ROLE OF PURCHASING IN COST REDUCTION AND CONTRIBUTION TO PROFITABILITY – AN APPRAISAL OF A MANUFACTURING COMPANY (CASE STUDY OF NIGERIA DISTILLERIES LIMITED). A RESEARCH PROJECT MATERIAL ON PRODUCTION AND OPERATIONS MGT.
The purchasing function contributes directly to the operating results, cost reduction and profitability of an organization. It has been argued out that, the fact that purchasing is responsible for spending more than 70 percent of an organization’s sales capital highlights the profit enhancing potentials of the purchasing on an organization.
The purpose of this research is to describe the role purchasing played in cost reduction and its impact on the profitability of Nigeria Distilleries Limited.
Primary and secondary data collected were collected in order to fulfil the research work; the primary data was gathered directly from relevant sources in, Nigeria Distilleries Limited through one on one interview and questionnaires. The secondary data was obtained from indirect sources, such as textbooks, articles, and websites. Due to population size of the entire staff which was 200, 10% of the entire population was chosen which amounted to 20 staff to administer the questionnaires.
These findings revealed so many problems encountered by the study which includes the problems of stock out, overstocking which had devastating effects on cost and profitability of the company. Recommendation was made to correct all the problems in the concerned company.
Purchasing is a relatively new profession in Nigeria, in comparison with other professions like Accounting, Administration, Banking, Law and Business Administration. Its acceptability by many organizations is slow and gradual. In many organizations, the buyers are not professionals; they do not therefore know the principles and techniques involved in purchasing. The trained professionals are now finding it difficult to find jobs in most organizations, as their positions have been occupied by the administrators, accountants and other allied professionals. To be a practicing buyer, one has to be trained in the art and science of buying effectively to the profitability of the organization.
Many people even in other disciplines think that casual or domestic buying is the same as organizational purchasing. Buying is, however not the same as purchasing. Obtaining quotation, placement of purchase orders or contracts after negotiation and scheduling of deliveries constitute a composite professional practice. Buying is a static concept and does not imply fostering of economies of scale.