ADMAS UNIVERSITY

SCHOOL OF POSTGRADUATE
DEPARTMENT OF MASTER BUSINESS ADMINISTRATION (MBA)

ASSESSMENT OF PURCHASING PRACTICE: A CASE OF BANK OF

ABYSSINIA

A Thesis Submitted to Department of Master of Business Administration

(MBA), School of Graduate Studies
Admas University

In Partial Fulfilment for the Requirements of MBA Degree

BY
Taye Gulilat

Advisor: Geleta Merera (PhD)

JULY 2020

ADDIS ABABA, ETHIOPIA

 Admas University
ASSESSMENT OF PURCHASING PRACTICE: A CASE OF BANK OF
ABYSSINIA

ASSURANCE SHEET

The undersigned agree to accept responsibility for the scientific, ethical and technical conduct
of the research.

Candidate:

_____________________________ Signature _______________ Date _________

(Name and Signature of candidate)

Advisor:

_____________________________ Signature _______________ Date _________

(Name and Signature of Advisor)

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 Declaration
The student researcher hereby declare that the thesis entitled ‘Assessment of Purchasing
Practice a case of Bank of Abyssinia’ has been carried out by me under the supervision of
Geleta Merera (PhD) during the year 2020 in master of business administration (MBA). The
student researcher further declares this work has not been submitted to any other University
or institution for the award of any degree. All quotations and their sources are specifically
acknowledged by means of references.

Declared by: Taye Gulilat

Signature

July, 2020
Addis Ababa, Ethiopia

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 Acknowledgements
I would like to express heartiest gratitude to my advisor Dr. Geleta Merera, for his valuable
suggestions and ever friendly and loving approach during the study. His enlightened views
and comments as well as his assistance in terms of materials have made great contribution to
the completion of the present study

I would also like to acknowledge my parents, my brother and my sister for their
encouragement, moral support, personal attention and care

I cannot forget friends who went through hard times together and those staffs’ members who
are working at Abyssinia Bank for their cooperation and willingness to involve in the study.
Without their voluntary involvement, this work would not have been realized in this manner.
My discussion with them has enabled me to understand the research problem from different
perspectives, which were of great help for the researcher to frame the study the way presented
in this research report.

Finally I would like to thank all that have indirectly helped me to bring out this dissertation.
Above all, I bow my head before ‘The God Almighty’ who blessed with health and
confidence to undertake and complete the work successfully.

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 Contents
Declaration............................................................................................................................................ii
Acknowledgements..............................................................................................................................iii
CHAPTER ONE........................................................................................................................................1
1 INTRODUCTION..................................................................................................................................1
1.1Back ground of the study..............................................................................................................1
1.2 Background of the organization...................................................................................................3
1.3 Statement of the problem...........................................................................................................3
1.4 Research Question.......................................................................................................................5
1.5 Objective of the study..................................................................................................................5
1.5.1 General Objective.................................................................................................................5
1.5.2 Specific Objectives................................................................................................................5
1.6 Significance of the Study..............................................................................................................5
1.7 Scope of the study.......................................................................................................................6
1.8 Limitation of the study:................................................................................................................6
1.9 Organization of the study:...........................................................................................................6
1.10 Definitions of Key Concepts & Terms:........................................................................................6
CHAPTER TWO.......................................................................................................................................7
2 REVIEW OF RELATED LITERATURE......................................................................................................7
2.1 Definition of Purchasing...............................................................................................................7
2.2 Role of purchasing in business.....................................................................................................8
2.3 Tasks of purchasing......................................................................................................................8
2.4 Objectives of Purchasing..............................................................................................................9
2.4.1 General Managerial Level Objectives....................................................................................9
2.4.2 FUNCTIONAL LEVEL OBJECTIVES.........................................................................................10
2.4.3 DETAIL LEVEL OBJECTIVES...................................................................................................11
2.5 Strategy, policy, guidelines and procedures..............................................................................11
2.6 The staff, changing roles and ongoing education......................................................................12
2.7 Communication is key................................................................................................................14
2.8 Internal marketing of purchasing...............................................................................................15
2.9 Factors Affecting Procurement..................................................................................................15
2.10 Procurement Best Practices.....................................................................................................19
2.11 Review of Empirical Studies.....................................................................................................22
2.12 Research Gap Analysis.............................................................................................................24
2.13 Conceptual Framework............................................................................................................25
CHAPTER THREE..................................................................................................................................26
3 RESEARCH DESIGN AND METHODOLOGY.........................................................................................26

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 3.1 Research design.........................................................................................................................26
3.2 Sampling Techniques and Sample size.......................................................................................26
3.3 Instruments of Data Collection..................................................................................................27
3.3.1 Questionnaire.....................................................................................................................27
3.3.2 Interviews...........................................................................................................................27
3.4 Procedure of Data Collection.....................................................................................................28
3.5 Methods of Data Analysis..........................................................................................................28
CHAPTER FOUR....................................................................................................................................29
4 Data analysis and Interpretation .....................................................................................................29
4.1 Overview....................................................................................................................................29
4.2 Demographic characteristics of the respondents......................................................................29
4.3 Descriptive Analysis of Purchasing Process and Practices of the Organization..........................33
4.4 Challenges related with purchasing performance.....................................................................40
4.5 BOA purchasing practices in terms of 5R’s purchasing principle...............................................45
CHAPTER FIVE......................................................................................................................................48
5 SUMMERY, CONCLUSIONS AND RECOMMENDATION......................................................................48
5.1 Introduction...............................................................................................................................48
5.2 Summary....................................................................................................................................48
5.3 Conclusion.................................................................................................................................49
5.4 Recommendations.....................................................................................................................51
References...........................................................................................................................................53
APPENDICES...........................................................................................................................................x

v|Page
LIST OF FIGURES

Figure 4.1 Genders of Respondents ----------------------------------------------------------------------------30

Figure 4.2 Age of Respondents -------------------------------------------------------------------------------30

Figure 4.3 Education levels of Respondents -----------------------------------------------------------------31

Figure 4.4 Department of Respondents -----------------------------------------------------------------------31

Figure 4.5 Positions of Respondents --------------------------------------------------------------------------32

Figure 4.5 Work experiences of Respondents-----------------------------------------------------------------32

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LIST OF TABLES

Figure 2.1 conceptual Framework of the Study Based on the Review of Literature---------------------25

Table 4.1 Purchase requisition ---------------------------------------------------------------------------------33

Table 4.2 Planned Purchase request ---------------------------------------------------------------------------34

Table 4.3 Unexpected Purchase request------------------------------------------------------------------------34

Table 4.4 Frequently requested items --------------------------------------------------------------------------35

