MAKE OR BUY DECISION; AN IMPORTANT TOOLS FOR INCREASED PROFITABILITY IMPROVEMENT IN AN ORGANIZATION (A CASE STUDY OF COCA-COLA COMPANY PLC, ILORIN)

CHAPTER ONE

          1.0      GENERAL INTRODUCTION

The term “purchasing” is widely used in industry, commerce’s, public corporations and management to denote the act, the functions and responsibility for procuring materials supplies and services.

The research is aware that most serious problems facing the world is the scarcity and the growing trend towards higher cost of materials and service. But it is amazing the purchasing, which can be so vital to an organization survival is still little understood. Although, the function spend a significant portion of every income of organization, yet many still look upon it as little and not more than a clerical or routine activity.

Too many people assumed the function is just a simple exercise of processing requisition and placing order. Professional purchasing however is not a clerical task.

However, in narrow sense and considering the topic make-buy decision as an important tool for increased profitability, the term determine the need, selecting the supplies, arriving of proper price term and condition issuing the order, follow up to ensure proper delivery.

The basic elements involved in performance of this purchasing function at a Coca-Cola Plc, Ilorin, are obtaining the proper equipment, materials, supplier and services that are needed, where they are needed at the right time, at the right price, in the right quantity and quality, from the right source through since Cullintin found that make or buy decision often attracts attention than need and it tends to be taken on the basic of incomplete or inaccurate information and for years without being re-considered, although they have changed significantly.

          1.1      STATEMENT OF THE PROBLEM

General problems in this research induces whether to make or buy in the special focus in order not to miss its usefulness. At the initial stage, there may be every tendency for the organization not to make it all in that level of profit maximum may be very low and it may be lead to the close down of the firm in the future.

The company may even find it difficult to achieve its pre-set objectives if it fails to run smooth production at a given period or as stated, as to be able to meet the demand of the timing customers. A merchandising firm will run the risk of loosing customer without adequate supplies to meet the rogues of customers.

Decision to either make or buy constitute the most significant part of the current production of most manufacturing merchandizing firms which indicates clearly that substantial amount of money is committed to this important tool. It is essential therefore to efficiently monitor to either make or buy to avoid in the production process, under investigation and over investigation.

          1.2      OBJECTIVE OF THE STUDY

The purpose of this project is to contribute to the standard and buying performance of an organization. It is aimed at examining the ways in which manufacturing organizations can achieve corporate goals in the area of profitability, lower operating cost, lower cost of financial procedure by applying make or buy decision in the strategic planning process.

          1.3      SIGNIFICANCE OF THE STUDY

Apart from the researcher, there are other parties to whom the research work is remarkably significant and could benefit from. The client company i.e. Coca-Cola Company Ilorin is also an advantage of gaining from the research works as its focused on its operation as the subject matter.

The reference company could benefit in the area of purchasing and supply impact made by researcher. Lastly, the professional colleagues will equally learn much about make or buy decision as particularly carried out in the manufacturing industry in an additional knowledge which has been learnt already in the lecture room.

          1.4      SCOPE OF STUDY

The scope of this research work is based and centers on core areas of make or buy decision i.e. who determine what or buy decision i.e. who determine what or buy and the effect of this decision on the organization profit.

In order to consider to scope of making or buy decision, there is the need to actually minimum effort and cost taking into consideration make or buy decision as an important tool for increased profitability at Coca-Cola Company Plc Ilorin.

Before any purchase order is raised of Coca-Cola Company Plc, Ilorin, decision has to be made whether the item in question to be purchased or manufacturing internally as will be necessary.

This decision regarding what to purchase or make is essentially the decision often seem to be taken as required by design, production or purchasing people acting together or separately with no writing policy guide and no apparent provision for periodic review.

There is no need to distinguish between tactical decision and strategic decision.

Make or buy decisions taken at departmental level are those which simply apply to the existing policy. They are tactical decision. When a change in policy in invariably considered, it is then this decision are taken at higher level where the company strategy is decided.

