The Effect Of Negotiation In Purchasing As A Cost Saving Technique In A Manufacturing Outfit

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These days most organizations and industries are compelled to adopt an effective method of negotiation for the purchase of their materials in order to reduce costs. Prior to this time, many organization did not bother to pay particular attention to how important is negotiation. But in recent years the continuous price increase, perennial scarcity of materials in, the commodity market coupled with constant changes in the environment have made this mandatory for the top management of such organization or industries to take note of the negotiation. 

This research work will evaluate the application of effective negotiation in purchasing as a cost saving techniques with reference to the practices as obtained in Doyin Investment industry, Ilorin, Kwara State In order to determine how effective the practice of negotiation is in industries as a cost saving and profit maximization techniques. The research work has been divided into five main chapters. Chapter one of the project work will cover the general introduction, historical background limitation and constraint, definition of the terms, hypothesis formulation, objective of the study, scope of the study, statement of the problems. 

While chapter two lay emphasis on the literature review. Chapter three of the project is focused on the research methodology research design, data collection instrument, research population and sample size, sampling procedure employed and method of data analysis. Chapter four will highlight presentation and analysis of data and finally proof of hypothesis. Chapter five is devoted to summary of findings, conclusion and recommendation.

TABLE OF CONTENTS

Title Page

Certification

Dedication

Acknowledgment

Abstracts

Table of Contents

CHAPTER ONE

1.0 General Introduction

1.1 Objective of the Study

1.2 Statement of the General Problem

1.3 Hypothesis Formulation

1.4 Rationale for the Study

1.5 Scope of the Study

1.6 Limitation and Constraint

1.7 Historical Background of the Case Study

1.8 Definition of Terms

CHAPTER TWO

2.0 Literature Review

2.1 Introduction

2.2 Objective of the Negotiation

2.3 Buyers Role in Negotiation

2.4 Qualities of a Good Negotiator

2.5 Stages of Negotiation

2.6 Factors in Favour of Negotiation

2.7 Importance of Time in Negotiation

2.8 Tactics of Negotiation

2.9 A Successful Negotiator

2.11 Knowing when Negotiate

2.12 Pillars of Negotiational Wisdom

2.13  Enhancing Negotiating Skills

2.14  Price analysis Negotiation

2.14 Cost analysis Negotiation

2.15 Characteristics of a Negotiation Situation

CHAPTER THREE

3.0 Research Methodology

3.1 Research Design

3.2 Data Collection Instrument

3.3 Research Population and Sample Size

3.4 Sampling Procedure Employed

3.5 Method of Data Analysis

CHAPTER FOUR

4.1 Presentation and Analysis of Data

4.1 Proof of Hypothesis

CHAPTER FIVE

5.0 Summary of Findings

5.1 Conclusion

5.2  Recommendations

References

CHAPTER ONE

1.0    GENERAL INTRODUCTION

Negotiation is barely one the most important and interesting elements of purchasing to any purchasing officer or manager in an organization or industry where purchasing is one of strategic management functions.

To know all about the goods or services you buy is not enough without the necessary negotiation skills and knowledge. It is important to recognize that the prime task of the purchasing manager in fulfilling his role of maintaining suppliers is negotiation.

The purchasing manager as specialists who in the process of satisfying the need of the company seeks for suitable source of supply and negotiate to secure the best terms and service possible.

Negotiation is necessary wherever it is required to reconcile two or more differing opinions in order that action may be limited or continued in mutually agreed condition. It is very vital that all buying and selling.

Transaction leaves both parties satisfied and hence negotiation is not forcing an unwilling acceptance on any of the parties.

This research work will go in depth with regards to the importance of negotiation in procurement activities of the Doyin Investment industry.

The overall objective of negotiation to any business is that it serves as a mechanism for decision making, conflict solution or problem solving, therefore it should be noted that purchasing negotiation is certainly a process used by management to reach an agreement in a non-violent and socially acceptable manner in other to get effective selling.

Though negotiation is complex and costly but it is essential to reaching an Agreement to exchange through a process of bargaining to achieve a mutually acceptable outcome. Competitive bidding is the preferred method of purchase but when this is not the case, negotiation is employed today in the market as a better and appropriate method of profit maximization in an organization.

1.1    OBJECTIVE OF THE STUDY

The” motive behind the research is to establish that negotiation is an effective tool for the procurement activities of any manufacturing industry. The primary objective of this project is to satisfy one of the conditions for the award of National Diploma (ND) certificate in purchasing and supply awarded by Purchasing and supply Department, institute of Finance and Management Studies, Kwara State Polytechnic Ilorin.

1.2 STATEMENT OF THE GENERAL PROBLEM

Procurement of materials in an organization is one of the most important functions of purchasing department. Efficient and effective purchasing is vital to realization of organizational objectives, but in most organization the purchasing department is not given the free-hand to operate in the procurement of materials for the organization and depriving such organizations of the benefits accruing from an efficient buying system.

