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Purchasing Research As A Tool For Profitability In The Service Industry
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Organizations uses many types of resources to function. One of the most valuable, often the least understood, is their knowledge base. Management is unable to take formed decisions without knowledge and the quality of that organization knowledge, skills, resides primarily in employees but can also be collected in data bases, reports patents, plans, budgets, memoranda and a variety of other documents. The knowledge base covers all aspects of the organizations activities products, technology, human resources, finance, sales and purchasing and is a wasting asset requiring constant dating, improvement and extension to keep abreast with changes in the operational environment.
Nowhere is the need for detailed, accurate and up to date knowledge more evident than in the purchasing function. The markets have two characteristics, which distinguished them from the other environments in which companies operate. They are:
In variable dynamic and are tending to become more so in response to increasing pace of technical development, competitive pressure and a continual uplift n customers’ expectations.
Change is caused by a wide diversity of factors most of which are beyond the control of any single supplier.
Purchasing therefore operate in an inherently unstable environment and it is all too easy for companies to lose touch with conditions in the market they service.
Furthermore, in the quest for growth or even to defend existing market positions, the problem tends to be exacerbated by the fact that companies continually need to do something new. They develop new strategies launch new product, target new market and initiate new service packages – all of which push them into increasingly unfamiliar purchasing territory.
Purchasing knowledge is created from a number of inputs experience and expertise are critical, as are experimentation and analysis, but the key dynamic ingredient purchasing information derived from sources within the market place itself, notably customers, competitors and distributors.
Purchasing research is the purchasing information. It is defined by the American purchasing association as the systematic gathering, recording and analyzing of about problems relating to purchasing of goods and services. Purchasing research can also be defined Kolter (20003:129) as the systematic design, collection, analysis and reporting of data and findings relevant to a specific purchasing situation facing the company.
Purchasing research is very important to any organization or company because it is through it that we know the feelings, wants, needs, perceptions and preference of customers/consumers knowing that consumer/customer is the focal point of purchasing and every organization or company will always want to satisfy their customers/clients in other to continue in the business. It is a link between the customer and the general public to the individual, organization of the business firm and also identify and define purchasing opportunities, trends, threats and measurements.
Therefore, this study try to find out how purchasing research is carried out in the service industry – people always believe that purchasing research is more suitable in product/goods offering company and it is not well practice in the service industry due to its certain characteristics.
Service can be defined as any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership anything. (Kotter 2003) services have four major characteristics that greatly affect the design of purchasing programs: intangibility, inseparability, variability and perishability. Services also vary as to whether they are equipment based or people based. It requires the client’s presence and differs as to whether they meet a personal need or business need. Services provided differ in their objectives (i.e. profit or non profit) and ownership (as to private or public).
These have made people believe that purchasing research in the service industry – insurance company, has resulted from the growth of purchasing management and purchasing concept. The basic purpose of applying purchasing research is to reduce purchasing management risks and consequently embrace higher purchasing efficiency. Purchasing research is also used in situation of disagreement or uncertainty amongst the purchasing decision or where the available purchasing research techniques will increase the amount or reliability of purchasing information decision in service industry.
CHAPTER ONE -- [Total Page(s) 4]
Page 1 of 4
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