THE ROLE OF THE PURCHASING FUNCTION IN NIGERIAN INDUSTRIES (A CASE STUDY OF NIGERIA BREWERIES LTD, IBADAN, OYO STATE)

ABSTRACT

This study examined the role of the purchasing function in Nigerian industries, focusing on Nigeria Breweries Ltd, Ibadan, Oyo State. The research was grounded in the assumption that effective inventory management, procurement monitoring, procurement controls, procurement planning, and workforce training can lead to improved organizational performance. A descriptive research design was adopted. The target population consisted of employees in the procurement department, from whom primary data was gathered through structured questionnaires. Data analysis was conducted using descriptive statistics and regression analysis.

The study found that Nigeria Breweries Ltd, Ibadan, Oyo State has adopted the purchasing function to a moderate degree. It further revealed that procurement planning and workforce training play significant roles in influencing organizational performance. The study concluded that the successful application of the purchasing function within the organization relies heavily on proper planning and workforce training. Consequently, it recommends that key procurement stakeholders develop effective strategies for managing the purchasing process. Additionally, a comprehensive revitalization of the entire purchasing process is necessary, as it would enable organizations to adopt modern technological approaches and current trends in addressing procurement challenges.

CHAPTER ONE

INTRODUCTION

1.1 Background

The purchasing function represents a vital component in the public sector, as the procurement process constitutes a critical element of organizational expenditure. According to Carr and Smeltzer (1997), the purchasing function encompasses the activities undertaken by the purchasing organization to manage and integrate its operations, thereby enhancing productivity through reductions in cost and time. The connection between the purchasing function and overall organizational performance underscores the importance of adopting best practices to achieve current organizational success. Procurement practices are widely implemented across numerous industries globally (Hussein & Shale, 2014). Kabega et al. (2016) emphasized that many public organizations in both developing and developed nations have introduced procurement reforms, including relevant laws and regulations; however, the primary obstacle remains inadequate regulatory compliance. Public organizations are significant spenders that manage substantial budgets (Roodhooft & Abbeele, 2006). Furthermore, Mahmood (2010) noted that public procurement accounts for approximately 18.42% of global Gross Domestic Product (GDP). Public procurement is acknowledged as crucial for effective service delivery and represents a substantial share of total organizational expenditure (Basheka & Bisangabasaija, 2010).

The theoretical frameworks underpinning this research are the Principal-Agency Theory (PAT) and the Legitimacy Theory (LT). The Principal-Agency Theory addresses the arrangements established for an individual or entity (the agent) to act on behalf of another (the principal). The Legitimacy Theory posits that organizations, particularly public entities, are obligated to account for their activities to stakeholders and demonstrate the societal benefits derived from their operations.

The integration of the purchasing function into various organizational operations and support activities such as aligning production with incoming orders, synchronizing purchasing with demand, and coordinating scheduling and shipping with customer needs has substantially contributed to the performance of many public organizations (Baily, 2011). Strategic application of appropriate purchasing functions has considerable potential to enhance organizational performance and broader national economies (Keith, Vitasek, Manrodt, & Kling, 2016). Nevertheless, Singhal (2011) observed that disruptions in the purchasing function at any level can severely undermine organizational performance. Poorly coordinated purchasing activities can inflict enduring harm on an organization’s stock prices and profitability, necessitating more robust attention from supply chain continuity planners (Thai, 2010). For prominent public organizations such as Nigeria Breweries Ltd, Ibadan, Oyo State to effectively navigate the current dynamic procurement environment, the adoption of robust procurement practices is essential. The complete purchasing process can significantly enhance the responsiveness of procurement systems at Nigeria Breweries Ltd, Ibadan, Oyo State.

1.2 Problem Statement

Procurement forms an integral part of management principles focused on achieving efficient performance and contributing to national growth in public organizations. When properly planned and executed, the purchasing process can serve as an economic tool for promoting national development (Keith et al., 2016). Many third-world countries face challenges arising from dynamic procurement transformations, which complicate the integration of procurement functions with organizational performance and both internal and external relationships (Wambui, 2013). Purchasing functions are inherently vulnerable and susceptible to frequent interruptions (Jeppesen, 2010). Karanja and Kiare (2015) highlighted that vulnerabilities in both public and private sectors manifested through irregular staff reductions and rehiring amid downstream and upstream linkage disruptions negatively impact organizational performance. Jibrin, Ejura, and Augustine (2014) identified that the primary issue in the contemporary procurement sector stems not from insufficient regulatory frameworks but from non-compliance and ineffective implementation processes.

Despite ongoing efforts by private and public organizations in Nigeria to enhance the performance of the procurement function, challenges such as poor implementation and non-compliance with procurement regulations persist as major obstacles (Hussein & Shale, 2014). These organizations frequently encounter delays and occasional failures in delivering goods to the intended recipients (World Bank, 2010). Such issues have contributed to a deterioration in procurement and supply performance across numerous public organizations (Schiele, Horn & Vos, 2011). Given that purchasing activities account for an estimated 70% of organizational spending and that procurement functions contribute more than 25% to firm profitability, it is imperative for organizations to determine how procurement practices can support the achievement of corporate objectives (Jibrin et al., 2014).

