Factors that influence strategic sourcing decisions in nbc plc

Project Abstract

Strategic sourcing decisions play a critical role in the success and competitiveness of organizations. This research aims to investigate the factors that influence strategic sourcing decisions in NBC Plc, a leading company in the consumer goods industry. The study employs a mixed-methods approach, incorporating both quantitative and qualitative data collection techniques to provide a comprehensive understanding of the subject matter. The research focuses on several key factors that impact strategic sourcing decisions within NBC Plc. These factors include cost considerations, supplier capabilities, risk management, sustainability practices, and alignment with organizational objectives. By examining how these factors interplay in the decision-making process, the study seeks to uncover the complex dynamics that shape sourcing strategies in the company. A thorough review of existing literature on strategic sourcing, supply chain management, and procurement practices forms the theoretical foundation of the research. Drawing upon established frameworks and models, the study seeks to contextualize the factors influencing strategic sourcing decisions within the specific organizational context of NBC Plc. By synthesizing theoretical insights with empirical findings, the research aims to generate practical recommendations for enhancing strategic sourcing practices in the company. The research methodology involves a combination of surveys, interviews, and document analysis. Surveys will be administered to procurement professionals and key stakeholders within NBC Plc to gather quantitative data on their perceptions of the factors influencing strategic sourcing decisions. In-depth interviews will complement survey findings by providing rich qualitative insights into the decision-making processes and challenges faced by sourcing professionals in the company. Document analysis of procurement policies, supplier contracts, and other relevant materials will further enrich the data collected. The findings of the research are expected to shed light on the complex interplay of factors that drive strategic sourcing decisions in NBC Plc. By identifying both internal and external influences on the sourcing process, the study aims to provide valuable insights for improving decision-making practices and enhancing overall supply chain performance. The practical implications of the research extend to informing strategic planning, supplier selection, risk mitigation strategies, and sustainability initiatives within the organization. Ultimately, the research contributes to the body of knowledge on strategic sourcing and offers actionable recommendations for optimizing procurement practices in the consumer goods industry.

Project Overview

<p> <b></b></p><p><b><b>INTRODUCTION</b></b></p><p><b><b></b></b></p><b><b><p><b>1.1 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br></b><b>Background<br>to the Study</b></p><p><b></b></p><b><p>Purchasing<br>departments are increasingly seen as highly valued strategic contributors to<br>the organisation because of their ability to impact product design and quality,<br>cost of goods sold, cycle time, and hence, the firm’s reputation,<br>profitability, and competitive position (Wisner, Tan &amp; Leong, 2008).</p><p>Searching<br>for the right sources of supply is often seen as one of the core responsibility<br>of procurement and supply managers. Because this purchasing function poses a<br>great deal of risk and reward if effectively executed, it represents one of the<br>most challenging of all procurement tasks.</p><p>Over<br>the past decades, a lot of factors have combined to drive the organisations to<br>approach sourcing more strategically. These factors include changing global<br>economic climate, increasing number of global competitors, demands by customers<br>and government for organisations to become more environmentally focused, rising<br>cost of materials and energy, and the desire to deliver new products quickly<br>and cheaply.</p><p>With<br>these trends, the recognition that tactical sourcing will not succeed in<br>developing a supply base that will yield the benefits of strategic sourcing<br>became clear. Strategic sourcing takes the concept of sourcing a step further<br>to go beyond just source identification and selection to include managing the<br>firm’s external resources in ways that support the long-term goals of the firm.<br>Its scope includes the make-or-buy decision, supplier identification and<br>selection, managing and improving supplier relationships and capabilities,<br>monitoring and rewarding supplier performance, and developing supplier tiers.</p><p>Effective<br>strategic sourcing decisions will only be made when all relevant factors have<br>been considered and weighed against the risks and opportunities which apply.</p><p>It<br>would be possible that the most important purchasing decisions is not only<br>concerned with selecting the right sources of supply; but also developing and<br>managing a collaborative relationship that is beneficial to both parties in the<br>long run.