ADIGRAT UNIVERSITY
COLLAGE OF BUSINESS AND ECONOMICS
DEPARTEMENT OF LOGISTICS AND SUPPLY CHAIN
MANAGEMENT
ASSESSMENT OF PURCHASING ACTIVITIES AND ITS
PROBLEM (In Case of Adigrat General Hospital)
RESEARCH PROPOSAL SUBMTTED TO THE DEPARTMENT OF LOGISTIC AND SUPPLY CHAIN
MANAGEMENT IN PARTIAL FULFILLMENT FOR THE REQUIREMENT OF BACHELOR OF ART
(BA) DEGREE IN LOGISTIC AND SUPPLY CHAIN MANAGEMENT
BY; AYENEW YISMAW
ID; 04123/09
ADVISER
DEC 2012
(ADIGRAT, TIGRAY ETHIOPIA)
II
i
Contents
CHAPTER ONE .............................................................................................................................................. 1
1. INTRODUCTION ........................................................................................................................................ 1
1.1 BACKGROUND OF THE STUDY........................................................................................................ 1
1.2 Statement of the problem ............................................................................................................. 2
1.3 Research Question ........................................................................................................................ 3
1.4. Objective of the study ................................................................................................................... 3
1.4.1 General Objectives .............................................................................................................. 3
1.4.2 Specific objectives ............................................................................................................... 3
1.5. Significance of the study ............................................................................................................... 3
1.6. Scope of the study ........................................................................................................................ 4
1.7. Limitation of the study .................................................................................................................. 4
1.8 Organization of the paper .............................................................................................................. 4
CHAPTER TWO ............................................................................................................................................. 5
2. Review related literature ......................................................................................................................... 5
2.1. Purchasing definition .................................................................................................................... 5
2.2. Objectives of purchasing............................................................................................................... 5
2.3. From functional cooperation level objectives .............................................................................. 6
2.4. The role of purchasing activity ...................................................................................................... 6
2.5. Produce of purchasing .................................................................................................................. 7
2.6. Purchasing policy .......................................................................................................................... 7
2.7. Purchasing principles .................................................................................................................... 7
2.8 The relationship of purchasing with other department ................................................................ 8
2.11. Purchasing challenges and problems.......................................................................................... 9
3. RESEARCH DESIGN AND METHODOLOGY .............................................................................................. 10
3.1. Research Design .......................................................................................................................... 10
3.2. Sources of data ........................................................................................................................... 10
3.3. Sampling method ........................................................................................................................ 10
II
ii
3.3.1 Target population ............................................................................................................. 10
3.3.2. Sample size and sample techniques ................................................................................ 10
3.4 Method of data collection .......................................................................................................... 11
3. 5.Budget Schedule ......................................................................................................................... 11
3.6 TIME SCHEDULE ........................................................................................................................... 12
4 REFERENCE .............................................................................................................................................. 13
II
iii
CHAPTER ONE
1. INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Purchasing is the functions of buying machinery, tools, general supplies, and raw materials in
order to fulfill customer requirement and organizational needs to achieve the desired levels of
the objectives. (Donald w. Dobbler and Burt, 2006).
Purchasing is the process of acquiring goods and services to be use in production process at the
right time, with the right quality, with the right quantity by the right price, from the right
suppliers, with the desired levels of service and at the right place. (Dobbler, 2006)
Purchasing is the activity of acquiring goods or services to accomplish the goal of the
organization. It is also a vital part of any business. The primary role of purchasing is to get the
business raw materials require for its day to day running of general purchasing can be define as
a quire equipment use organization (Dobbler, 2006).
The international federation purchasing and materials management (IFPMM), made up of
member nation associations, maintains a list of correspondents in many foreign countries.
Competitive pressure, globalization, and the desire to enter developing matter overseas to drive
greatly increase level of international sourcing (Bandore, 2009)
The structure of a global purchasing organization is influence by the location of the key
suppliers any company operations, and the overall corporate organizational structure.
