Sourcing Decision and Its Effect on Material Availability
CHAPTER ONE
Objective of the Study
This research work is aimed at determining sourcing decision and its effects on material availability in 7up bottling company plc Kaduna plant. The study is specifically designed to study ways of ensuring continuous availability of the right quality and quantity of materials in the organization at the right time and place in order to avoid shortage in supply and even complete stock out of materials in the organization.
The following are the objective of the research work:-
- Identify the criteria in use by the organization for supplier selection
- Examine the method employed by the organization
- Examine the method employed by the organization in evaluating suppliers.
CHAPTER TWO
LITERATURE REVIEW
This chapter reviews the work of different authors, scholars and business executives on the subject matter. The chapter looks at the various definition of sourcing, sourcing and supplier selection concept, supplier selection process, criteria for supplier selection, sourcing policy/decision, method of supplier performance valuation and management of supplier relationship.
Conceptual Framework of Sourcing
Hassan (2008) defines sourcing as the process and procedure by which the buyer seek, survey and evaluates suppliers and determine policies relating to those who can almost suitably meet the requirement of the organization. Thus, the extent to which buyers search for supplier (p. 124). Hassan’s definition views sourcing as a process and procedure of looking for good sources of supply. That is it involves all the process and procedures which a buyer has to undertake before getting the right source of supply. He further viewed it as a sort of surveying and evaluating the source. Thus significance that before any purchase is made, the buyer has to carryout a certain research about the source of supply and evaluate it properly from the financial capacity ability to meet the delivery date, capability of the supplier in supplying the right quantity’s quality expected by the buyer. Sourcing in relation to Hassan’s definition is a process by which a buyer seeks and determines suitable sources of suppliers.
Lysons and Farington (2003) define sourcing as “the process of identifying selecting and developing suppliers as a key purchasing activity. Sourcing can be either tactical and operational or strategic levels (p. 367).
Baily, Farmer, Tessop & Jones (2005) states that sourcing involves much more than supply. Picking a supplier or contractor for each requirement in isolation. It involves continuing relationships. Both with preferred sources with potential sources which may have been passed over for the present but are still in the running (p. 8).
CHAPTER THREE
Research Methodology
This chapter provides information on the various methods that was employed by the researcher in data sourcing collection and analysis. This captor addresses issues such as Area of the Study, Research Design, Population of the Study, Sample and Sampling Procedure, Instrument for Data Collection, Administration of the Instrument and Techniques for Analyzing Data.
CHAPTER FOUR
Presentation and Analysis of Data
This chapter deal with presentation and analysis of data collected form respondents to the research questions administered through questionnaires. These responses from the respondents to the research questions are tabulated using mean statistic for data analysis.
The analysis involves the use of values allocated to the four point scale. The acronyms of the four point scale are represented with the followings: Strongly Agree (SA), Agree (A), Disagree (D) and Strongly Disagree (SD). The four point scale cut off point is arrived at using arithmetic mean formula.
X = ∑x = 4+3+2+1 = 10 = 2.5
n 4 4
Where:
∑ = summation
X = distribution
I = elements in the table
n = sample size of the study
Sixty questionnaires were administered for this research work out of which 50 were returned, though the researcher would have been satisfied if only 45 were returned. This number returned would be valid for the research analysis.
CHAPTER V: Summary, Discussion, Conclusion and Recommendation
The summary of the research findings, discussions, conclusion and recommendation are addressed in this chapter.
Summary of Procedure
Form the study, it was revealed that in ensuring the continuous availability of materials in the organization, the right decisions has to be taken. This covers areas such as deciding on the right quantity and quality of materials to purchase, determine the right source that can efficiently and effectively supply us such materials. This decision is taken by no other but purchasing managers. This becomes very important for them to take such decisions because the main function of the purchasing department is to ensure continuous flow of materials in the organization at the right quantity, quality, price, time, place date and from the right source.
The entire research work rest on the buyer’s ability to take the right decision on sourcing policy to use such as single or multiple sourcing, buying nationally, locally or internationally whether to insource or outsource, buy directly from manufacturers are to use channels and so on. If the right decision is taken at the right time, it can move the organization to a greater height. It therefore becomes necessary for all organization that many manufacturers or even buy anything they require for their daily activities especially 7Up Bottling Company to have purchasing department as their presence in the organization will ensure reduction in cost and increase in profit. Because they are profit contributors to the organization.