</p><p>If<br>the correct source decision is made in a particular instance, then the buying<br>company’s need should be met perfectly. In such circumstances, it would receive<br>the required goods and services at all times. However, the very simplicity of<br>this statement conceals the complexity of source decision making, for in<br>arriving at the right decision, many factors have to be considered.</p><p>Strategic<br>sourcing thus involves much more than simply picking a supplier or contractor<br>for each requirement in isolation. It involves continuing collaborative<br>relationships both with preferred and potential sources. It involves decisions<br>on how to allocate the available business, and what terms to do business on.<br>Development of collaborative relationships and eventually world-class supply<br>management requires concerted strategic planning.</p><p>Strategic<br>sourcing deals with planning, designing, and building a reliable and<br>competitive supply base, determining the strategy for procurement, defining<br>pricing strategies and supply chain requirements. The strategy involves<br>integrating of its objectives in line with or conforming to the objectives of<br>stakeholders in operations, finance, marketing and distribution. Operating at<br>this level requires procurement, manufacturing, and technology groups to work<br>together to establish the best possible supply network, and to develop optimal<br>supplier capabilities.</p><p>Strategic<br>sourcing decisions are not just made based on the procurement managers’ whims<br>and caprices. They represent astute business judgment and thus involve the<br>consideration of several factors.</p><p>Profitability<br>in simple terms is the ability to make profit. Profit is a function of cost<br>minimization. Finding the best suppliers means that an organisation will be<br>able to get greater value, lower prices, supplier involvement in production<br>efficiency, high quality materials, discounts, and better relationships. All<br>combining to reduce the costs of doing business and add to the profitability of<br>the organization. Also, by developing strategies that will make the<br>organization have fewer suppliers, purchasing costs can be reduced, saving some<br>few coins for the profit.</p><p>Organisations<br>that seek to acquire quality materials and services at reasonable costs or<br>produce quality products at affordable price must first develop strategies<br>that will help find credible sources of supply of materials, equipment and<br>services, and build strong sustainable relationships. Sourcing is a very<br>important part of procurement manager’s job. Most supply professionals espouse<br>the idea that the entire procurement function is string around sourcing.</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; </p><p>The<br>risks of buying the wrong items, services or from the wrong supplier can have<br>major impacts and ripple throughout a business. Consequences can range from<br>late delivery to total service failure liability and can even affect market<br>competitiveness. In addition, if the selected suppliers cannot provide<br>opportunities to reduce costs, improve and upgrade product/service offerings or<br>provide other market-facing advantages, then an organization can quickly find<br>itself losing market share. To help solve this dilemma, businesses are<br>beginning to develop sourcing strategies that can create supply chain solutions<br>offering insights into the optimum approach to buying. Often known as strategic<br>sourcing, it begins the critical process and lays the foundation for creating<br>value through the purchasing process.</p><p><b>1.2 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br></b><b>Statement of<br>the Problem</b></p><p><b></b></p><b><p>For its<br>proper performance sourcing requires supply market research. It has however<br>been observed that a lot of organizations overlook the need to carry out market<br>research on supply, and if they do, it is not extensive enough to get a true<br>picture of the supply market structure and dynamics, identify potential and<br>actual sources, investigates their capabilities, examine market trends and<br>long-term supply prospects, and generally keep an ear to the ground. Successful<br>sourcing strategy requires sound market information. For lack of such<br>information, several failures have been recorded in terms of implementing the<br>right strategy.</p><p>Many<br>organizations fail to develop the right objective criteria which would help in<br>proper assessment of potential suppliers before final selection. Designing the<br>right set of parameters will help to properly evaluate suppliers and create a<br>basis for sourcing decision. When these criteria are not developed, these organizations<br>will eventually select suppliers who may not deliver the right materials.</p><p>Companies<br>also fail to design their sourcing strategies in line with the objectives of<br>the organization. Supply managers must not lose sight of the corporate and<br>functional objectives their decisions can help to achieve. This important<br>aspect is in some cases not considered when strategizing, thus resulting in a<br>implementation of sourcing strategies that are suboptimal.