The Impact of Specification on Cost of Buying Material in Public Organization

The impact of specification on cost of buying material in public organization. The organization (PHCN) central store in Kaduna metropolis can possibly develop a mode that will not only improve the standard but also ensure its proper up keep. It will also enlighten the researcher on the problem facing the store in terms of specification of buying material, if at all there is any cost of buying material. The researcher can proved valuable suggestions and advice on problem they are facing in the store department in terms of specifying materials.

The content of specification will vary according to whether the specification is written from the standpoint of the user designer, manufacturer or seller. The specification will also vary according to the materials or items concerned. For a simpler item the specification may be a brief description whereas in the case of complex assembly it will be comprehensive documents, perhaps running to so many pages.

A specification for a component may also be stated with the component it is intended it performed (functions and what a product or service should achieve under a given condition cost of buying material).

This will also help the organization to obtain the benefit as adaptation of recommended inventory control techniques which will help to improve service and profit margin (level) of the organization. The recommended techniques will also enable the organization concern to perform effectively and efficiently in their services.

It will also increase profitability and good reputation as they will always meet the need of the district and zonal store, proper specification can contribute significantly is the firm’s profitability. It is also necessary to note that “a specification does not automatically becomes a standardization is implacable without clear and precise edifications and form later vital or the cost of buying material.

1.2     Statement of the Problem

A major problem that most organization are facing today is because competent people are lacking in the organization or inexperience researchers who will describe what is needed in simple and clear language to the purchasing manager or supplier as to know proper means of buying materials is not in order. If the descriptions are not made in a very simple and clear language, it can lead to adverse effect on materials specified to the supplier by the buyer because of inability to identify what is needed by the users. The specification drawn by buyer should be flexible rather than rigidity which will lead to material failure from the supplier and result to production stoppage because without raw material nothing can be processed. When there is no input to determine output it will lead to machine idle and employed time waste of investing capital at the end of the day. However, the problems mentioned above must looked into before the material specified becomes a standard. The purchasing manager gives report on research to the production manager or department, and also purchasing manager or department receives instruction from the production department above the needs this shows that purchasing department cannot inference specification on time.

1.3     Purpose (Objectives) of the Study

The primary objectives and purpose of purchasing department is to contribute to the profitability of an undertaking by obtaining the best quality product or services in term of fitness for uses at bearest minimum cost.

This project is specifically designed to:

i)                   To assess the criteria for specifying materials used by the organization.

ii)                To explain the source of specification used by the organization to obtained materials.

iii)              To identify the problems of specification to the buying organization.

iv)              To explain the importance of specification in the acquisition of materials.

1.4     Significance of the Study

This project research study will enable the researcher to gain more knowledge of specification on cost of buying materials and determine the actual material required by the organization in ensuring the total materials needed to minimize cost of acquiring the particular materials.

The study will help organization in terms of dealing with materials to specifying the right materials needed by the organization the purpose and fitness and the performance of the material when all these are in place it will be of great benefit to the organizations that are innovative in nature.

The study will enlighten the elements involved in cost determination on materials. If a clear picture of specification is given it will avoid lapses that will affect the materials and also reduce cost of acquiring that materials.

1.5     Scope of the Study

This research work will cover PHCN Kaduna central store which will deal with the types of specification been used by the organization. This research work is quiet enormous, some of the problems encountered during the course of study include:

Time Limit: To get accurate and up-to-date data, it is important to note that time is of importance. Time available for the research is not adequately enough because as a student, the researcher has to face project work and at the same time battle with class work as well as outside classroom assignment.

Another problem is the non-challant attitude of the staff and the material management officer of PHCN because of the fact that they view it as a fault finding exercise this also brought about by the fear of linking management secret to the outsider.

1.6     Research Questions

i)                   What are the criteria for the specification of materials in organizational concerned?

ii)                What are the source of specification that an organization can use to obtain materials?

iii)              What are the problems of specification to the buying organization?

iv)              What function does specification play in acquiring materials for used?

1.7     Historical Background of PHCN

In September, 1969 the federal military government decided to merge the Electricity Corporation of Nigeria (ECN) and Niger Dams Authority (NDA) into a single body to avoid duplication for resource in the two organizations.

A year later, a Canadian firm of Consultants (Shansment Ltd) was appointed to look into the technical detail of the merger. The report was submitted in 1974. Consequently, a decree merging the two organizations in the National Electric Power Authority (NEPA) was promulgated with effect from April 1977.

This decree stipulated that the authority (NEPA) is so developed in efficient coordinated and economical system of electricity for all parts of the federation.