Companies with a decentralized organization structure give business unit purchasing staff
responsibility for international purchasing (Pooler 2008)
Based on purchasing party (PP), which basically suggests that prices of goods in any country
tend to equate under slating exchanging rate and therefore people will be able to purchase the
some quantity of goods in any country for a given sum of money. (Pearson, 2002) .developing
countries attempting to become fully interest in a world economy will probably need a higher
tax level in if they are pursue a government role closer to that of industrial countries which, on
average , enjoy lice the tax revenue.(John,2006).
1
Every organization both in public and private sectors are in varying degree depend on the
materials and service provide or supplied by other organization; therefore, purchasing is one of
the basic and common function of every organization to be achieve the desire levels of success
and
objectives
effectively
and
efficiently
as
per-establish
frame
work
of
the
organization.(Dobbler,2006.)
Today most firms will agree that the purchasing function shall be an integral part of the
operations (Peter Bally, 2004).purchasing or buying include activities as interviewing sales
people, negotiating with potential suppliers, analyzing bids, selecting suppliers, issuing purchase
orders, handling problems with suppliers and maintaining appropriate records. Obtaining service
is one of the purchasing most challenging responsibility. Most challenging responsibilities in
other area at there are relating complexes inter dependency between the purchase description
(statement of work, method of composition, source selection, contract Administration and
satisfy customers (Gopalakishanp, 2003).
This paper will try to investigate purchasing activities and its problems on Adigrat general
Hospital, because these hospital is carrying purchasing activities and it’s the nearest for the
researcher, Therefore the proximity and the of the hospital makes researcher to conduct on study
to choose the hospital.
1.2 Statement of the problem
Purchasing is currently, an effective and efficient means of achieving successful
competitiveness of today’s business environment. Purchasing is an integrate part of any business
and non- business organization. That is the life blood of the any organization. Furthermore the
benefit of implementing purchasing activities has being widely recognize by many competitive
organizations. So without the purchasing activities no any organization can be exist. (Dobbler,
2006)
Purchasing practice will essential for all organization. The public organization in the country
that purchase goods and services that are necessary for its regular operations or accomplish its
short and long plan (Dobler 2006).
This study will intend to clearly identify the causes of inefficient purchasing, assess the
consequences and try to recommend possible solution for concern bodies in the Hospital.
Despite the fact that purchasing contributes wide variety of significant for the organization, if
effective and plan a manner will not implement it has some consequence on the organization
2
such as, interruption of production, dis-satisfaction of customers, shift of customers to the
competitors and etc.
1.3 Research Question
The study will be guide by the following basic questions
1. What look like the current purchasing practice of the Adigrat General Hospital?
2. What are the major factors affecting the effectiveness of the purchasing practice in the
Adigrat General Hospital?
3. What types of purchasing systems and principle has being use in case of Adigrat General
Hospital?
4. How the purchasing process is performed in this Adigrat General Hospital?
1.4. Objective of the study
1.4.1 General Objectives
A general objective of this study will be to assess the practice of purchasing activities and its
problems in the case of the Adigrat General Hospital. That exit Adigrat town of Eastern Zone,
Tigray region of Ethiopia.
1.4.2 Specific objectives
This study will be the following specific objectives:•
To assess the purchasing practice in the case of Adigrat General Hospital.
•
To assess the major factors affecting the effectiveness of purchasing activities in Adigrat
General Hospital.
•
To find out the types of purchasing system and principles use in this hospital.
•
To identify the procedure of the purchasing perform in hospital.
1.5. Significance of the study
I believe the study is believe to help for the clear understanding of the reasons behind inefficient
purchasing practices and its implications on the accomplishment of hospital goal. Further
through the analysis, the study is believe to discover and recommend mechanisms for viable and
efficient purchasing, which help to save significant resource. The study will be important for
academic researcher for serving as a reference to conduct further study on this interesting and
important area of concept After accomplishment, this research will be have great significance
for the researcher and organization. For the researcher it contributes to identify the major
influences that affect purchasing practice.
3
.