</p><p>Purchasing<br>managers are often not given the autonomy to make sourcing strategies and<br>decisions in some organizations. It is observed that top management who are<br>rookies in the field, often interfere with the sourcing process because they<br>have selfish interests. Such practices are capable of reducing competition as<br>the contract may not be awarded to the best supplier.</p><p>Another<br>problem is the absence of cordial relationship between buyers and suppliers.<br>Many companies favour transactional instead of collaborative relationships with<br>their vendors. This will only result in short term benefits for both parties as<br>there won’t be free exchange of information, lack of trust, and one party<br>seeking to win at the expense of the other.</p><p><b>1.3 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br></b><b>Objectives<br>of the study </b></p><p><b></b></p><b><p><b>&nbsp;</b></p><p><b></b></p><b><p>The<br>general objective of the study is to measure the extent to which strategic<br>sourcing affects profitability in listed NBC Plc in Nigeria. Specific<br>objectives of the study are:</p><p>i. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br>To examine the factors that influence strategic<br>sourcing decisions in NBC Plc</p><p>ii. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br>To identify the performance criteria used for<br>evaluating and selecting capable suppliers by NBC Plc</p><p>iii. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br>To understand the strategies for improving supplier<br>relationships in NBC Plc</p><p>iv. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br>To establish the relationship between strategic<br>sourcing and profitability of NBC Plc</p><p><b>1.4 &nbsp; &nbsp; &nbsp; Scope<br>of the study</b></p><p><b></b></p><b><p>The<br>research work centers around the strategic sourcing and its impact on<br>profitability. The study is conducted among selected NBC Plc in Kaduna. The<br>researcher restricts the work on selected units of these firms whose operations<br>are relevant to the subject under study. <br>These departments include procurement, finance, stores and production<br>departments. The content scope of the study covers relevant areas such as: The<br>conceptual framework of strategic sourcing; the strategic sourcing process;<br>sources of supplier information; supply evaluation; supplier selection;<br>sourcing strategies; supply base rationalization and optimization;<br>collaborative procurement and supply alliances; and Profitability.</p><p><b>1.5 &nbsp; &nbsp; &nbsp; Significance<br>of the study</b></p><p><b></b></p><b><p><b>&nbsp;</b></p><p><b></b></p><b><p>The<br>study is expected to benefit the following groups and individuals. The study<br>will assist organizations whether manufacturing and service to understand,<br>appreciate and make decisions as regards sourcing and supplier selection. The study will reveal concepts that will be<br>helpful for organization in their sourcing polices by revealing the sources of<br>information of supply the various approaches to sourcing and sourcing polices,<br>the factors to be considered in making<br>sourcing decisions etc. The study will also identify the problems associated<br>with sourcing and proper solutions to them at the end.</p><p>For<br>students in Purchasing and supply and other related discipline, this study will<br>come in handy for them in their research works and will help broaden the existing<br>knowledge base for them. The project work can double as both a study material<br>and a foundation for further research.</p><p>Vendors<br>are also not left behind as this study will enable them understand the<br>importance that institutional, industrial or individual buyers attach to source<br>selection. Suppliers will also understand the criteria used to rate them by<br>these groups of buyers and how they can improve to meet the requirements of<br>buyers.</p><p>For<br>future researchers in business, management, and financial studies and other<br>related areas of study, this work can be used as a reference material for their<br>research. Other individuals who are not students but are in one way or the<br>other involved in research, will also find this work useful.</p><p>This<br>study is also a requirement for the partial fulfillment for the award of Post<br>Graduate Diploma in Procurement and Supply Chain Management from Kaduna State<br>University.</p><p><b>1.6 &nbsp; &nbsp; &nbsp; Research<br>Questions</b></p><p><b></b></p><b><p>For<br>the purpose of guiding the researcher into finding workable solutions to problems identified some questions have been developed, answers<br>to which will form <br>the basis for solving the<br>problems.</p><p>1 &nbsp; &nbsp; &nbsp; <br>What are the factors that influence strategic sourcing<br>decisions in the selected NBC Plc?</p><p>2 &nbsp; &nbsp; &nbsp; <br>What are the performance criteria used for evaluating<br>and selecting capable suppliers by the selected NBC Plc?</p><p>3 &nbsp; &nbsp; &nbsp; <br>What are the strategies for improving supplier<br>relationships in selected NBC Plc?</p><p>4 &nbsp; &nbsp; &nbsp; <br>What is relationship between strategic sourcing and<br>profitability of NBC Plc?</p></b></b></b></b></b></b></b></b></b></b> <br><p></p>