ASSESSING THE CHALLENGS AND PROSPECT

OF THE PURCHASING PRACTICE

(CASE AREA ABAY MINCH COLLEGE)

A research proposal submitted to department of management in partial fulfillment of the

requirement for bachelor of art degree in management.

NAME ID

BY: 1.Semahagn chale,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,BEE/2560/10

2. Habetamu tadele,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,BEE/2501/10

3. Mastewal yitayih,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,BEE/2519/10

ADVISOR: Muluken A.(MSC)

DEBRE MARKOS UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
APPRIL,2013

BURIE, Ethiopia
 Acknowledgment

The first word is not enough to express praise my ALPHA AND OMEGA who
has been carried from my mother wombs to until. Secondly, I would like to
vividly express Muluken A. which gave constructive comment to provide this
study. Thirdly, I would like to forward special thanks to my family who provide
me it financial as well advise by providing from primary school up to College
ended. Lastly, but not least I would like thanks a lot business and economics
college department of management heart full.
Abstract
purchasing practice is not a new phenomenon now days, it play significant in
enrolment by helping needed material to the other department the investigation
concluded on effectiveness and challenge assessing the prospect of the
purchasing practice in Abay minch college. The major objective of this study
was focused on improving purchasing mechanism challenges and prospect of
the purchasing with the most relevant information and assess it. To do this
both primary and secondary data is needed for successful achievement of the
study. Primary data was collected from purchasing department committee and
manager through open and close ended questionnaire. But, secondary data
was gathered from the different document, books, and reports of purchasing
department. The Study used judgmental or purposing sampling technique
because employee 17, in order to reduce bias. After the required data collect
from both primary and secondary source, and also finally analyzed using
descriptive analysis for logical conclusion as well put possible suggestion.
tabel of Contents

Declaration...................................................................................................................................................I
CHAPTER ONE..............................................................................................................................................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 is the following.............................................................................................3

1.4.1, General Objective of the study..................................................................................................3
1.4.2 Specific objective of the study……………………………………………………………..4

1.5 Significance of the study……………………………………………………………………….4

1.6 Scope and limitation of the study……………………………………………………………

CHAPTER TWO.............................................................................................................................................4
Review of Related Literature.......................................................................................................................4
2.1 Material management Definition......................................................................................................4
2.2 Purchasing Definition.........................................................................................................................4
2.3 Types of purchasing Approaches.......................................................................................................5
2.3.1 Speculative buying......................................................................................................................5
2.3.2 Functional cooperation level objectives.....................................................................................6
2.3.3 from the detail level objectives..................................................................................................6
2.4 Purchasing policy...........................................................................................................................6
2.5 Purchasing procedures......................................................................................................................7
2.5.1 Organization of Purchasing Regulation.......................................................................................7
2.5.2 Verification of purchasing Regulation.......................................................................................8
2.5.3, Request for Bidding (Quotation)................................................................................................8
2.6., Centralization versus decentralization.............................................................................................8
2.6.1 Merits of centralization purchasing............................................................................................8
 2.6.2 Merits of decentralization purchasing........................................................................................9
2.6.3 Demerits of centralization and decentralization purchasing......................................................9
2.7 International purchasing....................................................................................................................9
CHAPTER THREE........................................................................................................................................10
Research Design and Methodology...........................................................................................................10
3.1 Research Design...............................................................................................................................10
3.2 Source of Data collection.................................................................................................................10
3.3 Method of Data collection...............................................................................................................10
3.4 Sampling Techniques.......................................................................................................................10
3.5 Sample size......................................................................................................................................10
3.6 Method of data analysis and interpretation....................................................................................11
Chapter four..............................................................................................................................................12
Data analysis, interpretation and presentation.........................................................................................12
4.1 Analysis from questionnaire............................................................................................................12
Conclusion and recommendation..............................................................................................................23
5.2 Conclusion.......................................................................................................................................23
5.3 RECOMMENDATION........................................................................................................................24
REFERENCE............................................................................................................................................25
Appendix...................................................................................................................................................26
CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Purchasing is one of the basic functions of common to all type of business
enterprise. These functions are basic because no business can operate without
them. All business administered or managed by coordinating and integrating
these function (Donald Widowers, 1994).