The activity of buyers as regards negotiation helps the organization to resolve problems like:

• Time budgeting of purchase
• How to obtain the right quality and quantity of goods at the right time
• Ascertaining the right and fair price.

1.3 HYPOTHESIS FORMULATION

It is essential to develop a professional foresight and develop some reasonable assumptions about the subject matter.

The probability of the assumption been true is highly significant to this research work.

Ho: Effective negotiation is not a vital tool for cost saving and profit maximization.

Hi:  Effective negotiation is a vital tool in cost saving and profit maximization.

1.4    RATIONALE FOR THE STUDY

One of the rationales for the study is to ensure over-emphasis for many reasons, apart from being one of the conditions for obtaining a certificate, that some loop-holes existing in effective negotiation are corrected at the end of this research. Besides, the research work is to serve as significant instrument to both company under study and the researcher. This is cause the researcher will be opportune to relate what he had learnt in the classroom with what is actually opening in the field. The researcher would have detailed knowledge of negotiation which is one of the main tasks the purchasing profession. The company will know the usefulness of negotiation and its contribution to the survival d profitability of the organization.

1.5  SCOPE OF THE STUDY

The research work covers broad areas in purchasing operations and procurement procedures in manufacturing organization with emphasis upon contract negotiation, supplier relationship and ethics, buyer’s roles -In negotiation, objectives of negotiation and conducive atmosphere or environment for meeting during the course of negotiation.

1.6 LIMITATION AND CONSTRAINT

A major limitation of the study is the limited availability of some data demanded by the researcher; hence a detailed study of the organization could not be conducted.

In addition, some answers given during the interview were not detailed enough; this makes the information suffer the error of omission. Some were later compensated while in some, the researcher could not help the situation. Other problems encountered were financial constraint, limited textbooks and journals related to the topic and the time available for research work.

1.7 HISTORICAL BACKGROUND OF THE CASE STUDY

Doyin Investment of Nigeria limited is a group of companies and the first indigenous soap and detergent manufacturing company in Nigeria.

It was incorporated on 8^th October 1984 with head office in Lagos and factory situated along Asa dam road, Ilorin the Kwara State capital. The company is operated, managed and directed by full blooded Nigerians, owned by an experienced and courageous industrialist Prince (Dr) Samuel Adedoyin who had for many years championed indigenous technology, background integration and use of local materials in Nigeria.

Doyin Investment industry was established in response to the cal of the Kwara state government towards industrialization and upliftment of the economic position of the state. The company produces a wide range of products used at home, like soaps, detergent, toiletries, toothpaste and drugs.

The factory metamorphosed tremendously from its one detergent factory and a pioneer staff of 40 in 1984 to conglomerate of seven (7) factories in 1994, sourcing most of its raw materials locally. This is one way by which Doyin Investment industry has been contributing significantly to the country’s Economic rehabilitation and industrial revolution.

The company has consistently pared up with the existing multi-national detergent manufacturing companies in healthy competition towards enhancing the growth of the Nigerian economy. Beside the provision of employment opportunity for the indigenes and outsiders. The company is blessed with modern technology.

Doyin Investment operations and activities are controlled by the chain of command as contained in the organizational chart. The quality control manager -ensures that the required standards of raw material are maintained in collaboration with design and engineering department. The stores department will be responsible for inventory control to achieve a high level of efficiency in its operation. In every department there is supervisor monitoring the affairs of the clerks and cleaners.

1.8 DEFINITION OF TERMS 

Ø Purchasing: This is a continuous management process which is responsible for the anticipation, identification and the provisioning of the goods and services that are required by an organization with the objective of helping it increase its profitability or service provided.

Ø  Negotiation: This is the process of bargaining, reviewing and analysis used by buyer and seller to reach an acceptable agreement or compromise. It includes all aspects of the business transaction such as price, delivery, terms and condition of service.

Ø  Purchase order: This is the document used by purchasing officer to request the supply of certain items from the suppliers.

Ø  Negotiator: This is person authoritatively appointed to represent a company for the act of negotiation, he poses the basic skills required to achieve a high level of profitability for the organization.

Ø  Techniques: Simply this refers to skills and knowledge employed in doing things expertly by a person to best discharge a job or function.

Ø  Price: This refers to the value of a commodity or service measured in terms of the standard monetary unit. Price enables the appraisal of the relative value offered by each supplier.

Ø Competitive bidding: This is used for standard item, the quotation will be requested from the vendor and this is known as regular competitive bidding. The order type of competitive bidding is two steps bidding which is used for non-standard materials? The buyer request from prospective vendor to furnish the technical details about the product concerned. After evaluation the successful vendor will be invited for quotation.

Ø Sourcing: This involves the identification or development of suitable awareness for the supply of materials and services.

Ø Specification: This is the document which prescribes in detail the requirement to which the supplies or services must conform. In terms of its analysis, performance or other relevant characteristics.

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