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The Effect Of Make-or-buy Decision On The Organization’s Profit
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND INFORMATION
The “Purchasing†is widely used in industry, commerce, public corporation and management to donate the act of and the functional responsibility for procuring materials, supplies and service. The research is aware that most serious problem facing the world today are the scarcity and the growing trend toward higher cost of materials and service. But it is amazing that purchasing, which can be so vital to an organization, yet many still little understood. Although the function spend a signification portion of every income of an 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 simple exercise of processing requisition and placing order. Professional purchasing however, is not a clerical task. However, in a narrow sense and considering the topic make by decision as an important tool for increasing profit ability, the term determines the need, selecting the suppliers, arriving at proper price, term and condition issuing the order, follow up to ensure proper delivery. The basic element involve in the performance of the purchasing function at Okin biscuit manufacturing industry limited, Igabo. Offa are obtaining the proper equipment, material, supplies and service that are needed, were they are needed at the right time , at right place, in the right quantity and quality, from the right source through the minimum effort and cost taking into consideration make or buy decision as an important tool for increasing profitability at Okin biscuit manufacturing industry ltd, Ijabo, Offa. Before any purchasing order is raised at Okin Biscuit manufacturing industry L.T.D, decision as to be made were the item in question is to be purchase or .
Manufacture internally as it will be necessary. This decision regarding what to purchase or make essential the decision of top management. In practice, the decision often seem to be taken as require by design, production or purchasing people acting together or separately with no writing policy guide and no apparent provision for periodic review. There is need to distinguish between decision and strategic decision. Make or buy decision taken at department level are those, which simply apply, to the existing policy they are tactical decision, when a change in the policy is invariably considered, it is then these decision are taken at higher level were the company’s strategy is decided. Considering make or buy decision, it is worth nothing that 60% of company’s annual budget is spent by the purchasing department, and million of naira are lost annually as a result of purchasing items. It would therefore be more economical of purchasing item. It would therefore be more economical to decide whether to make or buy. This was the conclusion of cullintin’s research first published in 1942 and subsequent investigation do not reveal that there is considerable improvement ever since culminating found that make or buy decision often attract less attention than needed and it tend to be taken on the basics of incomplete or inaccurate information and for year without being re-considered, although they have change significantly,
1.2 STATEMENT OF RESEARCH PROBLEM
General problem in this research includes whether to made or buy in the organization set up, this has to be given a special focus in order not to miss usefulness. At the initial stage, they may be very tendency for the organization not to make it at all in that the level of profit maximization may be very low and it may lead to the close down of the firm in the future.
The company even find difficult to achieve its present objectives if it fails to run smooth production at a given period or, as started, as to be able to meet the demand of its terming customer.
A merchandising firm will run the risk of loosing customer with out adequate supplies to meet the request of customer
Decision to either make or buy constitutes the most significant part of the current production of most manufacturing/ merchandising firms, which indicate clearly that substantial amount of money is committed to this important tool. It is essential therefore to efficiently monitor the decision to either and over-investing.
1.3 SIGNIFICANCE OF THE STUDY
Apart from the researchers, there are other parties to whom the research work is remarkably significant and could benefit from the client company i.e. Okin biscuits, Offa is also an advantage of gaining from the research work as it focused on its operations as the subject matter.
reference company could benefit in the area of purchasing and supply impact made by the researcher. Lastly, the professional colleagues will equally learn much bout make or buy decision as practically carried at in the manufacturing industry in which is an additional knowledge which has been learnt already in the lecture room.
1.4 AIMS AND OBJECTIVE OF THE STUDY
Purpose of this project is to contribute to the standard and buying performance of an organization. It also aimed at;
a. To examine ways which manufacturing organization can achieve corporate goal in the area of profitability, lower operating cost, lower cost of finished project by applying make or buy decision in the strategic planning process.
b. To make recommendation on area of improvement of the company’s make or buy decision
C . to control the standard and by buying system of performance of organization.
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