freight: this is a type of contract whereby the cost, insurance and freight rates are quoted together by senders. Thus, the seller or the exporter is responsible for cost shipment, insurance and freight rates.
9. C x F (cost and freight): This is similar to CIF except that buyer will pay the insurance charges.
10. Demurrage: This is the sur-charge paid shipping company by the inner beyond the agreed charge. It is imposed against
11. Duty: payment made to the government either for import or export.
12. Freight: is a traffic term used to denote the shipping changes for cargo transportation, it can also refer to the consignment as well as transportation function.
13. Free on Board : This is a contract in which goods are delivered to the ship (on board) at the expense of importers or exporter.
14. Proof of Delivery: This document is like a delivery note, signed by the consignee that safe delivery has been performed.
15. Port of entry; This is the country’s port i.e the port through which consignment would enter the country of the destination.
16. Sourcing; This is that part of procurement function concerned with investigation, identification and development of sources of supply for organization requirement.
17. Allocation: sometimes, portions of materials available in the store are reserved or earmarked for specific requirements. It is then said to be allocated to those requirements
18. M R P (Material requirement Plant)in this system, the BOM (Bill of Materials) is listed in the product structure format and shows how the product is fabricated and assembled i.e it would indicated what raw materials are used to make the components, how the components would come into the production of sub-assemblies and finally how the sub assemblies would form in sequence into an assembly. This usually done by showing the BOM in a Multi-level format.
19. Bonded warehouse: A ware-house were goods on which exercise
duties have not been paid , are stored,
20. Bought-out items: These are materials not manufactured by the organization, but purchased and used with or without further processing in assembling the finished products.
21. Buffer stock: A certain quantity of materials are kept in the store to cover variation in demand delay in supplier. It is the average stock on when the replenishment supplies arrives. This is also called the “safety stock” reserve stock, insurance stock minimum stock. Buffer stock and active stock are the two components in an inventory.
22. Covert Emptor: This is a creak phrase that implies let buyer beware. The buying is purchasing at own risk.
23. Codification; A form of identifying a materials by the use of numerals, letters symbols or a combination therefore for the purpose of establishing, in a systematic manner, the unique and complete identify of an individual item and also of bringing out it’s similarity with others materials.
24. Component inventory: This term included any inventory item used to make another item. For instance, a raw material, a part or a sub- assembly is used as a component to make another product and there by becomes a component inventory.
25. Consignment stock: Im normal cases, goods are paid for on delivery or after a define credit period. In this case, the goods supplied by the seller are kept in the buyer’s establishment and paid for only after they are sold or after they are used.
26. Container: This is a dervice in which goods carried e.g a railway container, a barrel, bottle carbon, etc are types of container.
27. Dependent demand: a material becomes dependent when it’s needed for the manufacture of a higher level demand. A component is a dependent item for making a sub-assembling and it’s demand becomes dependent, as a separate part in after sales services. In inventory classification, therefore, dependent demand should be separated from an independent demand (sales as a service part)
28. Dispatching: This refers to the selection and assignment of jobs by an individual work centre on the shop floor. A despatch list is a schedule for a particular centre. This can be generated easily by the use of a computer and issued daily showing the priority sequence of jobs to be done at the work centre.
29. Distribution resources Planning (DRP) MRP was originally developed as a way to order materials to start shop floor assembly operations. However, distribution centres (in warehouses locations caring) finished goods inventory. DRP takes care of this requirement in the sense that it is a means of determing how much inventory of different items are required by the distribution centres when adding these figures to the production requirement to make up total requirements.
30. Continuous Inventory Control: This is the checking of inventories (materials usage) in the stores on a continuos basis throughout the year instead of once or twice a year. A few selected items are checked each week. It is also called perpetual stock taking the alternative procedure is annual stock-taking.
31. Discount: An allowance granted by vendors to buyers these are various types of discount, which include cash discount, trade discount quantity discount cumulative purchase discount. e.t.c.