Creation the idea or design function, finance the capital questions and
financial record, personnel the human resource and labor, relation, purchasing
the acquisition of required material, service and equipment. Conversion the
transformation of material into economic good and distribution the marketing
and selling of goods produced, purchasing the basic and integral part of
business management for a business to be successful. It is impossible for any
organization to achieve its full potential without successful purchasing
practice. In the long run the business enterprise depend every bit as much on
the purchasing and supply executives at it does on the executive who
administer the other function of the business (Dobler, Burt 1996).

Purchasing as a process of buying, it involves as determining the needs,

selecting the supplier, arriving at proper price, specifying terms and conditions,
issuing the contract and following up to ensure proper delivery (Alumina,
1984).

Purchasing is acquiring materials and part as a requisition to meet quality,

quantity and time specifications. Purchasing is responsible for acquiring raw
material, component part, tools and other items outside supplier. The
fundamental purchasing activity includes selection of accessible venders and
negotiation of terms, revision quality level and other factor of purchasing,
placing purchasing order for new and recorded material. Parts and service
consideration, priority of order expediting, delivery of material and parts to
meet inventory requirement and maintain supply system data supply (Donald,
1984). Meanwhile, the researcher observed gap is purchasing Arbaminch
University which is costly.

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 1.2 Statement of the problem
For every organization challenge and prospect of purchasing practice it will
understand to lead to their business to success. The challenges that in
purchasing practice do to the area of enterprise obtain the inputs what is
produced goods and service in best manner. In our country context, the
challenges and prospect of purchasing practice until critical issues for
operation in providing exhaustive phenomena. Purchasing practice in
Arbaminch University one of the immense function of follower of all Ethiopia.
It spends money for purchase of computer, student’s food, stationary and the
others. How over, this above listed circumstance can be cumbersome by
different factors like incurring high cost. Although it is purchasing practice is
not the best level for the challenging and prospect it that the problem exist
spends highly money in the study area of Arbaminch University (main
campus). The researcher has getting primary information by interviewing the
employees’ 0f purchasing department in Arbaminch University (Main campus).
In generally, the main purpose of study is assessing the challenge and prospect
of the purchasing practice in Arbaminch University because highly spends
money for purchasing.
1.3 Research question

What are Arbaminch University purchasing policies?

What are policies apply competitive in Arbaminch University?
What factor challenges purchasing practice in Arbaminch University?

1.4, Objective of the study is the following

1.4.1, General Objective of the study
The overall objective of this study to assessing the challenges and its prospect
of purchasing practice in Arbaminch University.

1.4.2, Specific Objective of the study

To investigate practice policies in Arbaminch university

To investigate how much the application of polices competitively.

2
 To investigate factor that affect purchasing practice in Arbaminch
University.
1.5 Significance of the study

There are benefit is generating for the purchasing practice like for society,
organization and other researcher. At first this research helps for society
reduce challenges that affecting them purchasing practice bureaucracy and
reduce cost of purchasing goods.

Next for organization it bring ground for good relations with departments,
retain their customers, give satisfaction for the customers and increase profit.
At last for other researcher will helps to start baseline data for further study by
using reference who is interested in this matter of study.
1.6, Scope and limitation 0f the study

The scope of the study limited to assessing the challenges and prospect of the
purchasing practice. Geographically this study is focused on Gamo gofa zone in
Arbaminch University in the area of main campus. Conceptually the researcher
will use variety analyses to solve a problem in the purchasing practice
Arbaminch University in main campus. The main point delaminating the study
of the scope which affects the conclusive capabilities of the study. This are
shortage of study time, budget constraint to conduct research and lack or
resource.

3
 CHAPTER TWO

Review of Related Literature

2.1 Material management Definition
Material management can be defined a confederacy of traditional material
activates bound by a common idea of integrated management approach to
planning, acquisition, conversion, flow and distribution of production on
materials from the raw material state to the finished product state the material
management state advocates to the assignment of all major activities which
contribute to materials cost to single material management department. This
includes the primary responsibility which are generally fund in the purchasing
department plus all other major procurements responsibly including inventory
management traffic receiving, warehousing surplus and salvage and frequently
production planning and control. (Donald and Dobler. 1964).

