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IMPACT OF MATERIAL SOURCING IN ENHANCING THE ORGANIZATIONAL PROFITABILITY

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Abstract

This study attempted to investigate impact of material sourcing in enhancing the organizational profitability. Organizations have unique materials which is peculiar to their operations. In manufacturing sector, it is a very sensitive task that requires practical steps under some approved and effective conditions. This is because to a very great extent materials sourcing have a direct relationship with the profit of an organization. This study was therefore undertaken to examine the impact of material sourcing in enhancing the organizational profitability, its importance, how effective and efficient it is to the overall achievement of the organizational goal and objectives. The specific objectives were to determine the most effective sourcing policies adopted by Nigeria Breweries; to determine the criteria for selecting supplier in Nigeria Breweries. The study adopted the survey research design. A population of 100 staff was estimated and the research used a sample size of 20 from the population of which describes the characteristics of the population. The findings showed that the company is making high profit for the use of locally sourcing material. This shows that the organization is satisfied with the contribution of locally sourcing to its growth by making available at the right time and right quality, raw materials availability is the basis for a sustained industries growth in any nation. It was also ascertained that the company maintain a very cordial relationship with their suppliers through payment of invoice bills and provision for their incentives which lead to better understanding through personnel observations and from interviews conducted. The study recommends that for industrial sector to develop and perform better, this study proposes a “Home Grow Industrial Policy” where ISI and EPI are jointly pursued and industrial inputs domestically sourced.

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

Material Sourcing is a set of tangible physical attributes assembly in an identifiable form. That is given the rapid changes in taste, technology and competition, organization will not rely solely on its existing supplier but look forward to get better sources of materials.

An organization can use three ways to minimize cost of sourcing materials, by interviewing her customers, by negotiation with the suppliers, by sourcing for better materials, we mean original material that can go into production and come out with quality product; and in the study, we will be concentrating on material sourcing as a way of increasing an organization’s profitability.

As a matter of fact, sourcing for the right material is like human being whose life span has to be treated to keep it working in order to add value, profit to the organization in the view that organization will not die subsequently. The death of organization lays on the fact that proper material are not acquired.

In the light of the above, it is necessary for organization will adopt the system of sourcing for materials to develop and grow their profitability, to achieve this successfully, sourcing strategies are required to be adopted, these are right material, right price, right negotiation, right place, right qualities, right quantities, right sources, right time etc.

In a nutshell, the study will dwell mainly on the impact of material sourcing to maximize organization profitability.

1.2     Statement of the Problem

Most organization especially production oriented organization like Nigeria Breweries spent about 60% to 70% of its annual expenditure on the acquisition of raw materials. Some of the major problems confronting any manufacturing industries are: high cost of materials will affect profit margin of the organization and also incompetence of supplies, if the suppliers are not competent in making right qualities supply will become problem to organization in profitability area.

High cost involved in sourcing suppliers whole material needed for organization. Improper sourcing policy, sourcing for organizational profitability need to be proper that right material will be supplied.

1.3     Objectives of the Study

The purpose or objectives of the study is to examine the impact of material sourcing in enhancing the organizational profitability, its importance, how effective and efficient it is to the overall achievement of the organizational goal and objectives. Under the aspect, the researcher hope to realize the following:

  1. To determine the most effective sourcing policies adopted by Nigeria Breweries.
  2. To determine the criteria for selecting supplier in Nigeria Breweries.
  3. To determine the challenges of manager in material sourcing
  4. To determine the impact of material resource on the profitability of Nigeria Breweries. 

1.4     Significance of the Study

This research work is conducted primarily to meet the requirements of obtaining the award of Higher National Diploma (HND) in Purchasing and Supply in Kaduna Polytechnic, Kaduna abides being an academic research. The study will add to the knowledge of the interested individual or group on the subject matter. The researcher chose this topic to highlight the inherent danger and consequence of adopting poor performance in material delays as problem associated with sourcing with a view of providing solution or applied to sourcing activities in the organization like Nigeria Breweries Plc. It will show the impact in the organization performance and profitability in Nigeria Breweries.

Another vital reason of the study is to contribute to the existing literature in the area of sourcing, types of sourcing, sourcing policy, sourcing process etc for future reference. It will enable a layman in the profession to have first hand information on bio sourcing activities is being carried out. Also the students of the department and other department will find this project an important relevant source of literature review in the area of sourcing ‘material sourcing’ further study will suggest ways that the organization can carryout its sourcing efficiently.

1.5     Scope of the Study

The research will be looking at improve on materials sourcing for organization profitability. This study will make use of population size of 100 staff and the research will use the sample size of 20 was adopted from the population of which describe the characteristics of the population.

Secondly, this chapter will strict to the procurement, production and administrative department. The study will take activities of materials and sourcing of Nigeria Breweries Plc in the last 5 years from 2009 to 2013.

1.6     Research Questions

          The research question includes:

  1. What are the determining factors affecting sourcing policies adopted by Nigeria Breweries?
  2. What are the criteria for selecting suppliers in Nigeria Breweries?
  3. What are the challenges facing managers in materials sourcing?
  4. What are the factors that lead to impact of material sourcing on the profitability of Nigeria Breweries?

1.7     Definition of Terms

  • Raw Materials: Are items, which are to be processed through production process to obtain desired finished goods.
  • Purchasing: it is the process of ensuring that all the materials required for production made available at the proper time, in the proper quality at a proper place and price.
  • Information: Data can be interpreted by an individual to provide meaning, a tangible or tangible entity that reduce uncertainty about a state or an event.
  • Sourcing: The event to which buyers search or suppliers to build long term relationship.
  • Outsourcing: An arrangement by which one organization provides a service or services for another organization that choses not to perform them in house.
  • Negotiation: Is the art and science of arriving at a common understanding through bargaining with essentials of a control, such as price, quality, quantity, delivery, time, terms and condition of services.
  • Selecting: Is the process of selecting the right suppliers to source or outsource.
  • Bid/Tender: Is an offer made by a supplier, contractor or services provider to a buyer in a response to a direct “written” or indirect “advert” enquiry.
  • Biding/Tendering: Is a purchasing procedure by which potential suppliers invited without collusion to present to an organization, a firm and clear offer of price, terms and conditions which upon acceptance of contract.
  • Time: When organization cannot meet up with time or cannot complete the whole task within the specified period, the organization can outsource a part of the product in other to meet up with schedules.
  • Quality Specification: Is the description of an item, its dimension, analysis, performance or other relevant characteristics in sufficient detail to ensure that it will be suitable in all respect for the purpose it is wanted.

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