CHAPTER I: Introduction
1.1 Background of the Study
One of the fundamental responsibilities of procurement function in an
organization is source selection. It deals with the entire process of
how prospective suppliers are being surveyed, evaluated and determine
policies relating to those who can most suitably meet the requirement of
the organization, before they are being considered for a buyer and
supplier relationship. However, this assessment is base on a number of
essential instrument which price is one of the such.
Price in general term refers to the amount offered for the purchase
of an item. It can also be value pay for obtaining something, it is
quite crucial to purchasing as price play vital role on the product
manufacturing and its sales value.
Negotiation among other relevant tools in sourcing selection function
that purchasing employ in making an organization to actualize their
goals to arrive at a most judgment on which suppliers are to be
selected.
Negotiation usually requires that the buyer have a face discussion
with the suppliers in order to arrive at a common understanding on
essence of a purchase/sale contact among which is price. Infact, price
determination is the main focus of negotiation.
In negotiation, to determine purchase price buyers and supplier
usually discuss such element, as cost of production overhead market
conditions. Speeds needs of the buyer and supplier eventually arrive at a
mutual price, that both deliver the best value of item and at reduced
cost to the buyer as well as favours the supplier fair interest to
ensure a continued supplier-buyer rapport.
This study set out to investigate some related problems having to do
with purchasing a high item cost also looks at how negotiation as a tool
for effective material pricing can be deployed to determine the right
price of supply.
1.2 Statement of Problem
Most problems associated with negotiation especially when the issues
of price is the pivot, buyers tend to overlook the variables that
determine the price itself. This most time leads to arriving at a very
high price for the purchase or contract.
Moreso, lack of proper planning before approaching the negotiation
table is very high fundamental and essential for any successful
negotiation. The other negotiation exercise such as source of
information and idea delivery time, quality of suppliers, fair and
reasonable deal. Hence, since negotiation comes before any purchase or
contract, what will happen to purchase without negotiation on
specification and at multiple effect on terms of payment etc.
Also the negotiation must not over power by one part or one
principles, dirty trick all they lead to failure in the objective. One
can derive benefit as solving problem source for information learn some
experience, quality fair and reasonable price, control and relationship
management.
1.3 Objectives of the Study
The objective of conducting this research among others are as follows:
i) To identify objective of negotiation.
ii) To identify the approaches of negotiation.
iii) To identify the requirement for negotiation.
iv) To determine the impact of negotiation on material pricing.
1.4 Research Questions
In dealing with the research question, the following question will be answered or addressed:
i) What are the objectives of negotiation?
ii) What are the approaches of negotiation?
iii) What are the requirements for successful negotiation?
iv) What are the impact of negotiation on material pricing?
1.5 Significance of the Study
The study will be of benefit to the organization which the study is
being carried an investigation, and also it will serve as guide for
relevant organization which have similar departments or problems, also
it will serve as reference to the similar topic and serve as reference
for further studies.
Also, it will be beneficent to research in future, the organization
also broaden the knowledge of the researcher; it will also assist the
research especially in partial fulfillment of the requirements for the
award of Higher National Diploma in Purchasing and Supply, Kaduna
Polytechnic.
1.6 Scope of the Study
The research work will cover carious department with the store
function and look at the process at which negotiation and its effect on
materials pricing in Peugeot Automobile Nigeria Ltd. Furthermore, the
research cover various departments with the total population of 65 and
with the sample size of 30-49 staff. It will be carried out within
department of procurement, administrative production, quality control
and material inspection unit as well as close department.
Also, it will look at requirement for successful negotiation and the
method employed in the conduct of negotiation also it will cover from
2010 – 2012 how they conduct their negotiation and we will look into
quality control.
1.7 Definition of Terms
Negotiation: This is a process of where people come together to reach an agreement.
Procurement: This term is mostly used in the
military organization as well as the public set up mean purchasing, it
is activity which involve logistic, buying, transportation and
distribution
Lead Time: This is the period between placing an order to its fulfillment or delivery.
Expediting: This is a continual progressing orders with suppliers to make sure that goods are received on time.
Inspection: This is a process whereby incoming items are examined so as to ensure that the quality and quantity conform with specification.
Quality: This is the standard feature of an item that make it different from item of the same characteristics.
Effective: This is the ability of producing a sound and successful result.
Purchasing: This is the process of buying things or item especially for a company.
Price: This is the amount of money to be paid for obtaining an item or items.
Suppliers: A supplier can be individual or company whose sole business is to supply items for people or companies.
Specification: This is the detailed description of how an item is or should be.