PROCUREMENT PRACTICE IN A SMALL SCALE BUSINESS
ABSTRACT
In this project, an attempt has been made to find out many ways of procurement practices in a small scale industry. It is on this purpose that the research has undertaken to know more about procurement practice. This study has attempted to identify and give a working description to procurement practice and the problem militating against the growth of the sub-sector. This project is divided into five chapters, chapter one being introductory analysis providing the definition and nature of procurement practice. Chapter two explains different author’s view on the subject matter or topic. Chapter three is the research methodology which explains the method the researcher used in achieving her results. Chapter four is the presentation and data analysis. Data are provided in a tabular form and analyzed using simple percentage method. Chapter five, conclusion are drawn based on the research findings and recommendation are made on how to improve on procurement practice on small scale industry.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Purchasing and supply management in Nigeria has existed since the evolution of ma. Earlier organization and individual were practicing purchasing unknowingly until the 19th century when management started to look and think about procurement as an area of management in organization which has to do with careful attention and development. Procurement was generally regarded as a routine clerical function or as a service function, which only concerned itself with spending the organization or co-operates money. The research discovered and found out that procurement practice is of a professional than a clerical function, also it can contribute to profit in this case, there are two basic types of procurement namely:
1. Procurement for consumption
2. Procurement for conversion
Speculators and merchants perform procurement for resale. It has been the prime responsibility of merchant. The merchant devoted a large portion of their time to the search for procurement of new and desirable materials. They spent some of their time dealing with sales problems, but their basic problem has not changed. Procurement managers buy for consumption are involved in the activity and function that involve more that determined or ascertaining customer’s requirement. Referring to industrial buying i.e. those that buy goods and services for tangible production or for commercial significant purpose such as manufacturers, primary producers, agricultural producers etc. They determined what product their company should make, what parts or components should be purchased from outside suppliers? The selected suppliers from purchasers can be made on a continuing and mutually profitable.
The Easy Life Superstore started as small business in 1996, marketing of items (varieties) is metamorphosed. In Easy Life Superstore in 1998. The guiding principle of preserving hard work, honesty and integrity, helped set Easy Life Stores on the path to resumption of business and strong believe in God Almighty, he nurtured Easy Life Stores through most critical time. In 1999, it was incorporated and together with their enormous trading experience and distribution network started the sam year. Determination lead to the establishment of a pharmaceutical store in 2000 and chemist shops modernized to present a credible outlet. For our ever increasing range of products. It is interesting to note that a vertical system existed between the superstores and pharmaceutical store. Easy Life Superstore Management is the procurement activities, be it for re-sale, consumption, or conversion require a good dress of knowledge of the market and the requirement of the user or customers on the final note it must be understood that the major purpose of any business is profit maximization, profit is an essential prerequisite for maintaining a business. As a result procurement practice in a small scale industry should aim at exploiting all possible avenues towards contributing to the overall profit earning of the company.
However the extent of application can depend in the expenditure value of the system in place, and the resources available. In this case, the researcher has examined the nature of purchase activity in a small scale industry to determine the following:
1. Determination of requirement
2. Authority of purchasing personnel
3. Quality control/value analysis
4. Procurement audits with a view to identify the problems associates with those functions and suggesting process of improvement.
5. Purchasing process and organization
a. Selecting of possible sources of supply
b. Price determination and availability
c. Placing order
BRIEF HISTORY OF EASY LIFE SUPERSTORE
Easy Life Superstore that is located in Port Harcourt in Rivers State came into existence in 1996 as a small business marketing of items (varieties) it is a business that is headed by the manager, and other heads of department.
Later in 1999, it was incorporated and together with their enormous trading experience and distribution network started the same year. It is interesting to note that determination of the manager and other head of department lead to an establishment of a modernized pharmaceutical store in the year 2000. Easy Life Superstore renders some services like sales, marketing of products, purchasing an existing and new products etc.
1.2 STATEMENT OF THE PROBLEM
A detailed analysis of the procurement practices in the small scale industry regards both in its internal and external environment will indicate the following problems:
1. The purchasing as an organization function has always been associated with neglects by management, thus it is yet to be given its pride of place in industries.