Table 4.5 Average time it takes you to receive an item you requested ------------------------------------35

Table 4.6 takes too long to receive the items you requested ------------------------------------------------36

Table 4.7 Reasons the time to receive the requested item is too long -------------------------------------37

Table 4.8 Presence of purchasing items different from user's request ------------------------------------37

Table 4.9 Reason for procurement unit to purchases items which are different from user's request--38

Table 4.10 what are the major challenges related with purchasing performance -------------------------40

Table 4.11 Respondents’ replay on 5R purchase principle -------------------------------------------------45

Table 4.12 Respondents’ replay on 5R purchase principle regards to improvement-----------46

LIST OF ACRONYMS

BOA: Bank of Abyssinia

ICT: Information Communication Technology

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 ABSTRACT

The main objective of the study is to find out the purchasing procedures and practices of the
organization, to assess the major challenges related with purchasing performance in BOA and to
assess how the 5R’s of purchasing principle are practiced in BOA. This study used analysis is
described using descriptive statistics to address the research questions and meet its objectives.
Descriptive statistics were employed including frequencies and measures of central tendencies
were employed. The researcher used on-probabilistic sampling technique to conduct purposeful
sampling. The demographic characteristics of the respondents were formed from Head office
departments, district office and administration and logistic office workers whose total numbers
was 57. The selection was made using stratified sampling technique followed by non-random
sampling method. The sample size was 57 but the responded number was 53. Primary data was
collected online Google form by questionnaires to the respondents. The collected data was
analyzed from www.googleform.com and exported and edited in excel form for as a summary
results. The data was represented in form of figures and tables. The finding of the study were
that Practice of preparing annual purchasing plan among users of the bank was found very
poor; purchasing unit staffs competency indicates inadequacy of knowledge and skills,
unplanned and unclear specification of items on the purchase request put additional burden and
delay to the procurement process. Based on the findings, the following recommendations were
that relevant staffs to procurement be involved in the process of plan preparation, the company
would benefit if the management support the procurement department by allocating more
resources and encourage trainings to improve the skills and knowledge of the purchasing staff,
management should also device mechanism to motivate qualified staffs, identify frequently
requested items and handle separately, develop standard specification for some items.

Key words:
Purchasing, procurement, right quality, right quantity, right price, right time, right supplier

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 CHAPTER ONE
1 INTRODUCTION

1.1 Back ground of the study

Usually Purchasing is defined as obtaining the right quality material, at the right time, in the right
quantity, from the right source, at the right place (Lysons and Gillingham 2003; Baily et al.
1998). Van Weele (2005) also defined purchasing as the management of the company’s external
supply of goods, services, capabilities necessary for running, maintaining and managing the
company’s primary and support activities is secured at the most favourable conditions. Although,
there is no agreed definition of purchasing from literature, these definitions indicate that there is
need for supply requiring to determination of specifications, supply continuity by choosing a
suitable supplier, efficient buying (worth the value), and relationship to ensure supply at the right
time to manage inventory and monitor efficiency of suppliers thereby defining the purchasing
function.

Many authors in the literature have identified the developments in purchasing. Lysons and
Gillingham 2003 identified that purchasing passes through stages from passive (no strategic
direction and supplier selection based on price and availability), independent (purchasing having
functional efficiency with no regards to firm’s competitive strategy), supportive (supports the
corporate strategy with regards to the competitive objective) to integrative (full integration of
purchasing strategy into the firm’s corporate strategy) stages to become a competitive weapon
for an organisation. Van Weele (2005) also identified that need for reduced costs, product
standardisation, innovation, stock reduction, increase flexibility, and purchasing synergies can
improve an organisation’s competitive position. In addition, changes in trade pattern, customer
demands, technology, competitor activity in the have wider business context has affected the
development of purchasing. An indication of this is that an increase the importance of purchasing
gives the organisation the capability to satisfy its customers’ needs by focusing on activities that
ensures quality products of good values are produced in line with the organisation’s competitive
strategy.

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Carr and Smeltzer (1997) were able to make a distinction between purchasing strategy and
strategic purchasing. Defining purchasing strategy as the specific actions the purchasing function
may take to achieve its objectives. While strategic purchasing was defined as the process of
planning, evaluating, implementing, and controlling strategies the purchasing follows. It is
gathered from these definitions that the actions of the strategy of the purchasing function must be
in line with the overall corporate strategy of the organisation be it cost or differentiation as
identified by Porter (1985) and that the strategic purchasing must be able to direct the purchasing
functions to ensure that the long-term goals are achieved and the organisation remains
competitive. Although, there may be nonstrategic purchasing functions due to the low status and
spend of the organisation (Carr and Pearson 2002), strategic purchasing functions must be given
top management consideration as it is proactively involved achieving the firm’s goals and adding
value to the organisation. However, this may only happen when the purchasing function is
integrated into the firm’s strategic planning process and is thought of as important to achieve and
maintain a sustainable competitive advantage as concluded by Goh, Lau and Neo (1999),

Bank of Abyssinia was established in 1996 and registered as a public owned share holding
company in accordance with the provision of the Licensing and Supervision of Banking Business
Proclamation No.84/94 (as amended by 592/2008) and the 1960 Commercial code of Ethiopia.
The Bank’s head office is at Legehar Building Addis Ababa, Ethiopia. Bank of Abyssinia (BOA)
having 450 branches throughout the country, currently the company on competitive position has
been one among the leading peers which are moving farther ahead in the private banking
industry. The financial and non-financial performance of the Bank, while encouraging, deviated
from targets. Furthermore, the Bank has been able to lay strong ground for sustainable growth
and profitability. In an effort to bring sustainable growth and profitability, there needs to ensure
continuous improvement in all areas of the Bank’s, one of the major area need to improvement is
administration and logistic offices this department responsible for the procurement process and
management. BOA allocates huge budget and processes procurement centrally through the
department of administration and logistic. And all central and regional offices plan budget for
procurement and BOA processes it centrally at the administration and logistic office of the Bank

Therefore the main objective or this research is to assess the overall purchasing practice and
mechanism of BOA, by focusing on the purchasing performances of the organization to meet its
objectives.

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1.2 Background of the organization
The present-day Bank of Abyssinia was established on February 15, 1996 (90 years to the day
after the first but defunct private bank was established in 1906) in accordance with 1960
Ethiopian commercial code and the Licensing and Supervision of Banking Business
Proclamation No. 84/1994.

BOA started its operation with an authorized and paid up capital of Birr 50 million, and Birr 17.8
million respectively, and with only 131 shareholders and 32 staff.