Discussion of Findings
In response in table 1, variable1, the use of financial capability of supplier as a criteria will determine whether the supplier will perform well when he is awarded the contract.
In table 1 variable 2, the mean score of respondents is 2.9 which shows that previous performance of supplier is an appropriate criteria to consider when selecting suppliers.
In table 1 variable 3 has a mean score of 3.1, it shows that respondents agrees that in determining suppliers to select, they have to consider the plant capacity of the supplier in order to avoid late delivery of materials in the organization.
In table 1 variable 4 with a mean score of 2.8 shows how important manpower or labour activities are to any organization, because if the suppliers frequently experience crisis in their site because labourers are demotivated, it will affect 7Up Bottling Company Plc and as such it must be added as a criteria to selecting suppliers that can satisfy the needs of the organization.
In table 1 variable 5 was accepted by respondents because you cannot select a supplier to supply any organization without determining or considering whether it has the required quantity and quality of material the organization requires for its operations.
In table 1 variable 6, Respondents agrees, that supplying managerial skills and technical know how should be used as a yardstick for selecting suppliers because it has a mean cut off point of 2.8.
Table 2 has 10 variables which shows the acceptable, figures by 7Up Bottling Company Plc because their mean cut off points are 2.5 above 2.5. the variables includes: Direct sourcing, indirect souring, insourcing, outsourcing, international sourcing, national sourcing lease buy, outright purchase, single sourcing and multiple sourcing.
Table 3 has 5 variables they were all accepted by the respondents in 7Up Bottling Company Plc, Kaduna plant because they all have cut off point which is above 2.5. The variable includes: adoption of cost-base method of evaluation, the weighted point evaluation system, regular visit to suppliers site, use of past record of performance, categorical plan method.
Table 4 has 5 variables, they are all accepted by the respondents in the organization (7Up Bottling Company Plc, Kaduna plant) because their mean cut off score is above 2.5. The variables: major source is monopoly, lack of professional procurers, financial incapability of 7Up Bottling Company Plc, Kaudna plant, inadequate source of supply locally, inadequate quantity and quality of materials required by the organization.
Table 5, this also has 5 variables with cut off point above 2.5, shows that the variables were accepted by respondents as a means of ensuring effective management of relationship between the organization and suppliers. This improved relationship will ensure the supply of the right quantity, quality of materials in the organization at the right time, place, date and price, for enhanced productivity and efficient and effective service delivery.
Implication of Findings
This entails the difficulties and benefits derivable from this research work. The positive implication of the finding to 7U Bottling Company includes:
– If the organization can select suppliers base on their past performance and reputation, they will be doing themselves good because the right source will be the ones responsible for supplying the needs of the organization.
– It will help the organization to determine the most effective and efficient method of sourcing decision to use at any given time.
– It will also help them to know how to maintain the relationship between them and their suppliers for increased productivity and continuous availability of materials in the organization.
Negative Implication of Findings
If they refuse to work to work with the results of findings might face the following problems:
- Stock out of materials because suppliers were not chosen based on merit but base on self interest.
- The organization decided to make use of monopoly to supply a crucial material, it might lead to delay in supply, increase in cost of production and a corresponding increase in sales of finished product.
- The organization might end up producing low quality material because the right decision was not taken.
Recommendations
In view of the findings, the researcher now recommends the following:
- The organization should establish a purchasing department and allow them to authorize purchase of goods for the organization. This is because when competent procurement personnel are used to carryout procurement activities, they will ensure that the organization joys all the 7 rights there by reducing cost and increasing profit for the organization.
- The organization should source for the materials both locally and internationally so that in the event of shortage locally, the required quantity and quality can be gotten across, national border that way there will not be shortage of materials in the organization, idle time for both machines and labourers, name it.
- The organization should ensure that inspection department be established in the organization so they can inspect incoming and outgoing materials for quality to avoid accepting sub-standard materials into the organization and supplying low quality output to suppliers so they can continue to enjoy brand loyalty from their numerous customers.
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