2. There is a tendency of fewer and often large sources of supply.
3. The imposition of high impact duties on purchasing abroad and the need to exploit alternative sources of supply pose a lot of uncertainties to the profession. The above outlines problems are however not exhaustive as others may exist hence the aim of this research not is not only to identify problems but most important to find out alternative sources with the organization constraints and yet accomplish the set objective use to solve them.
1.3 OBJECTIVE OF THE STUDY
With purchasing we have a responsibility to contribute positively to our company survival by improving our efficient today’s economic condition and environment within the small scale industry for a proactive and in some cases, reflective approach to achievement. The purpose of this study is:
1. To know reasons for procurement practices in small scale industry
2. To identify purchasing functions and roles in an organization most especially in small scale business or industry.
3. To also reduce the imposition of high import duties on purchasing abroad and find the needs to export alternative sources of supply.
4. Another purpose is to examine purchasing performance and reducing purchased materials cost through sourcing vendor rating, price indexing and contractual agreement.
1.4 RESEARCH QUESTIONS
1. What are the roles procurement practices plays in small scale business in Nigeria?
2. Is there any problem facing procurement practices in small scale industries?
3. If any, in what ways can these problems be solved?
4. Can efficient procurement practice help to contribute to the growth of small scale business in Nigeria?
5. Is there any relationship between good procurement practice and small scale business growth?
1.5 SIGNIFICANCE OF THE STUDY
This research work is of relevance to the organizational purchasing in Nigeria in the area of procurement practices. 1. It will serve as a reference guide to those who may want to write on this similar topic in procurement. 2. Other researchers will make use of the information 3. The researcher will help to know the importance of purchasing and its role in an organization 4. It will also help to find out procurement methods and the organizational needs and strategic plans. 5. This research will help to know the essentials of procurement in an organization which include buying materials at the five rights, to meet organizational needs. 6. It will equally help to find out problems affecting procurement practices in a small scale environment.
1.6 SCOPE OF THE STUDY
The scope of this study is limited to the activities of Easy Life Superstores Port Harcourt, Rivers State. It will embrace all the activities of procurement function and the procurement associated with. In this organization, Easy Life Superstore it is considered as the key in which this project is centered on. Furthermore, as the research project on procurement in the small scale industry with particular reference to Easy Life Superstore (ELS) Port Harcourt.
1.7 LIMITATION OF THE STUDY
Research of this type is limited by these problems: 1. Time: Time factor is one of the limiting factor that affect this project work. That is the time limit allocated to complete this work is very short and does not allow for detailed investigation of the factors wanted by the researcher. 2. Insufficient literature material: The greatest hindrance is the unavailability of sufficient literature material for this work to effectively carryout the research and this has been a major constraint to the researcher. 3. Finance: In a project work like this, finance is one of the constraints that limit this research work. As a result of this, the researcher has to limit to available finance. 4. Poor response of workers(respondents): The response of the people during the interview was very poor and they responded very poor to the questions asked to them, some are incompetent to speak on such issues on the question or they will wont the answer to such questions as they think it is confidential. With this information was not let out easily, these result created a lot of complexity in the are of gathering information and made it more difficult for the respondents in getting vital information for this project.
1.8 DEFINITION OF TERMS
1. Small scale business: Is therefore any business enterprise that is highly personalized situated within a local area of operation which is relatively small in terms of size, employment, turnover and capital and is actively managed by one or few person for the purpose of making profit.
2. Procurement: Procurement is somewhat broader and proactive as it focuses on strategic matters. It includes the activities required in order to get the product from the supplier to its final destination.
3. Purchasing: many authors in this area of management have defined purchasing in various form. From Dr. Lyson’s (1989) definition, purchasing is that organizational function responsible for obtaining by purchase, lease or other legal means, equipment, material, supplies and services required by an undertaking for use in production.
4. Accessory requirement: These are durable major equipment used to facilitate the production of goods and services or to enhance the operation of organization.
5. Operating equipment: these are semi durable minor equipment which is more able used in but not generally essential to the production of goods and services.
6. Furniture and fittings: These relate to all goods and materials employed to fit building for their organization purpose but not that equipment used specially in production of goods or services.