In two decades since its establishment Bank of Abyssinia has registered a significant growth in
paid up capital and total asset. It also attracted many professional staff members, valuable
shareholders and large customers from all walks of life. This performance indicates public
confidence in the Bank and reliability and satisfaction in its services.

Currently, employing the state-of-art banking technology, the Bank provides excellence
domestic, international and special banking services to its esteemed and valuable customers. It
also strives to serve all economic and services sectors via its ever increasing branch networks
throughout the country.

Bank of Abyssinia, which started banking services with only one branch in 1996, has 334
domestic branch networks, of which 152 branches are in Addis Ababa and the remaining 182 are
established in bankable towns all over the country. Most branches work 10 hours a day 6 days a
week (starting from 08:00 up to 06:00 PM), while some other work up to 07:00 PM in the
evening. All City and Outlying branches are interconnected with state-of-the art ICT. All
branches Offer both domestic and international banking services. Bank of Abyssinia still strives
to identify bankable area every year and serve valuable customers by expanding its branch
networks throughout the country.In this respect there are more branches on the pipe line to be
opened in Addis Ababa and in the regional states this fiscal year.

1.3 Statement of the problem

Purchasing is responsible in supply chain management decisions. Purchasing is typically
responsible for selecting suppliers, negotiating and administering long-term contracts,
monitoring supplier performance, placing orders to suppliers, developing a responsive supplier
base, and maintaining good supplier relations. Since material costs may represent at least 50–60

3
percent of the cost of goods sold, purchasing significantly affects profitability. Moreover,
changes in product cost structure, with materials comprising the bulk of the cost of goods sold,
have elevated the role of purchasing in many organizations (Alexis, 2016)

Purchasing or purchase management basically is a function in any enterprise that works to save
money and enhance profits. Hence, it becomes one of the most important departments or
functions in a manufacturing company. Organizations have realized that cost savings can be
achieved if the purchasing decisions are effective. The main function of this department is to
procure the material or inputs that are needed for production.

Nowadays, with so much competition and huge demand in the market and has made many
organizations to re-look at how they are going about with their purchasing. The role of purchasing
department has enhanced in a big way and it includes tasks like verifying the suppliers, reviewing
the material quality, making sure that the delivery is on time (Rawkery, 2018)

Various research studies conducted regards to purchasing practice focus on purchasing process
that hinders the effectiveness of its procedures with the common objective of examining the steps
involved in the purchasing process. However, none has been conducted to challenges related
with the purchasing performance in terms of Purchasing Planning, staff competency, resource
allocation and Purchasing Procedures.

According to Jayne (2018), a company's purchasing department plays an important role to the
success of any organization, whether in the public or private sector. The function is responsible
for obtaining the materials, parts, supplies and services of the right quality of the quantity, from
the right sources, at the right time and at the right price that an organization requires. Successful
purchasing depends to a large extent on the ability to understand the various environments in
which they operate. They should be fully aware of all legal requirements relating to purchasing
practices within their organization. Knowledge of this will help them in the performance of their
duties.

However the purchasing department of Bank of Abyssinia is not playing this role effectively and
properly. The preliminary investigation revealed that, there are problems need to attention

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include , The purchasing department takes too long and unacceptable delay time to provide item
for the user, The items purchased don’t match by quality and quantity with items requested.
These are some of the challenges that faced this unit and becoming obstacle for the organizations
goal attainment. Therefore this study helps to identify major problems and suggest potential
solutions as well.
1.4 Research Question
The question with regards to this study is: -
 What are the purchasing procedures and practices of the organization?
 What are the major challenges related with purchasing performance in BOA?
 How the 5R’s of purchasing principle are practiced in BOA?

1.5 Objective of the study

In line with the problem statement, this study has the following general and specific objectives.
1.5.1 General Objective
This study aims at reviewing the purchasing practice of Bank of Abyssinia, assessing the Variables
that influence its efficiency and examine the implication of the prevalent purchasing Practice on the
organization.

1.5.2 Specific Objectives

1. To assess the purchasing procedures and practices of the organization
2. To assess the major challenges related with purchasing performance in BOA
 To assess how the 5R’s of purchasing principle are practiced in BOA

1.6 Significance of the Study

This study is believed to help for the clear understanding of the reasons behind inefficient
purchasing practice and its implications on the accomplishment of BOA mission. Further
through the thorough analysis the paper is believed to discover and recommend mechanisms for
viable and efficient purchasing, which would help to save significant amount of resource that
otherwise would be wasted. The study shall also be a useful input for further research on the
area.

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1.7 Scope of the study
This study focused on purchasing practice in Bank of Abyssinia administration and logistic
departments and all BOA branches throughout the country. The researcher considers
administrative and logistic office, 10 districts with their respective branches requests and 6 head
office departments for studying the research.

1.8 Limitation of the study:

This study is limited by different factors. Time constraint was the first limitation. Time
constraint was the first limitation. It was impossible for the researcher to carry out an extensive
study in a short period of time. Due to time-constraint, the size of sample population was
decided to be small. Regarding the participants of the study, the sample selection comprised.

The study had also limitations because it only covered bank of Abyssinia that not include other
peer banks, However the findings of this study apply to the peer banks and other financial
organizations with large volume purchase can more benefit from the findings of this study. In
addition lack of well documented materials of the company secondary sources, secondary
sources are more efficient than planning, conducting, and analysing certain primary forms of
research.

1.9 Organization of the study:

This paper is organized in five chapters. The first chapter presents introduction, brief statements
on the research problem and the study purpose and the scope and limitation of the study. Chapter
two presents review of related literature. Chapter three presents the methodology used to collect
and analyse data. Chapter four presents the finding through data presentation, analysis and
interpretation of the assessment results. Finally, chapter five presents the summary of the finding,
the conclusions and the recommendation forwarded.

1.10 Definitions of Key Concepts & Terms:

Right Price: purchased item with reasonable costing
Right Quantity: purchasing of goods or items without less or more quantity delivery
Right Time: Deliver the purchased item at the right time
Right Quality: purchased item with the desired specification
Right Source: purchase items from right supplier who have equal quality for money value

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 CHAPTER TWO

2 REVIEW OF RELATED LITERATURE

In this chapter, the researcher has reviewed relevant literatures which are in related with the title
in the study area. The chapter includes concepts and ideas, practices of purchasing and
organizational performance. Conceptual framework of the research and empirical evidences are
also included.

2.1 Definition of Purchasing

Purchasing refers to a function in business where by the enterprise obtains the inputs for what it
produces, as well as other goods and services it requires. Purchasing is one of the basic functions
common to all types of business enterprise. These functions are basic, because no business can
operate without, them (Dobler, 1984).

