PURCHASING FUNCTION IN THE PROCUREMENT OF CAPITAL EQUIPMENT

1.0 Introduction

1.1 Background of the Study

Purchasing has a very vital function to play here as the buying of capital equipment differs substantially from the purchase of production materials and supplies.

The purpose of this work is to conduct an in dept research on the function played by purchasing in the procurement of capital equipment in Jacobs wine limited. To star with, we have to understand what capital equipment procurement is and how it is done at Jacobs wine limited. Capital equipment procurement therefore, is the purchasing of those items of machinery and equipment whose long life and high value require that they be carried on the balance sheet and depreciates over a period of time.

Specifically, therefore, the purchasing department in Jacobs wine, limited plays a distinctive function in the acquisition of capital equipment (items) as compared with the acquisition of production materials. In the procurement of capital items the purchasing department acts primarily in a service capacity as it gathers information, a contract administrator and acts as purchasing consultant to management.

The focal point of this research work is on Jacobs wine limited Mgbidi that is why the research want to know the purchasing function in the procurement of capital equipment Jacobs wine limited, a wine distilling firm is located in Mgbidi, Imo state it was established in 1985 by Dr Jacobs Frank (Phd) and was later incorporated in 1989. The company is committed to integrating suppliers into their long-term business process, this is done by early improvement of their supplier into their business plan to encourage good buyer/suppliers relationship.

Jacobs wine is involved in large scale production of pineapple based wine. Their winery remains the first and only commercial pineapple winery in Africa and second in the worlds.

The company has the following range of products, Jacobs pineapple wine Jacobs red candid wine Jacobs while candid Jacobs candid pineapple and Jacobs Topman wine while the spirit include addles dry gin and top brandy. The company's production capacity perineum is 1.09 million liters.

As a matter of policy, Jacobs wine Mgbidi, is committed to giving its numerous customers both in Nigeria and across the shores, good value for their money. Right from inception, the company's watch word is: “quality” a policy which it has maintained which has made the product to enjoy consumer preference and high patronage in the face of competition.

1.2 Statement of the Problem

There are several ways in which statement of problems are being stated in purchasing department in Jacobs, wine limited Mgbidi.

1. It is work mentioning that unpredictable number of requisitions and changes in quality specifications of actual amounts and time of delivery as specified by the department hinders the progress of the department (lead time).
2. The ideal of employing those that are not qualified or technically intellectuals also hinders the progress of the department hasty decisions often lead to problem of ill-fated investment and poor technical output of equipment in production use.
3. The process of not passing through quality control is the most crucial situation because before any product can be said to be of good quality and standard, the idea of weighing and knowing that quality of the product is encouraging.
4. Also, due to lack of adequate knowledge of purchasing most executives unknowingly reduce some proportion of cost associated with labour, there by increasing the cost concerned with materials management, which usually affects final price of their product.
5. The research intend to ascertain the purchasing function in the procurement of capital equipment under review, i.e. Jacobs wine, which is a wine distilling firm is faced with the problem of how to plan, manage and develop a sound supply base, that will ensure steady supply the raw- materials needed for production.

1.3 Purpose of the Study

The purchasing capital equipment for manufacturing becoming more complex. As north American manufacturers strive to compete in a global compete the in new equipment takes on a more important role. Business leaders are now looking beyond the machinery itself in the purchasing process in order to uncover advantage.

Companies now evaluate everything that surrounds the machine tool in addition to the normal productivity and cost savings calculation already commonly need and intended use of the machine, this is normally a starlight forwards analysis of capacity both for today and projected planning along with the resulting productivity increases expected from the new machine. It is rather easy if the intended use is identical to the process already in place.

So therefore, the purchasing department in Jacobs wine limited can also play a wonderful role in the procurement of capital equipment.

Basically, the success of a business enterprise depends in every bit as much on the purchasing executive who administers the other functions of the business.

Therefore, with this frame of work one should be able to identify capital equipment procurement.

1.4 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• How does the purchasing department in your organization in plays a tremendous role in the procurement of capital equipment?
• How cash one identify capital equipment and the function of purchasing department in the procurement of capital equipment in your organization with this frame of work?
• Is the purchasing function actually understood by your company?
• How does the understanding or lack of it affect the general performance of the organization?

1.5 Significance of the Study

The study will be of benefits to the following.

1. The writer or researcher it is a equipment for the award national diploma in purchasing and supply.
2. To other students who may be faced with familiar problems — it will serve as a data bank from which they can make references.
3. To the firm of case study Jacobs wine, to measure their performances as far as capital equipment procurement is concern.
4. Also, buyers and decision makes in other organization will gain from this research as this will help them in their own suppliers (s) selection that will also increase profit reduce costs.

1.6 Scope of the Study

The study of the function of purchasing covers a very complex are. But in the case of our study capital equipment in Jacobs wine limited Mgbidi, Imo State.

1.7 Limitation of the Study

Since the purpose of this study is to look into the efficient function- played by the purchasing department in Jacobs wine limited Mgbidi. Therefore, the scope of the study would be limited to such areas.

The main limitations encouraged in the course of carrying out this study were time and finance.

Due or the work involve in classes, it was not easy to squeeze out adequate time to complete the project so quickly and also the availability of money to take care of the financial aspect, the collection of data was not constant and so as a result of all these, the project look longer than necessary.

1.8 Definition of Terms

(A) Procurement:

This is the aspect of obtaining equipment and this obtaining of equipment can be made through cash, credit, cheque etc,

(B) Vendor:

This expatiates in the ideas of selling and buying and the person those suppliers goods to the buyer is the vendor.

(C) Negotiation:

This is a conference with another person with a view of reaching to an agreement. Larmarlee and Dober (1983 see negotiation as a process of planning, reviewing and analyzing used by buyer and sellers to reach acceptable agreement or compromises.

(D) Purpose:

What the actually is the prime purpose (aim) of the equipment. This consist of the things the equipment can serve as whether for production or resale

(E) Flexibility:

How versatile the equipment can be used all other purpose other than those fro which it was primarily acquired.

(F) Standardization:

Is the equipment compatible with any already installed thus reducing cost of holding spares.

(G) Life:

This usually ropers to the period before the equipment will start to depreciate or become obsolesce. However, it is not necessary to link depreciation to the total life span. It is intended to be disposed before it is obsolete or unusually.

(H) Reliability:

This is the ability of a product to service specific conditions within a given period.

(I) Durability:

This concerns if the equipment can sufficiently result for its intended use and if equipment will be efficient in doing its jobs.

(J) Product Quality:

British standard institution definers quality as the totally of features of product or service that bears upon its ability to satisfy a given need. And defective output proportionally increase the cost per unit of output.

(K) Cost of Operation:

Cost of power, fuel and maintenance with special labour or addition costs that are incurred during operations.