CHAPTER
ONE
1.0
GENERAL INTRODUCTION
The term “purchasing”
is widely used in industry, commerce’s, public corporations and management to
denote the act, the functions and responsibility for procuring materials
supplies and services.
The research is aware
that most serious problems facing the world is the scarcity and the growing
trend towards higher cost of materials and service. But it is amazing the
purchasing, which can be so vital to an organization survival is still little
understood. Although, the function spend a significant portion of every income
of organization, yet many still look upon it as little and not more than a
clerical or routine activity.
Too many people assumed
the function is just a simple exercise of processing requisition and placing
order. Professional purchasing however is not a clerical task.
However, in narrow
sense and considering the topic make-buy decision as an important tool for
increased profitability, the term determine the need, selecting the supplies,
arriving of proper price term and condition issuing the order, follow up to
ensure proper delivery.
The basic elements
involved in performance of this purchasing function at a Coca-Cola Plc, Ilorin,
are obtaining the proper equipment, materials, supplier and services that are
needed, where they are needed at the right time, at the right price, in the
right quantity and quality, from the right source through since Cullintin found
that make or buy decision often attracts attention than need and it tends to be
taken on the basic of incomplete or inaccurate information and for years
without being re-considered, although they have changed significantly.
1.1
STATEMENT OF THE PROBLEM
General problems in
this research induces whether to make or buy in the special focus in order not
to miss its usefulness. At the initial stage, there may be every tendency for
the organization not to make it all in that level of profit maximum may be very
low and it may be lead to the close down of the firm in the future.
The company may even
find it difficult to achieve its pre-set objectives if it fails to run smooth
production at a given period or as stated, as to be able to meet the demand of
the timing customers. A merchandising firm will run the risk of loosing
customer without adequate supplies to meet the rogues of customers.
Decision to either make
or buy constitute the most significant part of the current production of most
manufacturing merchandizing firms which indicates clearly that substantial
amount of money is committed to this important tool. It is essential therefore
to efficiently monitor to either make or buy to avoid in the production
process, under investigation and over investigation.
1.2
OBJECTIVE OF THE STUDY
The purpose of this
project is to contribute to the standard and buying performance of an organization.
It is aimed at examining the ways in which manufacturing organizations can
achieve corporate goals in the area of profitability, lower operating cost,
lower cost of financial procedure by applying make or buy decision in the
strategic planning process.
1.3
SIGNIFICANCE OF THE STUDY
Apart from the
researcher, there are other parties to whom the research work is remarkably
significant and could benefit from. The client company i.e. Coca-Cola Company
Ilorin is also an advantage of gaining from the research works as its focused
on its operation as the subject matter.
The reference company
could benefit in the area of purchasing and supply impact made by researcher.
Lastly, the professional colleagues will equally learn much about make or buy decision
as particularly carried out in the manufacturing industry in an additional
knowledge which has been learnt already in the lecture room.
1.4
SCOPE OF STUDY
The scope of this
research work is based and centers on core areas of make or buy decision i.e.
who determine what or buy decision i.e. who determine what or buy and the
effect of this decision on the organization profit.
In order to consider to
scope of making or buy decision, there is the need to actually minimum effort
and cost taking into consideration make or buy decision as an important tool
for increased profitability at Coca-Cola Company Plc Ilorin.
Before any purchase
order is raised of Coca-Cola Company Plc, Ilorin, decision has to be made
whether the item in question to be purchased or manufacturing internally as
will be necessary.
This decision regarding
what to purchase or make is essentially the decision often seem to be taken as
required by design, production or purchasing people acting together or
separately with no writing policy guide and no apparent provision for periodic
review.
There is no need to
distinguish between tactical decision and strategic decision.
Make or buy decisions
taken at departmental level are those which simply apply to the existing
policy. They are tactical decision. When a change in policy in invariably
considered, it is then this decision are taken at higher level where the company
strategy is decided.
Considering make or buy
decision, it is worth nothing that 60% of company annual budget is open by the
purchasing departments and millions of naira are lost annually as a result of
purchasing items. This would therefore be more economically decided whether
make or buy. This was the conclusion of Culling research first published in
1942 and subsequent investigation do not reveal that there is considerable
improvement over know that before purchase orders are raised, a decision, a decision
is made on whether the item in question is to be manufacture or bought as the
case may be.