According to Lu (2011), purchasing is a means of obtaining materials or services of the right

quality in the right quantity from right source delivery them to the right place at the right price.

Donald Walters (2003), purchasing is the function responsible for acquiring all the materials
needed by an organization. Many of these transactions are not standard purchases, but include
rental, leasing, contracting, exchange gifts, borrowing, and so on. This is why some people prefer
to talk about the ‘acquisition of materials’ or the more common term of procurement.
’procurement’ and ‘purchasing are often taken to mean the same thing. Usually, though,
purchasing refers to the actual buying, while procurement has a broader meaning.

Purchasing is the function of buying machinery, tools, general supplies, raw materials etc.,
required by an organization (Nair, 1990).

In general purchasing is all about industries, commerce, public corporations to denote the act of
and the financial responsibility for procuring material, supplies and services. It simply describes
the process of buying. However in a broader sense, the term involves determining the needs,
selecting the supplier, arriving at a proper price, terms and conditions, issuing the contract or
order, and following up to ensure proper delivery. It focus is to purchase or obtain materials in
the right quantity, in the right quality, at the right price, at the right time, and from the right
supplier and delivering to the right place (Leenders, 2010).

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2.2 Role of purchasing in business
A purchase department, also called procurement department or purchasing department, supports
operations by serving as the primary buyer of goods and services in a private sector company,
government agency, educational institution or another type of organization Zejian and Weiwei
(2003).

The purchasing department serves the needs of internal customers by procuring the good and
services they need in a timely manner. The purchasing staffs also serve the organization’s
financial wellness by seeking out and purchasing goods and services that offer the lowest prices
and best value (ibid).

A purchasing department must understand the complexities of the operation it supports and the
markets that provide goods or services to meet its objectives. Today, the duties and
responsibilities of a purchasing officer expand far beyond procuring office furniture and supplies
to include complex network technology equipment, acquisition of workspaces and international
travel needs (Monczka, 2004).

2.3 Tasks of purchasing

Purchasing in broader terms involves determine the need, selecting the supplier, arriving at
proper price, terms and conditions, issuing the contract or order, and following up to ensure
proper delivery (Alijan,1975).

Major types of purchasing activities carried by a typical Purchasing Department of a given

origination include: Coordination with user department to identify purchase needs, doing
traditional buying, discussion with sales representatives, identification of potential suppliers,
conduct market studies for important materials, negotiation with potential suppliers, analysis of
proposal, selection of suppliers and maintenance of a variety of purchase records (ibid).

In simple terms the basic element involves in performing the purchasing function are obtaining
the proper equipment, material supplier and service in the right quality, in the right quantity, at
the right price and from the right source (Alijan, 1973).

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Purchasing is one of the basic functions of a given organization shouldering the following major
responsibilities: provide an uninterrupted flow of materials, supplies, and services required to
operate the organization, keep inventory investment and loss at a minimum, maintain adequate
quality standards, find or develop competent vendors, standardize where possible, the items
bought, purchases required items and service at lowest ultimate price, improve the organizations
competitive position, achieve harmonious, productive working relationships with other
departments within the organization and accomplish the purchasing objectives at the lowest
possible level of administrative costs (Leenders, 1989).

2.4 Objectives of Purchasing

The objectives of purchasing can be classified into three levels including: general managerial
level objectives, functional level objectives and detail (operational level) objectives (Dobler,
1996).

2.4.1 General Managerial Level Objectives

The standard statement of the overall objectives of the purchasing function is that it should
obtain the right materials in the right quantity, for delivery at the right time and place, from the
right source with the right service (after and before sale) and the right price (Leenders,1989).
From the top managerial perspective, purchasing has the following objectives, which can be
explained in terms of the 5R's of purchasing.

Right quality -quality is defined as simply fitness for purpose' or the British standard institution
defines "the totality of features and characteristics of a production or service that bear on its
ability to satisfy a given need" (Nair, 1990: 125). In meeting, this objective purchasing must
select items, which have sufficiently quality to fit users’ requirements and specifications. The
term quality as used in the field of purchasing carries quite a different meaning than the meaning
that we usually associated with this word. In common usage, it refers to the excellent features of
the subject, "The right quality is the suitable of an item for a given purpose" (Nair, 1990).

Right quantity -The right quantity is more relevant to the purchase of consumables or parts or
assemblies for manufacturing than for project buying. Fulfilling these objectives will enable to
provide a continuous and uninterrupted material at the minimum cost. In most organization the

9
decision of how much to purchase is more important by the close relationship of purchases
quantity and schedule use. (Parson, 1982:25) The decision of how much to acquire follows
clarification of what is acquired. Therefore before making decision considering factors that
complicate that quantity decisions are essential, including: the larger the quantity is the lower the
unit price, the larger the quantity the higher the storage costs, the larger the quantity is the higher
the risk of damage, the larger the quantity the higher the cost of items in storage, the larger the
quantity the fewer orders that will be place and hence the lower the ordering cost
(Leenders,1989).

Right price -A traditional purchasing objective is to obtain the lowest possible purchase price.
However, the common practice is to obtain the best life cycle price or the lowest total acquisition
cost. "The factor that affect the price of items are quality and quantity required, urgency of
requirements, demand and supply of materials in the market, whether there is room for
competition or not, whether the past business relationship was good or not' strained
(Parson,1982).

Right time -The delivery of the contracted item to the right place at the right time is an
important procurement function. Proper buying enhances production schedules without loading
warehouse with excessive inventory and also minimizes the unfavorable effects of price changes.
In case of regularly used or procuring' items, right time may mean the time when the stock
reaches the minimum level adhering the responsibility shared both by the purchasing unit, and
the approving body (Leenders,1989).

Right source - is fundamental component or the major purchasing objectives. Basic information
about the number and location of potential suppliers, the nature of products, prices charged and
forecasts of the economic condition can be acquired if we are to analyze the supply market
effectively rather than simply buy from traditional sources which may not be competitive (Nair,
1990)

2.4.2 FUNCTIONAL LEVEL OBJECTIVES

The operational Functional level perspective probes more deeply to develop a set of statements
that provide practical and useful targets for decision-making purpose. This Perspective contains
eight basic objectives: to support company operations with uninterrupted flow of materials and

10
services, to purchase competitively, to keep inventory investment and inventory loss of at a
practical minimum, to buy wisely, to achieve maximum integration with the other departments of
the firm, to handle the purchasing and supplies management function proactively in a
Professional, cost effective manner, to handle the purchasing and supplies management function
proactively in a Professional, cost effective manner, to develop effective and reliable sources of
supply and to develop good relationship with the supplier community and good continuing
relationship with potential suppliers (Dobler, 1996).