Material management provides an integrated system approach to the

coordination of material activities and the control of the material costs, it
advocates to assigning to single operating department all major activities which
contribute to the cost of materials. The objective is to optimize performance of
the material system as opposed to sub optimizing the performance of individual
operating units that are major part of material system. (Donald and Dobler
1984). The theories related that the issue of purchasing practice is one of the
function of management service given company which able to execute several
activities more efficiently and effectively than the manufacturer their added
value to attract maintaining customer which proper circumstance all thing.
The above definition which stated by different scholars regarding on
purchasing with an organ that is responsible for the interface with supplier.

2.2 Purchasing Definition

Purchasing refers to a function in business where by the enterprise obtains the
inputs for what is produced as well as other goods and services it requires.
Purchasing is one of the basic function common to all type of enterprise. These

4
functions are basic because no business can operate without them (Dobler,
1964, p.27).

Purchasing the activity of acquiring good and services to accomplish the goal of
organization. Different scholars have given different definitions for purchasing.

The main objective of purchasing are: (1)to maintain the quality and value of
company product (2) to minimize cash tied up in inventory, (3) maintain the
flow of inputs and (4) strengthening the organization competitive position
purchasing may also involve (a) developing and review of the product
specialization, (b) receipt and processing of requisition, (c) advertise for bid, (d)
evaluation (e) award of supply contracts (f) inspection of gods received and (g)
their appropriate storage and release purchasing is the acquisition of goods
and service in exchange for something of value its material management
function concerned with process of buying the right type of material at the
right price and time purchasing is essential to all organization manufacturing,
non-manufacturing, profit making, nonprofit making and government (Eugene,
Miranda and John, 1995, p. 247).

Different scholars have given different definitions for purchasing. “Purchasing

is disciplined entrepreneurial activity directed toward providing profit” (parsons
and W.J 1982).

“Purchasing is disciplined entrepreneurial activity directed toward providing

profit” (parsons and W.J 1982).

In narrow sense the term purchasing simply describe the process of buying,
however, in a broad sense, the term involves determining the need selecting the
supplier, arrive at proper price terms and conditions issuing the contract or
order and following up to ensure proper delivery (Aljian George, 1973).

2.3 Types of purchasing Approaches

There are three types of purchasing approach based on findings these are:
Speculative buying

• Hands to mouth buying

• Forward buying

2.3.1 Speculative buying

 Speculative buying refers to buying on item of one price with the
intention of profiting the transaction by selling it at higher price

5
  The purchasing material in excess of foreseeable requirement. It
anticipated that the need on arise for material and the firm will profit by
making the purchasing at the current prices. (Donald and Dobler, 1984)

2.3.2 Functional cooperation level objectives to support company operation with

uninterrupted flow of material and service. This is the most fundamental of all
purchasing and supply objectives.

 To buy competitively involves keeping abreast of the process of supply and

demand that regulate price and availability of material in the market.
 To buy wisely buying wisely involves continual search for better value that
yields the best combination of quality, services and price, relative to the
buyers need.
 To develop good relationship with the supplier, continuing relationship with
active supplier and good relationship with potential suppliers.
 To keep inventory investment and inventory loses as a practical minimum
although maintaining a large inventory is one of achieving objectives from
top manager perspective.
 To achieve maximum integrations with other departments of the firm this
essential for buyers to understand the major need of their using
departments so that this needs can be translated in to materials support to
action.
 To handle the purchasing and supply management function in professional
& cost effective manner. (Donald and Dobler 1964).

2.3.3 from the detail level objectives

At this level precise straggle buying plan are formulated the focus is one the detailed objectives
that are developed when precise buying plan are made for each of the major categories that
are material arms use in its operation. (Dobler 1986, p. 42-44).

2.4 Purchasing policy

Purchasing policies are general statement or undertaking which guide or
channel thinking and action in carrying any purchasing transactions and
objectives in an optional manner it is statement that describes in very general
terms UN intended course of action (Dobler and Donald, 1996) purchasing
policies has various characteristics.

