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CONTRIBUTION OF PURCHASING TOWARDS THE PROFITABILITY OF AN ORGANIZATION

ABSTRACT

Purchasing is a process involving the provision of raw materials, tools and equipment of the right quality in the right quantity, at the right time, at the right price and from the right place (source). The contributions of purchasing towards the profitability of an organization is to maintain a continuous supply of material to support the company’s operation, and to provide raw material in an organization as in star paper mill limited, Aba, Abia State. (as a case study) This study is aimed at investigating the contributions of purchasing towards the profitability of am organization. the chapter one deals with the introduction, background of the study etc, which shows what the topic is all about. The chapter two deals with the functions while chapter three discuss on the findings, research design and methodology of the optic. Chapter four deals with the summary, conclusion and recommendation with the questionnaire of the findings.

CHAPTER ONE

1.1 INTRODUCTION 

In recent time, emphasis are laid on the balance sheet report, without cognizance of other factors that made up the inflow and out put of the resources that sustain the body mechanisms of a given firm. With the recent emphasis on cost control in the face of the rising cost of input resources and subsequent spill over the high cost of out put, it is very essential to discuss the contribution of purchasing towards the profitability of an organization. After the Civil War, they attendant boom introduction resulting from the growth of private sector enterprise from Europe and America, and they began to a waken other management inputs for eventual profit. The reasons is based on the sophisticated resources put in by these multi-nationals in to the mechanisms of our business management. Therefore purchasing is referred to as that department which is concerned with the process of defining the organization needs, selecting suppliers agreeing to terms placing orders and receiving good and service and function which is oriented to providing complete supply function to users with the organization for onward production.

1.2  BACKGROUND TO THE STUDY

Ownership: The ownership started as wholly indigenous private enterprises upon it admission in 1991 to the second tier security market of the Nigerian stock exchange, the companies share is now being held by the Nigeria public individual, associated and co-operative organizations. Management: The management policy of the company is determined by the board of directors of which Hon. Echeme Nnanna Kanu is the chairman and managing director be hold a degree in economics and master degree in engineering thermodynamics and is seen in business circle as the man with a vision due to his dynamism in management and interper annual projections. The company also maintain the technical advisory service of his foreign supplier and product brand owners. Location: The factory star paper mill Owerri nta is located on the vast area of land at Aba in Abia State the factory accommodates the company raw materials and finished products were house utilities services plants and factory administration offices.

A BRIEF HISTORY OF STAR PAPER MILL OWERRI NTA A brief history of star 1977 as a private limited liability company. Under chairmanship of the late founds Hon. Chief Nnanna Kanu and was commissioned by the military Governor of Imo State Brigadier Ike Nwachukwu, the second man was an Abiriba business Migal has the objective of manufacturing toiletries house hold products and key personal hygiene product for the heath care market. The company maintains its need office at No 4 Ajayi street off Sir Alex Avenue Ikeja Lagos. While the factory is located at plots mission Rood Umungsi Aba it also maintain sales office and depots in kano and Owerri nta.

1.3 STATEMENT OF PROBLEM

The high inflationary trends records in Nigeria in recent times are never a thing of joy to companies couple with the critical raw materials shortages, components, parts etc. and there is no complete autonomy given to purchasing department to exercise full control over its functions. In some organization purchasing department lacks can effectively and trained personals that candle the taste of buying which is required in the most economics with a view to increase profit knowing that over all purchasing contributes to organizational profitability. therefore staff training is important to organization due to the changes in the economy and market differences. This should be done in order to achieve success for the organization.

1.4 OBJECTIVES OF THE STUDY 

The main purpose of the study is to note the contributions of purchasing management to wards the profitability of an organization the objective of the study is to prove that purchasing contributes towards the profit and growth of an organization.

purchasing as a specialized discipline is meant to satisfy the materials need of an organization ad its should not be see as “all come affair” where any body can come and do anything the way he wants it or the way it please him.

Therefore the fundamental goals of purchasing are to buy materials at the lowest cost from the right source and obtained the tight supplier and delivered to the right place.

This is described as the “rights” of purchasing or otherwise known as the “purchasing mix this means that any organization that wants to remain in business must purchase materials and components at the lowest cost consistent with quality and service requirements.

1.5 SIGNIFICANCE OF THE STUDY 

This study intends to be beneficial to three main categories of people that is:

- The organization

- The students

- The researchers 

To The Organization: The finding of this study will acquaint the organization and it shall discover competent and well trained professionals who can effectively manage and handled the task of buying and supplying of material in the most economic manner thereby increasing the profitability and growth of the organization and also reduces waste. To The Student: This study will make the student become versatile with all purchasing functions, and it will make him/her acquire more knowledge to become a component purchaser in any organization he/she finds himself. To The Researcher: In trying to find out the contributions of purchasing towards the profitability of an organization the study expose the researcher to the many activities played by purchasing officers and the strategies used to solve them.

1.6 SCOPE OF THE STUDY

An effectively and efficiently operating purchasing function can make an important contribution to company results. However, there is more. As a result of the implementation of improvement programme in engineering manufacturing and logistics management, many companies feel the need for improved relationship with suppliers. These relationship necessarily should result in lead time reduction in new production development and just-in-time delivery and zero effects on components. Traditionally, the purchasing department acts as the intermediary which records the agreements with suppliers on these issues and suppliers their fulfillment. This traditional role, however, is changing rapidly as can be seen from the purchasing practices in some major leading-edge companies moving away from their traditional, operational roles, purchasing managers are assuming more strategies roles in their organizations. Focusing an getting better performance from suppliers and the active management of supplier relationships.

1.7 LIMITATIONS OF THE STUDY

The researcher in the course of carrying out this research work has contented with a lot of factor that limits him in one way or other. On of them is finance. The researcher being a student at the time of making this research. Work found it difficult to make ends meet with the little saving he has made. Therefore he has to limit himself to school libraries and journals with which he has to complete this work, and also with the help of a standard company which is star paper mill that works towards the satisfaction of human wants and needs the researcher can engage him to meet up with the contribution of purchasing towards the profitability of an organization.

1.8 DEFINITION OF TERMS 

Study of variety reduction is not limited to the purchasing item only. It also encompasses the study and reduction on variety in the products made, methods used, materials, employed. Variety in organizational techniques, etc, like valve analysis it is a technique use to reduce cost. Variety increases the cost and operational problems in an organization. an increase in the number of components stored will increase the storages space required, increased the number of order placed, increase the difficulties of stock recording and the cost of storage.

Buying methods there are two types of buying, buying for consumption and buying for resale, buying for conversion or consumption is normally practiced by industry and domestic buyers which buying for resale is performed by merchants and speculators. Purchasing officer (buyers) especially industrial buyers are faced with numerous problems in the discharge of their buying duties.

Ordering is the process of instructing the supplier to supply of provide goods or service as stated in an L.P.O which is local purchase order the local purchase order must specify the quantity, quality, price and delivery date.
In ordering, the purchase order remains an offer made to the supplier to supply the items so listed. Once the order is accepted by the supplier, it becomes a legal document binding on both parties.
Quality and Cost Factors

The major requirement of any capital equipment if for it to fit the purpose for which it is required. It most conform to quality. Quality in terms suitability for the purpose. This means the ability of the equipment to do a particular job satisfactorily and efficiently over a period of time.

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