2.4.3 DETAIL LEVEL OBJECTIVES

At this level precise strategic buying plan are formulated. The focus is on the detailed objectives
that are developed when precise buying plans are made for each of the major categories of
materials the firm uses in its operation. These objectives are produced from the second level
objectives and are applied to fulfill the specific needs associated with each type of purchase. The
precise set of objectives for each material typically varies because the usage requirement, the
operating conditions and the markets in which each material is purchased usually are different.
These objectives focus on points like quality, sourcing, pricing, production and inventory
planning (Dobler, 1996).

2.5 Strategy, policy, guidelines and procedures

The contribution of strategic purchasing to overall organizational performance is widely
acknowledged. An organization should have a purchasing strategy in place to deliver best value
for money (Swinder & Seshadri, 2001). This purchasing strategy has to be structured, clearly
documented and communicated to the purchasing staff (Ruiter, 2011). To prevent pitfalls such as
lack of scope, scale and unaligned incentives those are encountered when translating the strategic
intentions into practice (Knoppen & Saens, 2015).

Strategic alignment and a fit with the organization: To achieve an increased purchasing
performance, strategic alignment of purchasing with the organizational objectives should take
place (Caniato, 2007). For an effective purchasing department, there has to be a fit with the
policies, organization and processes of the rest of the organization. It might seem obvious that
purchasing strategy and goals should be in line with organization strategy and goals, but a study
of (Kamann, 2007) reveals this is often not the case. If the purchasing goals and strategy are
shaped in accordance with the organizational environment, not only the purchasing performance

11
will increase, the organizational processes are also positively influenced. To effectively organize
this aligned purchasing process, guidelines, regulations and recommendations on the different
steps of the purchasing process should be composed (Kamann, 2007).

To achieve the alignment of organizational and purchasing strategy, purchasing professionals

should be involved in organization-wide strategic planning and formulate a long-term plan for
the direction of development of the purchasing department. The organizational strategy should
be communicated towards purchasing professionals and all internal customers involved; they
should be acquainted with the organizational goals and strategy (Gonzalez-Benito, 2007).

Documented, up to date guidelines and procedures: Research performed by Laios and Xideas
(1994) indicates that the current purchasing procedures should be critically reviewed since these
are often not up to date. The procedures might have to be altered, or new ones created, to assure
clear procedures are in place for all phases of the purchasing process. Not only should the
documented procedures and process be up to date, but they should also be transparent and
sustainable (Husted & Reinecke, 2009). Ruiter (2011), suggest to implement tools and templates
for purchasers to manage the purchasing process. This is expected to increase purchasing
performance.

2.6 The staff, changing roles and ongoing education

Ongoing education and training: With the constant changing environment and the high pace at
which technology develops, the purchasing staff should be able to expand and up-date their
knowledge. The learning capabilities of the purchasers heavily influence the potential
contribution of purchasing to the organizational performance. A well-trained purchaser will
communicate better, outside the limits of conventional transactional-oriented price and
availability information (Knoppen & Saens, 2015). Three main skill areas can be identified in
which training is required, according to Humphreys (2003). These areas are business skills,
interpersonal skills, and technical skills. To create an efficient and effective purchasing process,
purchasers have to possess and update these skills.

Roles and (overlapping) responsibilities of the staff: Due to the development of new
technologies, fast changing markets and the increase in collaborative arrangements, the roles and
responsibilities of the purchasing staff are subjected to change (Humphreys 2003). Reviewing

12
current responsibilities and tasks is relevant to assure an efficient and effective purchasing
process, to which managers, purchasers and administration employees contribute (Cousins,
Lawson, & Squire, 2006).

First of all, the function of a purchasing manager, a redefinition of the role of the purchasing
manager is needed according to Humphreys et al. (2003). The strategic role of the purchasing
manager, and the influence the purchasing manager can have on the management of a hospital,
are key factors for purchasing success. The purchasing manager has the responsibility to
emphasize the contribution of purchasing to overall performance and the strategic role of
purchasing to general management (Gonzalez-Benito, 2007). Updating process and strategy
based on developments is a core task of the purchasing manager to stimulate purchasing
performance. A high level of knowledge is required, to set and maintain standards regarding
purchasing practice and assure training and development of the purchasing staff. The focus of the
purchasing manager should be on mentoring and coaching staff, strategic leadership, cooperating
with other departments and updating purchasing processes in the light of developments
(Humphreys 2003). The head of the department reporting directly to general management
indicates a highly developed, professionalized purchasing function (Gelderman 2005).

Also, the skills required of a purchaser have changed over the past years. Strategic and value
adding tasks have become more important since the 1990s. Purchasers should no longer spend a
disproportionate part of their time on low-value purchases. Because of the increased
responsibilities concerning projects and public tenders, the time spent on low-value purchases
should decrease. In order to do so, information systems that allow users to order from selected
suppliers, should be implemented leading to less operational work for the purchaser concerning
these day-to-day purchases (Trent & Monczka, 1998). Instead of the role of buyer, focusing on
price and quality, purchasers have to compose and manage long-term agreements between
buyers and suppliers (Cousins, Lawson, 2006). The skills of planning, evaluating, implementing
and controlling purchasing and supplier strategies have become more important to purchasers
(Gelderman & Van Weele, 2005).

The tasks and responsibilities of purchasers and administration employees have become less
clearly defined and require more flexibility (Humphreys, 2003). According to McCue &
Gianakis (2001), partly the same activities are performed by the purchaser and administration

13
staff, while the scope of their function differs. A purchaser should focus on tactical purchasing
and be involved in strategic decisions. While the administration staff has the responsibility for
the day to day handling of purchasing. Overlap, as indicated to be present concerning
negotiations and supplier relations should be prevented (McCue & Gianakis, 2001). These shared
responsibilities for several tasks create ambiguity and do not lead to an efficient and effective
purchasing function. The roles and responsibilities of the different staff members should be
clearly defined and attuned to one another for a successful purchasing process (Husted &
Reinecke, 2009). It is important to be open to a redefinition of tasks, obligations and the methods
used (Kamann, 2007).