 Policies limit an area with in which a decision is to be made and assure

that the decision will be consistent and contribute to objective.
 Clarity and improve relationship with other functions.
 Training new personal and communicating approved practice

6
  Evaluate and improve purchasing function.

The purchasing department is responsible to establish and administer

purchasing polices, institute report necessary to permit analysis of purchasing
performance negotiate and approved terms of contracts and analyze price paid
for material and generally define how to obtain saving and coordinating
purchasing procedures (Aljian and George, 1973).

2.5 Purchasing procedures

Purchasing procedure often vary depending on the type of items to purchase. A
purchase procedure outlines in detail the specific actions to be taken
accomplished a given task within the guide line of any applicable policies it
establish the founding objectives (Dobler and Donald, 1996).

 Full fill each tasks satisfactory with minimum of time effort and paper
work
 Effectively communicate and coordinate the effort of one work group with
another.
 Minimum overlapping effort and group conflict
 Permit effective management by exception.

Nevertheless, the procedures given by different authors seem more

comprehensive it can be also using the flow chart prepared (J.H. Westign,
1985). The principal purchasing procedures are listed as follows.

2.5.1 Organization of Purchasing Regulation

Materials requisition from the customer unit or individuals that have been
authorized to make such a request users of the stock items for instance may
submit materials regulation from the stores to purchasing units for non-stock
items the authorized individual or units fill the purchase unit.

The information in the purchase repulsion form includes

• The name of the material required

• The code number and part number

• The quantity required

• The time when the material is required.

• Specification and standard.

7
2.5.2 Verification of purchasing Regulation
The purchasing unit verifies whether the purchase requisition is authorized
and whether other requirements have been fulfilled appropriately questions
cleared in the verification includes.

It the requesting unit or individual authorized to make such a request?

Is there a budget to meet the request?

2.5.3, Request for Bidding (Quotation)

The purchasing unit examine whether bids are required or a direct purchase
polices of the organization bid can be open or closed.

2.6., Centralization versus decentralization

Centralization of purchasing means that the requirement of any departments of
a plant or of different units of the same company of associated companies of
the same group will be purchased by a single purchased department (Nair,
1990).

Decentralization purchasing provide authority of purchase to the lower unit in

order to purchase their own material (Nair, 1990) decentralization purchasing
is the power to delegated to sub group or subordinates. The power is not
centralized within one party.

2.6.1 Merits of centralization purchasing

Quality discount

 Effective use of limited and highly specialized skilled purchase staff.

 Standardization of purchase materials and purchase procedure.
 Avoidance of significant difference in price between them in case of short
supply.

2.6.2 Merits of decentralization purchasing

 Advantage would take of locally available product leading to possible cost
reduction and more suitability.
 Delegation authority to a various unit price moral of involved personnel
and taken advantage of their local acquaintance and knowledge.
 Suitable for department or plant that require different type of item.

8
  Enable local management to exercise control over it cost and selection of
material in addition to enhancing its relation with local suppliers and its
social responsibility to the local community.

2.6.3 Demerits of centralization and decentralization purchasing

By and large the advantage of centralizing reflects the disadvantage of
decentralization and the advantage of decentralization indicate the main short
coming or disadvantage of centralization.

2.7 International purchasing

The term global sourcing, global purchasing, foreign sourcing and international
sourcing are used interchangeably in recent year the term “international
purchasing” is being used by many firms which means integration and
coordination of common item, process, technology and supplier (Dobler and
Burt 1996).

9
 CHAPTER THREE

Research Design and Methodology

3.1 Research Design
The researcher will use descriptive type of research that helps to collect
information about the assessing the challenge and prospect of purchasing
practice in Arbaminch university. The data also both of the qualitative and
quantitative.

3.2 Source of Data collection

The student researcher will use both primary and secondary sources of data.
The primary data will be collect by interviewing and as the same time
questionnaire for employees Arbaminch University of purchasing department.
The secondary data will be use from the retain source such as books,
magazine, internet and etc. in generally the above mentioned to source use by
the researcher to acquire information that is necessary to accomplish
effectively the study.