1.6. Scope of the study
The scope of the study will be limit on the area of purchasing activities in the case Adigrat
General Hospital that exist in Tigray Eastern zone, Adigrat town, because of time and financial
constraints as well as lack of the experience of the researcher before now, But because of lack of
finance, inaccessibility of information and shortage of time to cover wider area and institution,
the study will focus only Adigrat General Hospital. This might have its implication on the
findings of the analysis.
1.7. Limitation of the study
When under taking of the study, there are many problems that has being encounter face. While
investigating and collecting data most of the respondents were UN willingness to respond the
questions, to give enough information and also the manager will so busy due to this he will not
ready to the interview. In addition to this, shortage of time and lack of financial are other
problems to the study. Furthermore, lack of skill, lack of experience in research activity and lack
of research tools also has being the limitation to the study.
1.8 Organization of the paper
The paper will organize in to three main chapters. The first chapter is an introductory part,
which contains background of the study, statement of the problem, objective of the study,
significance of the study, scope of the study and organization of the study. The second chapter is
provides review of relate literature. The third chapter is provides the research methodology, such
as research design, sampling technique and sample size, source of data, data collection method.
4
CHAPTER TWO
2. Review related literature
2.1. Purchasing definition
Purchasing refers to a function in business where by the enterprise obtain the inputs for what are
produces as well as other goods and services if require. Purchasing is one of the basic function
common to all type of enterprise. These functions are basic, because no business can operate
without them (Dobler, 2006). The main objective of purchasing are:1. To maintain the quality and value of company product
2. To minimize cash tie up in inventory
3. Maintain the low of inputs and
Purchasing is a question of goods and services in exchange for something of value, its materials.
Management function concern with process of buying the right type of material at the right price
and time. It is essential to all organization manufacturing, non-manufacturing, profit making,
nonprofit making and government. Its responsibility as obtain purchase materials and services in
the require quantity at minimum total cost. (Dobbler, 2006).
2.2. Objectives of purchasing
The objectives of purchasing can be view from three levels
•
A very general managerial level
•
A more specific functional or operational level and
•
A detailed at which prices strategic buying plan are formulate.
From top managerial perspective
The general objective have traditionally been experience as the three rights which management
expects the department to achieve the acquisition material (Nair, 2003)
1. Right quality: is define as simply fitness for purpose or British institution defines” the
totality of feature and characteristics of production as service that bear units. Ability to
satisfy a given need(Nair,2003)
2. Right quantity: the right quantity is more relevant to the purchase of consumable parts
or assembles for manufacturing than for project buying fulfilling this objectives will
enables.
5
•
To provide a continues and uninterrupted material at the minimum cost, the most
organization the decision of how much for purchase is more important by close
relationship of purchase quantity and schedule use (Nair, 2003).
3. At the right time: purchase must make available material at the right time. Such that
when materials are requires, materials that will be available before the organization
require them. These involve costs such as carrying cost, deterioration costs and
obsolescence costs (DavidN.Burt, 2006).
2.3. From functional cooperation level objectives
When one looks at purchasing objectives from an operating perspective it is necessary to go
more deploy to develop asset of statement that provide practical and use all for gets for decision
making purpose; the basic objectives the following(Dobler,2003).
From the detail level objectives
At this level precise strongly buying plan are formulate the focus is on the detail objectives that
are develop when precise buying plan are make for each of the major categories of materials the
firms use in its operation. These objectives are generally from the functional level objective
discuss, and are apply to fulfill the specific needs associate with each types of purchase (Dobler,
2003).
2.4. The role of purchasing activity
The production process converts materials into finish products desire by customers. The
efficiency of production function significantly depends on the timely availability by the right
kinds of materials, components, parts, suppliers, tools, etc. purchasing concern with the
procurement of the right price, time and place.
Procedure and objective is primarily service function through modern concept of its roles shall
be to co-ordinate one with other phases of the materials management operation so as to best
serve the common goal. Purchasing activity is deeply involve in the management or material
flow right from the outside source down to production through the inventory pipeline. Basically
the purchasing authority is conferred authority, along with a delegation of responsibility. The
general principle is that authority shall be can measure with responsibility both these criteria are
apprise and decide by the management as through appropriate to the functional responsibility,
purchasing department rarely has any difficult in exercising its authority and increasing its scope
of responsibility in serving other facts of materials management. Purchasing is science and an
6
art. It is a science because are certain basic principles of purchasing. The application of that
principle when put into practice makes the art of purchasing an interesting job.