2.7 Communication is key

The staff members of the purchasing department have to communicate with suppliers, internal
customers, and other supporting departments and internally at the department. First, frequent and
clear communication with suppliers is necessary to reduce order cycle time and costs while
increasing supply assurance. Improved communication contributes to increased purchasing
performance (Swinder & Seshadri, 2003). Insufficient communication can be problematic
because misunderstandings easily appear. Communication increases both parties’ understanding
and encourages problem-solving. When communicating with suppliers, the purchasing
department should be careful with multiple parallel communication lines. The danger is in
ignoring the full scope of the relationship with a supplier and the appearance of
miscommunications. A solution could be to place the responsibility of communicating with a
supplier at one purchaser (Knoppen & Saens, 2015). Second, the purchasing department is
working for the internal customers of the company. Therefore, communication between the
purchasing department and the internal customer is crucial. Feedback from the internal customer
should be used to determine whether the wishes and needs of the customer are fulfilled with
current practice (Kumar & Ozdamar, 2005). In addition, Kumru and Kumru (2013), identify
improving communications with internal customers as a measure to prevent missing information,
unclear tender documents, underreporting and late involvement in the purchasing process
(Kumru & Kumru, 2013). Third, the purchasing department has to communicate with other
supporting departments at the company, such as the logistic center and the financial department.
Clear and frequent communication is a prerequisite for a steady collaboration with these
departments, which contributes to purchasing success (Kakwezi & Nyeko, 2008). Fourth,

14
internal communication of the purchasing department has to be paid attention to. Communication
is needed to assure smooth collaborations between staff members and be aware of each other’s
affairs. An environment has to be created in which open and clear communication within the
purchasing department is stimulated to prevent misunderstandings and assure efficient
purchasing (Knoppen & Saens, 2015).

2.8 Internal marketing of purchasing

Since the purchasing department serves the internal customer, involving the customer in the
purchasing process is important. In fact, according to Janipha (2015), involvement of the internal
customer in the purchasing process positively impacts the quality of supplies and services. What
is more, professionalizing the purchasing function, by means of standardization, process
improvement, and performance management, is only possible with commitment of the internal
customer (Ruiter, 2011). Especially in large projects, lively participation of the internal customer
is necessary. The internal customer has to draw up accurate specification documentation to
assure receiving the right supplies. Plus, the experiences of the internal customer can contribute
to recommendations on improving the purchasing process (Janipha, 2015). Crucial for internal
customers to be involved with the purchasing department, is awareness of the relevant
purchasing policies and processes in place (Gonzalez-Benito, 2007).

The needs the purchasing department has to meet differ per internal customer. to advise and
assist each department correctly, a close relation between the purchaser and the internal customer
is necessary. Such a relation will positively affect customer satisfaction (Van Poucke, 2014).
According to Van Poucke (2014), wishes of the customers have to be identified, since these will
differ per customer and type of product purchased, to be acted upon. Fulfilling wishes stimulates
trust and the sharing of information with the purchasing department, which contributes to the
performance of the purchasing department (Kakwezi & Nyeko, 2008).

2.9 Factors Affecting Procurement

Procurement Planning
Procurement planning is the purchasing function through which organizations obtain products
and services from external suppliers (Burt, 2004). A procurement plan defines and documents
the details of purchases from suppliers needed for a particular department. According to Basheka
(2008), procurement planning is the major function that sets the stage for successive procurement

15
activities. Likewise, James (2004) describes that the principles of planning can be implemented
in an atmosphere of complete harmony. He further states that, as a function, procurement
planning endeavours to answer the questions as to what one wants to procure; when to procure it;
where to procure them from; when the resources be available; the methods of procurement to be
used; how timely procurement or failure will affect the user of the items; the procuring and
disposing entity; efficiency in the procurement process; and the people to be involved in the
procurement.

Peter (2012) states that good procurement plan should describe the process in detail to appoint
pertinent suppliers contractually. At the beginning, the items needed to procure are defined, and
then the process for acquiring those items is expounded in detail. Finally the timeframe for
delivery is scheduled.

Moreover based on Quentin (2003), procurement planning is important due to the following
reasons: it helps to decide what to buy, when and from what sources; it allows planners to
determine if expectations are realistic; particularly the expectations of the requesting entities,
which usually expect their requirements met on short notice and over a shorter period than the
application of the corresponding procurement method allows; it is an opportunity for all
stakeholders involved in the processes to meet in order to discuss particular procurement
requirements.

Staff Competency in Procurement Process

Armstrong and Baron (1995) explain that competency is the application of knowledge and skills,
performance delivery, and the behavior required to get things done very well. Besides
competency indicates adequacy of knowledge and skills that enable someone to act in various
situations (Aketch and Karanja, 2013). According to Russell (2004), absence of adequate
knowledge in procurement matters, may end up with serious consequences including breaches of
codes of conduct.

According to Banda (2009), many organizations do not have staff with the right competence
critical to good procurement process management. As a result considerable and continuous
investment is incurred in training and development (Sultana, 2012) and there is a need for

16
extensive external training for human resources to be able to improve and contribute to the
efficiency of organizations (Appiah, 2010). Moreover, Saunders (1997) advises that multiskilling
offers employees with a variety of skills and should be developed extensively.

Hence, all employees need broad and continuous education and training. Leenders
and Fearon (2002), noted that qualifications are crucial for value-based management which
requires employees to assess and improve processes while contributing to team performance.
Baily, (2005) suggested that the existence of top-down objectives with related performance
measures, and process guidelines link individual or group performance to the firm’s goals and
expectations of upper management which require good qualifications.

Banda (2009) stated that many organizations lack competent staffs with the proper knowledge
for good procurement process management. He further noted that authorities should give greater
emphasis for developing competence to adopt best practice more widely. According to Berger &
Humphrey (2007), a procurement function that is carried out professionally is the core of
delivery of any service on value for money principle. Furthermore, Sultana (2012) stated that in
order to sustain economic growth and effective performance, it is important to optimize the
contribution of employees to the aims and goals of the organizations. Therefore, competence can
ensure that the benefits of new products and services are brought to the attention of the right
person in the organization.

Procurement Procedures
Moncska et al (2010) stated that procedures provide guidance to staffs what to follow in the
execution of activities put constraints on behavior and show how the procurement function
should work to achieve strategic objectives. Organizations need standard procurement
procedures which cover all aspects of the procurement cycle, including supplier selection,
contract negotiations, order placement and payment (Oumaand Jennifer, 2014). Procedural
procurement ensures orderliness and efficiency in any procurement department. Baily et al
(2005) discussed that public procurement procedures tend to be characterized by high levels of
bureaucracy independent of order value; poor communications and focusing on unit price rather
than long-term relations. Ineffective procurement procedures would end up with failure of the
objectives of government policy.

17
Burt et al. (2004) stated that every organization is expected to develop procedures to enable its
personnel implement policies and plans; designed to meet objectives. Jones and George (2009)
noted that bureaucratic mechanisms are controlled by a comprehensive system of formal rules
and standard operating procedures that shapes and regulates the behaviour of divisions, functions
and individuals. Moncska et al (2010) noted that the procurement function has a significant
impact on business performance. As a result, traditional procedures are becoming obsolete in
modern organizations.