3.3 Method of Data collection

The primary data will gather from individual committee who are responsible for
purchasing activity. The method of data collection that can be use for this
study will open and closed ended questionnaire for the purchasing department
committee and the manager. The secondary data will gather from different
documents, manual, books and reports of the purchasing department.

3.4 Sampling Techniques

The researcher depend on target population in this study are 17 employees in
purchasing Arbaminch University. In cause the researcher use probability
sampling technique. From probability sampling technique the researcher will
be used census because of below of 100. It is suitable for the study and
minimizes cost in terms of money, save time and convenience to use attention
and select target respondents that provide relevant information.

3.5 Sample size

The total population owing to bit the researcher will use census which
probability sampling. Because the total population the researcher will take
purchasing committee in order to obtain accurate and necessary information.

10
3.6 Method of data analysis and interpretation
The method of data analysis is descriptive the rationale for choose of this
method of data analysis will it allows describing. Finally, the researcher to
interpret the analyze data in communicable and understandable way for the
reader.

REFERENCE
Burt D.N(1984.purchasing and material management

Text and case, 6th ed Mc Grew hill new work.

Dobler, DW, and Bert DN (1996, purchasing and supply management;

5th. ed.New York; mc Griw hill Inc

11
George Alijan (1975), Purchasing hand book,3rd ed New York mc griw hill inc

………… (1973), Purchasing Hand book, 2nd Ed. New York: MC Griw hill Inc

J.W person (1982), Improving-purchasing performance; Londen; Gower Itd.

Nair NK (1990), Purchasing and materials management 2nd ed. New York Delhi
vikas publishing

Van Weel, Arjan J (2000), Purchasing and supply chain Management Analysis,
Planning and practice; 2nd, Australian Business.

W Dobler Donald (1984), Purchasing and Material management 4 th ed.New

York; M Griw hill inc

Westign, J.H (1985), purchasing management material in motion J. weng and

sons inc new Delhi.

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 Appendix
ARBA MINCH UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

QUESTIONNAIRE

Thus, questioner is considered for only academic research purpose that is

gather primary data required to conduct a research. On purchasing practice of
ARBA MINCH university. Any information gathers will beaver be disclosed to
other parties and kept confident. Filling this questionnaire crucial for
successful completion of paper and would like to thank you in advance

INSTRUCTION

Dear respondents make in the box that will fit our options and write in the
space provided option.

I personal information

 Sex: - male female

 Age: - 18-30 31-40 41-50 51 and above

 Marital status: - single Married Divorce

 Educational level below 12 Diploma first Degree

Masters And above

Year of experience of service department below 10 year 10-20

20- And Above

13
1, How much do you know the purchasing practice a procedure applies by
Arba Minch university
Not much medium very much
Please explain reason if your answer is not much ………………..

………………………………………………………

2, How selection of supplier is done in the university?

Based on organization procedure Based cost it varies supplier to

Supplier No idea

3,How do you perceive the purchasing function of ARBA MINCH university?

Centralized Decentralized

4, Which one do you prefer? Give you reasons …………………………….

………………………………………………………………………………………
………………………………………………………………………………………

5, The purchasing department provides the material with appropriate quality?

Agree Disagree

6, The purchasing department provides the material with appropriate

quantity?

Yes No

7, At right time? Yes No

14
8, In right supplier selection? Agree Disagree

9, In your option, how do you evaluate the overall purchasing process from

Speed of delivery to work unit? Very length and time taking

Neither slower or fast

10, Do you get the material on time? Yes NO

if you say no please write the reason behind. …………………………………….

………………………………………………………………………………………….

11, In which product attribute do you think the purchasing function are well

Being done in ARBA MINCHUniversity? Right quality price

Right source Right time

12, Is there any problem in purchasing practice of ARBA MINCH university?

Yes No

13, In question 12, if you say what are the problem ………………………….

……………………………………………………………………………………

14, Have you encountered any problem because of the poor performance of

Purchasing? Yes No

15, In question 14 if you say yes, please writer

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I, the incident ……………………………………………………………………..
……………………………………………………………………………………

If, the result ………………………………………………………………………

……………………………………………………………………………………..

16, Dose the university place purchasing order in writing with

Inappropriate format designed by minister of finance and economic

Development?

Yes No undecided

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