2.5. Produce of purchasing
A procedure our lines in details the specific action to be taken to accomplish a given task within
the guidelines of any applicable polices. In short it establishes the way of doing things (Donald,
W.Dobler David N. burt, 2007).The procedures of procurement and the documents they utilize
serve two fundamental within a firm. They provide the frame work and the direction for
accomplishing of the supply and materials management effectively and efficiently. They provide
the means for processing information inputs from side of the departments to produce output
communication need in individuals; another department to do their jobs in a coordinate and
timely manner.
2.6. Purchasing policy
Purchasing polices are general statement or under taking which guide and channel thinking and
action in caring any purchasing transactions and objectives in an operational manner. It is
statement that describes in very general form intend course of action purchasing policies have
different characteristics:•
Policies limit an area in which decision is to be made and assure that the decision will be
consistent and contribute to objective.
•
Policies tends to produce issues avoid respected analysis and give qualified structure to
other types of plans. Those permitting managers to delegate authority which maintain
control.
•
Clarify and improve relationship with other functions.
2.7. Purchasing principles
The essential of efficient purchasing are right quality, right quantity, right time, right price, right
source, and deliver at the right place, this are describe briefly as the following (Nair N.K, 2003).
Right quality
It is the suitability of an item for a given purpose. The best quality needs not be the right quality
because it is different among different person. The quality is dimensional limits, composition
performance and durability and etc. (NairN.K 2003).
Right quantity
7
In the case of requiring items right quantity is the quantity that may purchase at time within
minimum total cost and storage. If the quantity is large the price is lower the inventory carrying
cost goes up (Nair, 2003)
Right time
The time when stock reaches minimum level. The stock control send recall payment requisition
sufficiently in time for the purchase section will avoid delay in finalizing the order will indicate
the delivery date by efficient follow up action (Nair, 2003).
Right source
The right source shall possess the necessary financial resources, the organization to handle the
commitment including procurement of raw materials which may be difficult to obtain and
technical ability to supply the require quantity and quality of goods at a satisfactory price as for
as possible the firm shall be locate with few miles of buyers plan. This will avoid delivery delay
and high transportation charges, (Nair, 2003).
Right price
Right price is the one which brings best ultimate value. The price shall be determine in
combination with other factor such as; quality life, delivery time, and delivery service etc. the
factors which affect the price are quality and quantity require, urgency of requirement. Demand
and supply materials in the make weather the requirements are repetitive or not (Nair,
N.K.2003).
Right service
Right service is totally of additional values that the suppliers provide to buyer before and after
the sales of goods or service (Nair, 2003).
2.8 The relationship of purchasing with other department
Purchasing department is the hub of a large part of a company’s business activity. It has
continuing relationship with all other departments in the firm, as well as with the firms’
suppliers.
Costly special production runs and premium transportation cost shutdown of production. On the
other hand, the several consequences of productions to page may cause production managers to
8
advocate an excessively large inventory of production materials. This cause ties up of capitals
that may be use for other investment. Generally, seeking the relationship between the
purchasing and production departments helps.
•
Preparation of materials schedules to meet just in time requirements.
•
Ensuring that delivery schedules are maintain
•
Make or buy decision
•
Supplier development and etc.
2.11. Purchasing challenges and problems
The purchasing practice could be obstructed by the following situation:•
Less personal relationship: purchase order is place with which the users are friendly
relationship. So suppliers may fall to accept the order during the time argent needs if the
user (purchase) has no long relationship. (Dobler,2006)
•
Lack of good contractual agreement: contracts when available are stated in general terms
they are not complete and have not pass legal surrounding and clear description of the
product supplier may be missing and the contract may differ by the supplier own element
and condition. (Dobler and David N.Burt, 2008).
•
Poor administrative process: in some case the supplier may have actually make the
delivery and how the purchasing department is request by the user to produce, so that
payment can be make and invoices are paid without matching the proper purchase order
and delivery document. But sound administrative significant saving. (Dobler, 2006).