Considering make or buy decision, it is worth nothing that 60% of company annual budget is open by the purchasing departments and millions of naira are lost annually as a result of purchasing items. This would therefore be more economically decided whether make or buy. This was the conclusion of Culling research first published in 1942 and subsequent investigation do not reveal that there is considerable improvement over know that before purchase orders are raised, a decision, a decision is made on whether the item in question is to be manufacture or bought as the case may be.

The basic elements involve in the performed of this purchasing functions are obtaining the proper equipment, material and services that are needed and where they are needed at the right piece, time, quantity and quality with minimum efforts. It covers all fact of purchasing in Coca-Cola Company, Ilorin. For example whether the decision has reduced, in a storage spaces or has added whether quality of product or falls with make or buy decision at Coca-Cola company Ilorin.

          1.5      LIMITATION OF THE STUDY

There cannot be any successful research of this nature without encountering some difficulties which might cause it success or failure. Different in securing some of the vital documents containing some valid information relating to the subject matter because of Lukeworm attitude of some officers who are suppose to assist in the research work. This occurred with the view that such a research can secure a deterrent to them, forgetting that it may be of immense improvement in their performance.

          1.6      HISTORICAL BACKGROUND OF COCA-COLA COMPANY

Coca-Cola is the world leading soft drink sold in more than 145 countries. A total of 270 million of bottles of Coca-Cola are consumed everything in all parts of the globe from Canada on the north to Argentina and New Zealand in the south, from Alaska to China, from Mexico to Nigeria. It first comes to Nigeria in 1963 when Bottling Company set up its first plant in Lagos. It was to be the beginning of an exciting story of growth and development particularly during the past ten years.

The success of Coca-Cola has brought with it the development of a number of sister industries, they all contribute to the Nigeria economy. For example Delta Glass Company Ughu, which supplies the million of bottles required to keep a large Bottling Company in operation and the crown Product factories in Ijebu-Ode and Kano which manufacture the metal crown to seal the bottles. Also, the Benin Plastic Company which make the plastic crate for carrying the bottle.

In addition, the trucks which are a familiar sight in many parts of the country, delivery soft drink to more than 80,000 dealers are also assembling in Nigeria.

Nigeria Bottling Industry is also the largest manufacturer of carbon dioxide in the country.

This is used to carbonate the favourite soft drink: Nigeria Bottling Company employed over 60,000 Nigerians in all fields operation.

Quality is the words which determine the success of the whole operation. Only the very best ingredient are used for making soft drink and sophisticated washing and filling equipments have been installed at all plant extremely high standard for hygiene are maintained to ensure that top quality products reach the customers.

The manufacturing process of Coca-Cola is based on a carefully increased combination of sugar, water and the same standard is maintained throughout the world. Nigeria Bottling Company plants are situated in many parts of the country; the headquarters of Nigeria Bottling Company is at Leventis Building Iddo House, Lagos.

      1.7      DEFINITION OF TERMS USED FOR CLARIFICATION AND BETTER UNDERSTANDING

MAKE: It is the act of producing certain things

BUY: It is an idea of paid or getting by buying a price.

POLICY: The plan of action to be taking by management of an organization policies defines the boundaries within which decision can be made by their direct decision towards the accomplishment of objective.

DECISION: It is the act of making up one’s mind about certain things.

CAPITAL EQUIPMENT: Is the installation of equipment such as plant machinery, and other major equipment used directly for production of goods and services.

PURCHASING POLICY AND PROCEDURE AUDITS: This is used to determine of established policy and procedure are being adhere to.

PURCHASING: Is the continuous management process that is responsible for anticipation, identification and the provision of the goods and services that are required by an organization with objective of increasing organization’s profitability.

PRODUCTION: It is the process of production or making an item.

CAPACITY: Ability to contain, hold or get hold of something.

UNSATISFACTORY: Not giving pleasure of satisfaction, from need or desire.

SPECIFICATION: Is a defined description of what is wanted.

SUPPLIER: One where responsibility to supply or make available for further usage either for production or normal consumption.

STANDARD: It is model with which something is compared.

QUALITY: Is anything that conforms with one’s pre-determined standard.

EVALUATION: Evaluation in purchasing is required to ensure that progress is being made toward objective according to plan. Evaluation is part of the control process.

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