ABSTRACT

This study investigated the role of purchasing function in the Nigeria industries of the Nigeria Breweries Ltd, Ibadan, Oyo state. The study based on the assumption that proper inventory management, procurement monitoring, procurement controls, procurement planning, as well as training of workforce can result to better organizational performance. Descriptive research design was followed. The target population of the study was the employees working at the department of procurement from which primary data was collected using structured questionnaire. Data analysis was done using descriptive and regression methods. The study established the Nigeria Breweries Ltd, Ibadan, Oyo state had adopted purchasing function to a moderate extent. It further found out that procurement planning and training workforce are important in influencing the organization’s performance. The study concluded that application of the purchasing function in the organization is founded on proper planning and training workforce. Therefore, recommends that the key procurement actors should come up with viable ways of managing purchasing process. Revitalization of the entire purchasing process should be a requirement as it can help in ensuring that organizations embrace modern technological ways and trends in handling and addressing procurement issues.

 

 

CHAPTER ONE

INTRODUCTION

1.1 Background

Purchasing function are vital functions in the public sector, since purchasing process is generally a critical part of open spending in organizations. Carr and Smeltzer (1997) states that purchasing function comprises of the actions taken by the purchasing organization to navigate and integrate its performance in order to increase productivity by reducing cost and time. The linkage of purchasing function to organizational performance in particular, makes the embracing of best practices important to present organizational success. Procurement is found to be practiced in many industries around the world (Hussein & Shale, 2014). Kabega, et, al. (2016) reiterated that various public organizations both in developing and developed countries have instituted procurement reforms which involve laws and regulations but the main challenge has been inadequate regulatory compliance. Public organizations are found to be big spenders and that they deal with massive budgets (Roodhooft & Abbeele, 2006). In addition, Mahmood (2010) restates that public procurement was estimated to represent 18.42% of the world Gross Domestic Product (GDP). Public procurement is recognized as essential in service delivery and it accounted for a high proportion of total expenditure (Basheka & Bisangabasaija, 2010).

The theories guiding the research are the principal-agency theory (PAT) and the legitimacy theory (LT). The PAT concerns with the understanding that is put in place for an individual or entity (agent) to act in another’s interest (principal). The legitimacy theory asserts that an organization has the mandate to explain its activities to the stakeholders, especially, if it is a public entity and should state how society will benefit from it.

The existence of integration of purchasing function in various organizational operations and support functions, harmonizing production with new orders, purchasing with demand, scheduling and shipping with customer requirements, has contributed significantly to the performance of many public organizations (Baily, 2011). Application of appropriate purchasing function strategically, has the potential impact to the performance of organizations and national economies in general (Keith, Vitasek, Manrodt, & Kling, 2016). However, Singhal (2011) observed that disruptions in purchasing function at any level devastate organizational performance. Poorly coordinated purchasing function do long-lasting damage to organizations’ stock prices and profitability and need to be more thoroughly addressed by supply chain continuity planners (Thai, 2010). For leading public organizations like the Nigeria Breweries Ltd, Ibadan, Oyo state to respond to the current dynamic purchasing environment, it is required to embrace procurement. Since the entire purchasing processes can work well in the improvement of the responsiveness of the Nigeria Breweries Ltd, Ibadan, Oyo state procurement systems.

 

1.2 Problem Statement

Procurement is deemed to be part of principles of management of plans that focus on effective achievement of performance efficient in public organizations as well as growth of the nation. In practice, when purchasing process is well planned and implemented, it can act as an economic instrument for guaranteeing national development (Keith et. al, 2016). Many of the third world countries are challenged by dynamic procurement revolution and this gives them difficulty on the functioning of procurement and performance together with the inside and outside dealings (Wambui, 2013). The purchasing function are fragile and predisposed to regular discontinuities (Jeppesen, 2010). Karanja and Kiare (2015) indicates that the vulnerabilities in the public and private sector evidenced in the erratic shedding and re-employment of staff when faced with downstream and upstream linkage discontinuities, affect organizational performance. Jibrin, Ejura and Augustine (2014) noted that the major problem in the current procurement industry is not on the limited regulation models but because of noncompliance and pitiable execution process.