•
Delivery problem: at the stages of delivery problems occur supplier deliver too late.
Deliveries are not complete, products are damage or do not meet the quality require
packing is unsound, information levels cannot be read by barcode system. Generally,
many more factors affecting the purchasing practice. (Dobler, 2006).
9
CHAPTER THREE
3. RESEARCH DESIGN AND METHODOLOGY
3.1. Research Design
Based on the purpose of the research there are three types of research design. These are
exploratory, descriptive and explanatory research studies. Among those the intention of the
researcher will to collect the existing facts on the purchasing activities and its problem, and
describe them as they will in the existing circumstance; therefore, the researcher plan to use
descriptive type of research design for this study because this design will help to describe and
analyze the data and proposes the alternative ideas based on the results of the study.
3.2. Sources of data
The researcher will use both primary and secondary source. Primary data is gather by the
researcher himself for the first time. These data are obtain for the reliability of the research
output. Because it helps the researcher to generate clear, accurate, reliable information and more
detail understanding of the problem. While secondary data will be collect by somebody else and
also gather from published and unpublished books, company manual and related journal. It will
be use to support and coordinate primary data in appropriate manner.
3.3. Sampling method
3.3.1 Target population
The subject of the study will be purchasing, store and pharmacy department of Adigrat General
Hospital. The total population of this study is 399, and from this total population 207male and
the rest 192 female
3.3.2. Sample size and sample techniques
Because of time and financial constraint the researcher will be draw the sample of 32,
employees for this study through non probability sample technique. The reason behind the
researcher use this technique to collect data from appropriate special group which enables the
researcher to use own judgment to select cases that enables to answer the research question and
to meet the research objective. the reason which makes researcher to use this method is that, the
degree of freedom given to researcher to select number of respondent by depending on the
investigations personal knowledge, since each and every employee of the organization don’t
have equal knowledge about the question under this study, therefore the researcher use this non
10
probability judgmental sampling method for the seek of gathering relevant information from the
employees and the manager of the organization.
3.4 Method of data collection
The primary data will be collect through use interview. There are many interview such as
structure, un structure and Sami-structure the researcher will use un structure interview to gather
relevant information so un structure interview is butter to understanding of the candidate than a
structured interview, it is very flexible and more comfortable, very practical method to analyze
the candidate, it breaks the communication gap between the interviewer and candidate.
The secondary data will be collect by referring different related documents books, journal,
internet, reference of other researcher, manual policy, published book and others.
3. 5.Budget Schedule
No
Item of expenditure
Unit
of
Quantity
measurement
Unit
price
Total price
(birr)
(birr)
1
Telephone cost
-
-
10
10
2
Paper
Ream
1
86
86
3
Flash
_
1
180
180
4
Pen
Pieces
1
8
8
5
Transportation cost
_
-
5
30
6
Print cost
_
1
0.45
170
7
Miscellaneous
-
-
100
100
8
Total
-
-
-
806
11
3.6 TIME SCHEDULE
No.
Task
1.
Submission of proposal
2.
Data collection
3.
Data analysis
4.
Writing the paper
5.
Ratification
6.
Summation of the paper
October
12
November
December
4 REFERENCE
✓ AlijianJ.Vanweele (2006), purchasing and supply chain management
analysis, planning and practices third edition.
✓ Alijon George (1990), purchasing hand book second edition, New York; mc
Grimw hill Inc.
✓ Donald W. Dobler, (1996) purchasing and material management sixth
edition.
✓ Donald and Dobler, Davidn.Burt (1996), purchasing and supply
management Newyorkmc.Griwhin, Inc.
✓ Donald w.Dobler(1996) purchasing and supply chain test and cases; 16
edition,Tato-Hill
✓ Gopala Krishnan (1990), purchasing and material management 17 editions
reprint McGraw. Hill.
✓ N.K Nair (2003), purchasing and material management; second edition, new
dell; Vikas purchasing.
✓ Parson Wj. (2002), Improving purchasing performance; London: Gower ltd.
13