ASSESSMENT OF THE IMPORTANCE OF PURCHASING PROCEDURE IN AN ORGANIZATION
ABSTRACT
The research study main aim was to determine the effects of purchasing strategies on organisational performance a case study of Goshen children hospitalOwerri with specific objectives being to examine how quality management affects purchasing strategies at Goshen children hospitalOwerri; to establish how supplier optimization affects purchasing strategies at Goshen children hospitalOwerri; to examine how vendor development affects purchasing strategies at Goshen children hospitalOwerri; to establish how risk management affects purchasing strategies at Goshen children hospitalOwerri. The findings were the reference point to other researchers in the same field and the knowledge generated by this study will enable scholars to improve and develop a better understanding on the subject. The study was anchored on the following theories goal setting theory, institutional theory and expectancy theory. The study variables are quality management, supplier optimization, vender development and risk management. The study adopted a research design that is descriptive with the target population being 100 respondents comprised of senior managers, middle level managers and non-management that were randomly selected. Stratified proportion sampling was involved in order to get a suitable unit of representative of analysis. Questionnaires were administered as the main data collection tool. Questionnaires were pilot tested before being administered to the target audience. Analysis of data has been described with the aid of descriptive statistics and analysis was done using SPSS, statistics and quantitative methods.The study established that quality management influences purchasing strategies at Goshen children hospital the way suppliers are identified and developed. The study also established that purchasing strategies at Gertrude children hospital are very effective and affects performance and also vendor development, supplier optimization affects purchasing to some extent but not as much as risk management. The study recommends that Total quality management schemes should be adopted by the Management of Goshen children hospital. To ensure quality management is enhanced throughout the processes of purchasing in the organization. By so doing the organization will be better placed for better performance and be very competitive and the procurement department should quarterly review their operational and strategic policies; the process should involve all the staff members, section heads, main suppliers and board of trustee to enable sound decision making.
CHAPTER ONE
INTRODUCTION
1.0 Introduction
This section reviews the research study background, problem statement, objectives, research study questions, significance and scope of the study which to determine the effects of effects of purchasing strategies on organisational performance a case study of Goshen children hospitalOwerri.
1.1 Background of the Study
According to Terpend, Dooley and Krause (2011) describe. There is a direct connection between purchasing strategies and organization strategy. In other words purchasing strategies, purchasing decisions and purchasing practices are commonly used interchangeably to express decisions that are considered at various stages of the purchasing process (Van Weele, 2010). With reference to operation management purchasing strategies is referred to as decisions on quality purchased, number of suppliers and supplier optimization strategies among others. According to Cannon and Perreault (2009) organizations continue to struggle with strategies in relations to suppliers and buyers. They further indicate that it’s the buyer who decides on what to purchase or not and they have outlined numbers of constructs such as information exchange, operational linkage and legal bond.
Terpend, Dooley and Krause (2011) explain that purchasing strategies are practiced in most organizations based on trial and error that have affected the business environment. Research has shown and identifies several factors that affect and determine the choice of purchasing strategies such as the market, the product, the industry or the portfolio model. According to Caniels and Gelderman (2010) portfolio model is the most cited model where buyer and supply market strength is considered while Cox (2013) focuses specifically on the power of his portfolio model which classify buyer supplier power into four aspects; the buyer might have dominance, the supplier might have dominance, they might be independent of each other and they might be mutually interdependent. The buyer can leverage supplier’s performance on cost and quality and to maintain only normal returns for the supplier this occurs when the buyer is on a dominance position. While in the interdependence position all the parties have resources that require them to closely work together. But within the independent position where none of the partners has leverage, it’s suggested that all the parties must accept the existing quality levels and price (Cox, 2013). He further suggests that the situation to slightly favour the buyer when the supplier have few chances to increase leverage. And finally when the supplier is in a dominance position, the supplier is required to incorporate market strategies against the potential competitors to increase more than normal returns and the buyer is expected to be the receiver of quality and price. The ideal position of suppliers would be monopoly ownership on the in-imitable resources subject to transaction and highly valued in the supply chain. For buyers on the ideal position is to have monopsony power in being able to source from suppliers in highly economical markets (Cox, 2013).
1.1.1 Organizational Performance
Organizational performance is a major factor that maintains efficiency and effectiveness of organization that makes a company to be more competitive at the market place. Establishments are formed with employees, for that reason executives have to determine the causes that lead to deteriorating of performance. Therefore it’s important to understand internal forces as well as external forces affects performance of companies in general (Green & Heywood, 2007). According to Pinder (2008) efficiency of organization performance can be determined by natural aptitude that the organization acquires over time. The reason why a person is motivated to perform certain tasks but he does not have the required knowledge for the job which they are required to do; work can still be affected due inadequate skills required. According to Kreitner and Kinicki (2011), workers' ability in determining the effectiveness of performance is crucial for the organization, although staff with high motivational level can still perform-well if they possess sufficient skills. In order for staff to remain relevant at the work place their skills and ability to do carry out in any assignment given to them by their employers. Individual performance can be identified by role perception (Locke, 2011).
1.1.2 Profile of Goshen children hospital
The hospital was established in 1947 with land donation from Colonel Ewart Grogan in memory of his loving wife Gertrude Edith. Goshen children hospital is a charitable trust which implies that all profit are ploughed back in the hospital. The organization is managed by board of trusties who offers their services voluntarily in running daily activities of the hospital and they are also responsible for all policy decisions and they don’t receive any rewards or emoluments for the charitable work they do. The monies the hospital receives are used for hospitals routine management. In April 2008 the hospital marked its Diamond Jubilee which also marked as formal opening of new outpatient department that included Accident and emergency unit and theDoctors plaza. The means that the hospital can know offer one stop paediatric center that can provide all available treatment that a child can require.