Finally based on (Eriksson and Westerberg, 2011), procurement perceptions are affected by the
existing organizational structure, quality of internal communication system, past experience and
resources available. Without elaborate and effective procurement procedures, government policy
objectives would fail to meet the desired objectives.

Resource Allocation
Resource allocation is the process of determining the best way to use available assets or
resources in the execution of a given project. Companies attempt to allocate resources by
minimizing costs and maximizing profits using strategic planning methods, operational
guidelines and implement policies and procedures that move the business toward the
achievement of its goals (Shantanu et al, 2012).

Resource allocation begins at strategic planning when a company formulates its vision and goals
for the future. Most of the public entities lack clear accountability on how the resources provided
impact on their performance therefore going against the fundamental principles of public
procurement, Ouma Danis (2014).Tangible resources are assets that can be seen and quantified
such as production equipment, manufacturing plants, and formal reporting structures. Intangible
resources include assets that typically are rooted deeply in the firm’s history and have
accumulated over time (Michael and Hoskisson, 2007).

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2.10 Procurement Best Practices
Procurement best practice will seek to lead to improvement in quality and reduction in cost it
improves proper allocation of firm resources, high quality and timely procurement and budgetary
saving and increase profitability in the organization .The best Organization performance will be
measured by determining quality, productivity, market share, increase in customer base,
profitability, return on equity, customer satisfaction, management efficiency and increase in
branch network (Husted and Reinecke, 2009).

Green Purchasing
Green procurement is the practice of purchasing environmentally preferable products and
services, which are products or services that have a lesser or reduced effect on human health and
the environment when compared with competing products or services that serve the same
purpose. Such products or services may include, but are not limited to; those which contain
recycled content, minimize waste, conserve energy or water, and reduce the amount of toxins
disposed of or consumed (Ochoa & Erdmenger, 2003). Organizations recognize that there are a
large number of consumers with a broad spectrum of goods and services. Every purchase has an
environmental impact resulting from the combined effect of a product’s manufacture, delivery,
use, and disposition

Leading companies that decide to go along with green procurement activities are experiencing
tangible benefits. Strategic sourcing can create value through increased overall cost efficiency,
enhanced reputation and market share, and reduced environmental risks and liabilities. These
companies get economic benefits by reducing supplier generated wastes and surpluses,
companies decrease handling expenses and risks associated with waste disposal (Holt and
Kockelbergh, 2003). In addition, a supplier's savings from improved efficiencies may be passed
along to buyers in the form of reduced prices. Competitive advantage is also acquired through
innovation. Efficient production may be enhanced through suppliers’ use of cleaner technologies,
process innovation, and waste reduction (Holt and Kockelbergh, 2003). This is especially true
when suppliers and customers work together to find new ideas. Companies get improved public
image by adopting green procurement. Greening its suppliers can contribute to a company’s
overall reputation among customers, investors, employees, and other stakeholders
(Khiewnavawongsa and Schmidt, 2008). Some of these tangible benefits include cost avoidance,
savings from conserving energy, water, fuel and other resources; easier compliance with

19
environmental regulations; demonstration of due diligence; reduced risk of accidents, reduced
liability and lower health and safety costs; support of environmental/sustainability strategy and
vision and improved image.

Supplier Partnering

Relationship between the organization and its suppliers, It is designed to leverage the strategic
and operational capabilities of individual participating organizations to help them achieve
significant ongoing benefits. Supply partnership emphasizes direct, long-term association and
encourages mutual planning and problem solving efforts (Ragatz, 1997). Such supply
partnerships are entered into to promote shared benefits among the parties and ongoing
participation in one or more keys strategic areas such as technology, products, and
markets .Strategic partnerships with suppliers enable organizations to work more effectively with
a few important suppliers who are willing to share responsibility for the success of the products.
Suppliers participating early in the product-design process can offer more cost effective design
choices, help select the best components and technologies, and help in design assessment.
Strategically aligned organizations can work closely together and eliminate wasteful time and
effort. An effective supplier partnership can be a critical component of a leading edge supply
chain (Griffith and Harvey, 2001).

Supply partnership is viewed as the firm’s ability to coordinate and integrate resources with their
respective partners. Griffith and Harvey (2001), considered the ability to coordinate inter-
organizational relationships effectively as one of the important resources of the firms. Wu (2006)
viewed SRP as one of the key supply chain capability and refer Suppliers partnership to the
ability in coordinating the Supply Relationship transaction related activities. These capabilities
improve operational efficiency and performance between the supply chain relationships.
Similarly, supply chain leaders viewed the ability to integrate strategies in an effort to jointly
execute a collective activity as an important capability (Grant, 1996). Adopting early supplier
involvement, operational activities, such as product development projects, can offer more cost
effective design choices, and improved product quality and reduction in lead time (Tan , 2002).
Through strategic suppler relationship, organizations can work closely with suppliers who can
share responsibility for the success of the products (Li et al., 2005). A result of increasing
reliance on suppliers has been that shortcomings in supplier performance and/or competency
may present buying firms with problems such as missed shipping dates and inferior quality

20
levels. For other companies however, superior supplier performance or capability may lead to
superior quality and/or rapid integration of the latest technological breakthroughs into the buying
firm’s own products through early supplier involvement (Ragatz et al., 1997).

Adoption of Information Communication Technology

As companies seek to improve the efficiency in the supply chain through increased integration,
ICT can be considered as a key enabler for procurement process through its ability to support
information sharing and shortening information processing time (Mouritsen, et al 2003).
Similarly, the impact of ICT can be demonstrated in terms of for instance changes in
relationships, inter organizational changes and performance (Wilson and Vlosky, 1998). The
many dimensions in which procurement process can be expressed and the wide variation of
factors in which the impact of ICT can be defined in terms of integration indicates that previous
research has been limited to studying a few dimensions and variables relationships at a time. The
aspect of how to control and coordinate the activity between the companies in the supply chain,
and how ICT affects the level of control integration in the supply chain is of great importance
(Mouritsen et al, 2003).

Use of ICT in procurement help in coordination of business processes, both within the
organization and between a purchaser and existing suppliers. Examples include electronic
purchase-order systems, online catalogues and online linkages with suppliers to exchange
information regarding fulfilment activities (Johnson and Leenders, 2004). Managers are attracted
to the benefits of improved productivity, faster response times and an overall perception of low
risk in implementation (Flynn, 2003). Technological developments in information systems and
information technologies have the potential to facilitate coordination in transporting firms, and
this, in turn, allows the virtual integration of the entire procurement process. Managers have
realized that the Information communication technology can enhance procurement decisions
making by providing real-time information and enabling collaboration between trading partners
(Power & Simon 2004).Technology provides tools to enable organization operations to
consistently procure the best-value materials and services, using unified internet-based sourcing
tools and streamlined support for complex negotiations (Williams, 2005).