Regardless of the effort by the private and public organizations in Nigeria to improve performance of the procurement function, poor implementation and non-compliance to procurement regulations still pose as key challenges (Hussein & Shale, 2014). They are burdened with delays and occasional inability to deliver the goods to the designated organizations (World Bank, 2010). This problem has precipitated to a decline of procurement/supply performance of enormous public organizations (Schiele, Horn &Vos, 2011). With the present estimated spending of about 70% in purchasing and the importance of functions of procurement in contribution of profitability of a firm by over 25%, it will be essential for organizations to come up with a decision on how practices of procurement could assist in meeting organizations goals (Jibrin, et al, 2014).

There are various studies conducted on the topic of procurement and its relation to organizational performance which have given different findings. For instance, Nantage (2011) found out that strategic procurement management has a direct impact on the financial performance of Banks in Uganda. It is necessary to carry out similar study in a different setting and find out if the same suggestion holds in the Nigerian public organizations specifically, Nigeria Breweries Ltd, Ibadan, Oyo state. Kabega et al, (2016) study was on effect of purchasing function on performance of public projects in Rwanda. In their study, they did not include purchasing function like inventory management, procurement controls, procurement monitoring and training workforce of which this study intends to examine. It is also essential to test if procurement planning has an influence on the performance of the Nigeria Breweries Ltd, Ibadan, Oyo state.

A study carried out by Makabira and Waiganjo (2014) on the practices of procurement and corporate organization performance in Nigeria with focus on Nigeria national police service, indicated that procurement controls, procurement planning, procurement monitoring and training workforce in purchasing function have a great role in the performance. The study did not examine how inventory management affects performance which is one of the practices under investigation in this study. Similarly, Oyuke and Shale (2014) did a research on the purchasing function strategies and performance of organization and a unit under investigation was the office of national audit in Nigeria. The findings of this research revealed that most of the respondents lacked training on management of records, and that employee training on management of records affected performance of procurement. This study clearly shows that purchasing function specifically, inventory management is a significant function that lead better organizational performance. Therefore, this study aims to investigate inventory management in conjunction with procurement planning, procurement controls, procurement monitoring and training workforce. A study on strategic purchasing function and procurement performance among commercial banks in Nigeria by Masiko (2013) suggested that the current practices of procurement needed revision as well as strengthening to consequently improve performance of procurement in the commercial banks. However, it is crucial to find out the existing purchasing function among the Nigerian universities with focus on Nigeria Breweries Ltd, Ibadan, Oyo state.

Several researches have been carried out on the role of purchasing function in the Nigeria industries. However, most of them were done in different countries focus on different aspects other than the role of purchasing function in the Nigeria industries. In addition, it was evidenced from this studies that the purchasing process still fail in many public entities. Therefore, the aim of this study was to fill this knowledge gap in literature guided by the following research question: What is the role of purchasing function in the Nigeria industries of the Nigeria Breweries Ltd, Ibadan, Oyo state.

1.3 Objectives

The main objective of this study was to establish the role of purchasing function in the Nigeria industries of the Nigeria Breweries Ltd, Ibadan, Oyo state.

The specific objectives were:

1. To establish the extent in which Nigeria Breweries Ltd, Ibadan, Oyo state has adopted purchasing function.
2. To determine the relationship between the role of purchasing function in the Nigeria industries in the Nigeria Breweries Ltd, Ibadan, Oyo state.

• To establish the challenges faced in the adoption of purchasing function at the Nigeria Breweries Ltd, Ibadan, Oyo state.

1.4 Research questions

1. What is the extent in which Nigeria Breweries Ltd, Ibadan, Oyo state has adopted purchasing function?
2. What is the relationship between the role of purchasing function in the Nigeria industries in the Nigeria Breweries Ltd, Ibadan, Oyo state?

• What are the challenges faced in the adoption of purchasing function at the Nigeria Breweries Ltd, Ibadan, Oyo state?