The basic elements
involve in the performed of this purchasing functions are obtaining the proper
equipment, material and services that are needed and where they are needed at
the right piece, time, quantity and quality with minimum efforts. It covers all
fact of purchasing in Coca-Cola Company, Ilorin. For example whether the
decision has reduced, in a storage spaces or has added whether quality of
product or falls with make or buy decision at Coca-Cola company Ilorin.
1.5
LIMITATION OF THE STUDY
There cannot be any
successful research of this nature without encountering some difficulties which
might cause it success or failure. Different in securing some of the vital documents
containing some valid information relating to the subject matter because of
Lukeworm attitude of some officers who are suppose to assist in the research
work. This occurred with the view that such a research can secure a deterrent
to them, forgetting that it may be of immense improvement in their performance.
1.6
HISTORICAL BACKGROUND OF COCA-COLA
COMPANY
Coca-Cola is the world
leading soft drink sold in more than 145 countries. A total of 270 million of
bottles of Coca-Cola are consumed everything in all parts of the globe from
Canada on the north to Argentina and New Zealand in the south, from Alaska to
China, from Mexico to Nigeria. It first comes to Nigeria in 1963 when Bottling
Company set up its first plant in Lagos. It was to be the beginning of an
exciting story of growth and development particularly during the past ten
years.
The success of
Coca-Cola has brought with it the development of a number of sister industries,
they all contribute to the Nigeria economy. For example Delta Glass Company
Ughu, which supplies the million of bottles required to keep a large Bottling
Company in operation and the crown Product factories in Ijebu-Ode and Kano which
manufacture the metal crown to seal the bottles. Also, the Benin Plastic
Company which make the plastic crate for carrying the bottle.
In addition, the trucks
which are a familiar sight in many parts of the country, delivery soft drink to
more than 80,000 dealers are also assembling in Nigeria.
Nigeria Bottling
Industry is also the largest manufacturer of carbon dioxide in the country.
This is used to
carbonate the favourite soft drink: Nigeria Bottling Company employed over
60,000 Nigerians in all fields operation.
Quality is the words
which determine the success of the whole operation. Only the very best
ingredient are used for making soft drink and sophisticated washing and filling
equipments have been installed at all plant extremely high standard for hygiene
are maintained to ensure that top quality products reach the customers.
The manufacturing
process of Coca-Cola is based on a carefully increased combination of sugar,
water and the same standard is maintained throughout the world. Nigeria
Bottling Company plants are situated in many parts of the country; the
headquarters of Nigeria Bottling Company is at Leventis Building Iddo House,
Lagos.
1.7
DEFINITION OF TERMS USED FOR CLARIFICATION
AND BETTER UNDERSTANDING
MAKE: It is the act of producing certain
things
BUY: It is an idea of paid or getting by
buying a price.
POLICY: The plan of action to be taking by
management of an organization policies defines the boundaries within which decision
can be made by their direct decision towards the accomplishment of objective.
DECISION: It is the act of making up one’s mind
about certain things.
CAPITAL
EQUIPMENT: Is the
installation of equipment such as plant machinery, and other major equipment
used directly for production of goods and services.
PURCHASING
POLICY AND PROCEDURE AUDITS:
This is used to determine of established policy and procedure are being adhere
to.
PURCHASING: Is the continuous management process
that is responsible for anticipation, identification and the provision of the
goods and services that are required by an organization with objective of
increasing organization’s profitability.
PRODUCTION: It is the process of production or
making an item.
CAPACITY: Ability to contain, hold or get hold of
something.
UNSATISFACTORY: Not giving pleasure of
satisfaction, from need or desire.
SPECIFICATION: Is a defined description of what is
wanted.
SUPPLIER: One where responsibility to supply or
make available for further usage either for production or normal consumption.
STANDARD: It is model with which something is
compared.
QUALITY: Is anything that conforms with one’s
pre-determined standard.
EVALUATION: Evaluation in purchasing is required to
ensure that progress is being made toward objective according to plan.
Evaluation is part of the control process.