1.2 Statement of the Problem
Procurement departments are under considerable pressure to deliver performance improvements in order to achieve financial saving through more efficient and coordinated service delivery. Organizations are in demand of increasing professionalism in the procurement process. Procurement practices such as risk management, planning and supply performance influence organization in achieving communication and collaboration capabilities and at the same time maintaining the flexibility and responsiveness capabilities of market-oriented governance structures. Procurement best practices help organization in achieving cost reduction, new product development, improved inventory management, information management, improved customer service, material flows and improved performance in the organization. According to Hassanzadeh and Jafarian (2013) best practices are viewed as a strategic function working to improve the organization profitability reduce raw material prices and cost and identifying better sources of suppliers.
Several studies have been conducted on best procurement practice and organization performance such as Lee (2009) conducted a study on procurement best practices as measure for improving efficiency, quality and delivery performance of suppliers. Another study conducted by Mark, Wilson and Ram (2010) to investigate the implementation of lean procurement among SMEs. In Kenya there are few organization have successfully embraced procurement best practices like a study conducted by Gitahi (2011) on e-procurement and employment qualification of procurement staff at Cadbury Kenya ltd. Goshen children hospital like most organization are affected by changes in the external environment that include trading blocks, inadequate free movement of goods, increasing cost of inputs, increased competition and improved customer awareness. Despite all the measure put in place the organization still have challenges with its procurement process there are concerns with regards as it was suspected that some brokers are being selected to provide services at children hospital. And there is a need to examine how the different vendors are selected and how their selection has an implication on their performance of the organization. This means measuring output in terms of time and quality of delivery as per laid down standards it’s in this light that current study intends to determine the effects of purchasing strategies on organisational performance at Goshen children hospital.
1.3 Objectives
The underlying study objective is to determine the effects of purchasing strategies on organisational performance a case study of Goshen children hospitalOwerri.
1.3.1 Specific Objectives
i.To examine how quality management affects purchasing strategies at Goshen children hospitalOwerri.
ii.To establish how supplier optimization affects purchasing strategies at Goshen children hospitalOwerri.
iii.To examine how vendor development affects purchasing strategies at Goshen children hospitalOwerri.
iv.To establish how risk management affects purchasing strategies at Goshen children hospitalOwerri.
1.4 Research Questions
i. To what extent does quality management affects purchasing strategies at Goshen children hospitalOwerri?
ii. Does supplier optimization affects purchasing strategies at Goshen children hospitalOwerri?
iii. To what extent does vendor development affects purchasing strategies at Goshen children hospitalOwerri? iv.To what extent does risk management affects purchasing strategies at Goshen children hospitalOwerri?
1.5 Significance of the Study
To management of Gertrude’s hospital, scholars and individual researchers who used this study as basis for conducting research in the same area to identify gaps in this study. The board of directors and management can identify areas of weaknesses and the need to seek strategies to know the importance of having efficiency of supply of products and how to improve them.
Procurement department at Gertrude’s was able to see suppliers who ensure operations are being performed in a manner that is appropriate as it applies to their ethical, legal, environmental and social responsibilities, from the study findings for the important information the study shall obtain from the field will help in policy formation and better management of funds allocated to strategic purchasing.
1.6 Scope
The research was confined to Goshen children hospital head office located in Owerri. This study was conducted in the month of May to July 2018. The researcher sampled employees in all level of management and non-management staff in providing needed research information. The study targeted 250 employees at Goshen children hospital.
1.7 Chapter Summary
The chapter provides study background information the much need information needed to place the study problem in proper context and understanding, the chapter includes the outlines the background of the study, statement problem, study objectives, significance and study scope. Therefore this chapter guided as the as the norm which study variables are reviewed and study is conducted in order to achieve the main research objectives and determine the effects of effects of purchasing strategies on organisational performance a case study of Goshen children hospitalOwerri.
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
In the chapter the study has studied information and other works that have explored quality management, supplier optimization, vendor development and risk management and related literature. Review of literature involves documenting information and data that has a positive relation with study variables. The section also includes theories, gaps within other studies, conceptual framework, operationalization of study variables and it concludes with a chapter summary.
2.1 Theoretical Literature Review
The theoretical review is a logically described, developed and elaborated network of associations among variables deemed relevant to the problem situation identified. Theoreies are generaly formulated to understand, predict and explain a phenomena. The theoritical literature describes and introduces the theory that explains why research problem under investigation exists and is a structure that can support research study theory (Sekaran, 2010).
2.2.1 Expectancy Theory
Expectancy theory was proposed in 1964 by Victor Vroom and it stress and focuses on outcomes. According to Lucas and Diener (2007) expectance theory is a set of decision theories of work of motivation and performance. Perception plays a vital role in this theory because it emphasizes on cognitive ability to anticipate likely consequences that result from behavioural action (Krentner & Kinicki, 2011). Vroom (1964) the expectancy theory has two major assumptions that is individuals have a perception about the concerns that result from their interactive engagements and casual relations among the outcomes and second assumption is individual has effective reactions to certain outcomes that is both positive and negative value (Lucas & Diener, 2007).
Expectancy theory indicates those individuals are motivated to perform in double expectations. Not all efforts were rewarded and the staff may not be motivated to perform specific duties. Expectancy theory relies upon motivators to clarify the causes of behaviour at a work station; external rewards are viewed as motivators when behaviour is driven from internal forces. The study will adopt this theory because it addresses how quality management and supplier optimization affects purchasing strategies in organization and in this case it is Goshen children hospitalOwerri.
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