Various prior studies on procurement and its relationship to organizational performance have produced differing results. For example, Nantage (2011) established that strategic procurement management has a direct positive impact on the financial performance of banks in Uganda. It is therefore important to conduct a similar investigation in a different context to determine whether comparable outcomes apply to Nigerian public organizations, specifically Nigeria Breweries Ltd, Ibadan, Oyo State. Kabega et al. (2016) investigated the effect of the purchasing function on the performance of public projects in Rwanda but did not address aspects such as inventory management, procurement controls, procurement monitoring, or workforce training elements that this study seeks to examine. It is also valuable to assess the influence of procurement planning on the performance of Nigeria Breweries Ltd, Ibadan, Oyo State.

Makabira and Waiganjo (2014), in their study on procurement practices and corporate organizational performance in Nigeria with a focus on the Nigeria National Police Service, demonstrated that procurement controls, procurement planning, procurement monitoring, and workforce training within the purchasing function play substantial roles in organizational performance. However, their study did not explore the impact of inventory management on performance, which is one of the key practices investigated here. Similarly, Oyuke and Shale (2014) researched purchasing function strategies and organizational performance, focusing on the Office of the National Audit in Nigeria. Their findings indicated that many respondents lacked training in records management and that such employee training significantly affected procurement performance. This highlights inventory management as a critical component of the purchasing function that drives superior organizational performance. Consequently, this study investigates inventory management alongside procurement planning, procurement controls, procurement monitoring, and workforce training.

A study by Masiko (2013) on strategic purchasing functions and procurement performance among commercial banks in Nigeria recommended revising and strengthening current procurement practices to improve performance in those institutions. Nonetheless, it remains essential to evaluate the current state of purchasing functions in Nigerian organizations, with particular attention to Nigeria Breweries Ltd, Ibadan, Oyo State.

Although several studies have explored the role of the purchasing function in Nigerian industries, many were conducted in other countries and emphasized different dimensions rather than its specific role within Nigerian industries. Evidence from these studies also indicates that the purchasing process continues to underperform in many public entities. Therefore, this study aims to address this literature gap, guided by the following research question: What is the role of the purchasing function in Nigerian industries at Nigeria Breweries Ltd, Ibadan, Oyo State?

1.3 Objectives

The primary objective of this study was to determine the role of the purchasing function in Nigerian industries at Nigeria Breweries Ltd, Ibadan, Oyo State.

The specific objectives were:

i. To establish the extent to which Nigeria Breweries Ltd, Ibadan, Oyo State has adopted the purchasing function.

ii. To determine the relationship between the role of the purchasing function in Nigerian industries at Nigeria Breweries Ltd, Ibadan, Oyo State.

iii. To establish the challenges faced in the adoption of the purchasing function at Nigeria Breweries Ltd, Ibadan, Oyo State.

1.4 Research Questions

i. What is the extent to which Nigeria Breweries Ltd, Ibadan, Oyo State has adopted the purchasing function?

ii. What is the relationship between the role of the purchasing function in Nigerian industries at Nigeria Breweries Ltd, Ibadan, Oyo State?

iii. What are the challenges faced in the adoption of the purchasing function at Nigeria Breweries Ltd, Ibadan, Oyo State?

1.5 Significance of the Study

The findings of this study will benefit managers in the procurement department at Nigeria Breweries Ltd, Ibadan, Oyo State by offering insights into how the purchasing function influences organizational performance. The research will also assist them in identifying optimal approaches to enhance profitability, productivity, and the institution’s overall image. The methodology and outcomes will additionally prove valuable to other higher education institutions, enabling them to evaluate how organizational purchasing functions contribute to performance and to identify potential bottlenecks that may impede success. This aligns with the principles of the Legitimacy Theory.

The study holds importance for policymakers, as the results will provide them with a clearer understanding of how the government can effectively regulate public purchasing functions. This will promote greater achievements and improved performance in public sector organizations, which serve as a key strategy for driving economic growth in Nigeria. The research further equips policymakers with essential information to develop and refine regulations and alignment strategies for public purchasing processes.

Finally, the findings are of considerable value to researchers and academicians, as this study contributes to existing scholarly literature by addressing knowledge gaps related to the purchasing function and organizational performance. It thereby provides a foundation for future research on performance improvement through purchasing functions.

1.6 Scope of the Study

This study examined the role of the purchasing function in Nigerian industries, with a specific focus on Nigeria Breweries Ltd, Ibadan, Oyo State.

1.7 Limitations of the Study

The researcher encountered several constraints that limited the scope of the study:

a) Availability of Research Material: Insufficient research materials were available to the researcher, which restricted the depth and breadth of the investigation.

b) Time: The allocated time frame for the study was inadequate for broader coverage, as the researcher had to balance the research with other academic commitments and examinations.

c) Organizational Privacy: Limited access to the selected organization made it challenging to obtain all necessary and required information regarding its activities.

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