The national good connected the facilities resulting from the merger. The good interconnection includes generating at Kainji Lagos (Ijora) Ughelli (Delta). A parm and Oji River. In addition, there were diesel generator installations at Ibadan, Benien Warm Aba, Enugu, Zaria, Kaduna, Abeokuta and Oshogbo.

Further, diesel generation supplied systems in population centre isolated from the grid include Gusau, Sokoto, Bauchi, Yola, Maiduguri, Potiskum and Mubi. The grid was infact two major sub-systems since yet affected. A 330k transmission was in operation in the western system between Kainji and Lagos.

In 1972 NEPA could only boast of a peak load of 339 MW. In Order to obtain guidance on the optimum pattern or system development, NEPA commissioned to studies in 1973 from motor Colombus resulting engineers to Switzerland the first examined load development in Lagos and its environ and made a recommendations for the long term development to the transmission and distribution system for Lagos with about 50% of total load.

The second study converted the long range total system development including recommendations on future generations sources.

Since 1972, NEPA has invested on transmission and distribution equipment. Effort has been made to interconnect all the major power stations to form a national grid and to transmit electrical energy to load center. NEPA have always striven to meet its distribution and marketing of stable electricity to its customer against all odds.

The authority basic responsibility is to generate, transmit and distribute electricity throughout the federation of Nigeria.

The corporation’s management reports to the federal government through the Board of Directors which in turn report to the Minister of Mines and Power the management of the authority is headed by a Managing Director/Chief Executive. The MD/CE is assisted by four executive director for Generation, Transmission and Engineer, Distribution and Marketing, Finance and Accounts and Corporate Service. The general managers head the zone sector and sub-sectors. These major changes occurred in 1991 and the authority moved towards commercialization and recentralization. Presently NEPA is undergoing reform by changing the name to Power Holding Company of Nigeria (PHCN) in order for people to have steady power supply and all part of the country will be connecting to nation grid before 2010 and also the federal government has decided to privatize the sector. On the other hand, the federal government is seriously investing huge money on Power Holding Company of Nigeria (PHCN) and they about to privatize to ensure effectiveness and efficiency of running of the sector and also Power Holding Company of Nigeria (PHCN) is doing its best to ensure that caliber of staff are employed and train into various area in the organization in order to overcome present and future challenges in the organization and also to contribute towards increasing standard of living and economic situation of the country central store.

The Power Holding Company of Nigeria Central Store Kaduna was established in 1976 into the sections made up of the following:

i)                   Administration

ii)                Receipt and packaging

iii)              Issue and storage

iv)              Account

v)                Stock Control

At inception there were about twenty (20) staffs but since then, there has been an increased manpower sections namely inspection and audit section. The principal objectives of establishing a central store of the Kaduna state. To control and manage all material issues to fifteen (15) state at the Northern state. Since Power Holding Company of Nigeria has three central stores within the country which made up central store. Omodi issuing materials to western states of the country and central store Port-Harcourt for eastern establish of the country.

Organizational Chart Power Holding Company of Nigeria Central Store Kaduna

1.8     Definition of Terms

Specification: This is a means of oral or written communication as to the requirement or intension of one party is another in relation to materials, products, service procure or test.

Material: These are component, spare parts, raw materials that are kept in store house for use.

Products: This is anything that can be offered to a market for attention acquisition use or consumption that might satisfy a need, it include physical objective and services.

Service: The action of serving or a period of employment with an organization.

Description: The means in which the buyer used to convey deal, accurate picture of the item required to the seller.

Sample: Common practice in market dealing of Specification used buyers and suppliers.

Inspection: Careful examining of incoming consignment to ensure they are right quality and quantity.

Simplification: Eliminating of all labour and materials that are absolutely essential, it simply means the “cutting down” process.

Standardization: Reducing the number of varieties of stock to a controlled workable minimum.

Rationalization: Eliminating waste and inefficiency by some sort of collaborative action from firms.

Quality: Anything that conforms with one’s predetermined standard.

Quality Control: A system of programming and coordinating the efforts of the various groups in an organization to maintain or improve quality, at an economical level which allows for customers satisfaction.

Raw Material: Purchased items received which have not entered the production process.

Partly Processed: Raw materials that have entered the manufacturing process and are being worked on or waiting to be worked on.

Finished Product: Products ready to be sold or disposed as completed items, after undergoing all production processes.

Purchasing: This means the process of obtaining the right materials or service of the right quality and the right quantity at the right time, at the right price, from the right source of supply to be delivered that the right place.

Brand Name: This is what a component carried by implication, the warranty as the market that it attains a certain standard.

Component: A part of a large whole or being part of a large whole.

Function: An activity that is natural to or the purpose of person or thing.

Fit: Suitable quality or types to meet the required purpose, be able to occupied a particular position

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