ROLE OF PURCHASING FUNCTION AND ITS CONTRIBUTION TO PROFITABILITY

ROLE OF PURCHASING FUNCTION AND ITS CONTRIBUTION TO PROFITABILITY

CHAPTER ONE

1.0 INTRODUCTION 
1.1 BACKGROUND OF THE STUDY 
During the past few year, purchasing and supply function as a discipline has changed considerably in many companies.
This is reflected in the increased attention this function is receiving from manager and practioners. Considering the amount of money generally involved in the preparation and execution of purchasing and supply function decision, this is not so stranger. An effectively and efficiently operating purchasing and supply function can make an important contribution to the company result.
However, there is more. As a result of implementation of improvement programmes in engineering, manufacturing and logistics management, many companies feel the need for improved relationship with suppliers. These relationship necessary should result in lead time reduction in new product development and just-in-time delivering zero effect on components.
According to Uzor (2004) the function of purchasing is to insure that supply of raw material, product equipment fuel and power, consumerable and services for use resale by organization in the right quantities, right quality, right place right time and at the right economist cost for increase in profit. The role of purchasing also cover areas like suppliers development value analysis and harmonious relationship with other functional units like production design engineering, inspection, maintenances, finance, marketing, personnel and transport. Purchasing users some managerial tool like to achieve the objective of its function of uninterrupted or a constant flow of materials to meet the need of the user department.
The research therefore found that there is an important area to explore which to find what role purchasing has to play to justify it as a management function and its contribution to profit for the organization.

1.2 STATEMENT OF THE PROBLEM
In recent times, several companies in Nigeria have reported shortage of materials, high cost of labour, ineffective scheduling problems and wrong specifications, and finally inventory control problems which lead to production stoppages and loss of sales. All these factors have greatly affected the operation of this organization.
It has further affected the staff and management of this organization. In view of the enormous in terms of money, materials and services, loss and non performance standard has been function in the day to day running of the industries. Specifically, this study will focuses on the following.
1. The problem of high cost of labour, and increasing costs concerned with materials management.
2. The problem of ineffective scheduling specifications and inventory control.
3. How purchasing role affects the profitability of an organization.

ROLE OF PURCHASING FUNCTION AND ITS CONTRIBUTION TO PROFITABILITY