21
Purchasing Ethics
It is very important that the procurement function is discharged with probity, transparency and
accountability in a manner that secures best value for public money (Telgen, 2007). Probity
requires the purchasing process to be conducted ethically, honestly; and with fairness to all
participants. Transparency and accountability require that the basis for decisions is demonstrably
clear and objective and that the purchaser is held to account for the conduct of the procurement
process. Contracting authorities must be cost effective and efficient in the use of resources while
upholding the highest standards of integrity. Management in contracting authorities should
ensure that there is an appropriate focus on good practice in purchasing and, where there is a
significant procurement function that procedures are in place to ensure compliance with all
relevant guidelines (Saeed et al., 2005)
Badenhorst (1994) stated that purchasing departments are not fully involved in strategic decision
making in organizations and hence competent people are not appointed to run the function. He
organizational culture as affecting ethical standards in procurement (Not well-trained people
cannot be expected to uphold high expected ethical standards). Poor record-keeping and
inadequate control measures make unethical behaviour and fraud in the purchasing department
inevitable (Saeed et al. 2005). According to Thai (2001), the procurement system is influenced
by culture and technology. In a culture where giving gifts is a common public relation practice, it
is difficult to make a distinction between gifts and bribes (Thai, 2001). (Badenhorst, 1994), An
environment characterized by an absence of clear ethical policies can contribute towards
unethical behavior. Reilly and Kyi (1992) state that the ethical level of behavior is procurement
staff is mainly determined by the climate of the organization, top management, limited
productive resources and lack of intellectual support in the organization. Thai (2001) outlines the
environmental factors affecting the ethical standards in procurement as internal environment,
legal environment, political environment and socio-economic environments.

2.11 Review of Empirical Studies

According to Tewodros W.(2006), presented to Addis Ababa University College of Commerce
procurement and Supplies management department, the paper presents a list of problems which
badly influence the company's purchasing performance. The major challenges are continuous
price fluctuations in the supply market, shortage of raw materials, poor quality purchases,
delayed purchases and unreliable suppliers. To address the above stated problems the researcher

22
developed research objectives, which are analysing the effects of purchasing on organizational
performance and its process and learn about source of supply. The research findings shows that
the absence of permanent suppliers is related to unreliable source of supply, which is bringing
poor quality purchases, the existence of weak relationship between purchasing and other
departments together with unskilled purchasing staff is delaying the purchasing process, the least
price selection criteria the company is currently using are bringing poor quality materials. Based
on the analysis made the paper recommends solutions assumed to improve the challenges. The
researcher proposes further research on the area to come up with viable solutions. Besides this
establishing permanent source of supply are recommended.

Biruk A. (2006) conducted in Addis Ababa University college of Commerce procurement and
supplies management department. The paper discusses the problems hindering the efficient
purchasing practice in the organization. The main problems in the enterprise were poor quality of
grain purchases because of suppliers deceiving purchasers, continuous price fluctuations and
unclear purchasing procedures. The paper presents a general research objective analysing the
purchasing procedures and understanding the relationship between purchasing and other units of
the organization. The research findings show that the poor quality of grain is attributable to the
fact that no technical specifications are given to purchasers and disloyal act of suppliers. The
paper discusses unreliable suppliers are causes of inefficient purchasing since the enterprise has
no permanent source of supply. Further the problem of unclear purchasing procedure is
mentioned as a research finding. Thus developing a clear purchasing procedure is recommended
for speedy purchasing process. Also, development of specification for purchases and training the
purchasers on the application of specification is recommended. Although the problem of
unreliable and disloyal suppliers is presented as the critical problem possible ways of solving this
problem are not suggested.

Banchamlak M. (2014) the study was to assess the procurement process and identify major
challenges in Commercial Bank of Ethiopia. The issues studied include identify the merits and
drawbacks of the purchasing policy, guidelines and manual, examining the steps involved in the
purchasing process and make viable recommendations to improve the purchasing management.
To this end, The major findings of the study are lengthy process of purchasing, late delivery of
goods and poor quality of goods purchased. Based on these findings, the researcher

23
recommended that the purchasing unit establish long term mutually benefiting relationship with
reliable suppliers since this will reduce suppliers cheating problem, to a certain extent tackle low
quality purchases, delayed deliveries and minimize the purchasing quantity approval period, To
enhance feasible and efficient procurement process which save time and resource substantially.

The last but not the least research paper prepared by Yonas Dubale presented to Addis Ababa
University College of Business and Economics Department of Public Administration and
Development Management. The findings of the study showed that the authority has no any
procurement strategy and policy. As a result, the researcher recommended that senior managers
should protect the department staff from the misperceptions of the procurement department and
assist the department to avoid the corruption process with little adverse effect. The department
with the involvement of the senior manager should revise the procurement process and evade the
unnecessary stage and bureaucratic steps to make the organization material flow effective.
Moreover, the internal controlling system should be revised to be more in effect (Yonas D.,
2014).

2.12 Research Gap Analysis

From empirical literature review, all the four papers that were selected by similarity with the
study in the assessment of the purchasing practices of organization and the researchers tried to
find out which exist in the purchasing process that hinders the effectiveness of its procedures
with the common objective of examining the steps involved in the purchasing process and make
feasible recommendations and improve the purchasing practice and Procedure.

However, none has been conducted to challenges related with the purchasing performance in
terms of Purchasing Planning, staff competency, resource allocation and Purchasing Procedures.
And also from the above four empirical literature the researcher found only one research that
were studied in the area of banking industry.

24
2.13 Conceptual Framework
Base on the above literature review and by adopting from Triantafillou (2007), a research
conceptual framework was designed.

Procurement planning
 Need identification
 Planning is participatory
 Timely procurement

Employee Competency
 Skills

Influences
 Experience
 Educational Background
Procurement
performance
Influences
Resource Allocation
 Adequacy of allocation of resources

Dependent Variable

Procurement Follow-up
Mechanism

Independent Variable
Figure 2.1 conceptual Framework of the Study Based on the Review of Literature.

25
 CHAPTER THREE
3 RESEARCH DESIGN AND METHODOLOGY
3.1 Research design
The purpose of this study is to find out the purchasing procedures and practices of the
organization, to assess the major challenges related with purchasing performance in BOA. To
achieve this objective satisfactorily, the researcher formulated three major research questions.
According to Cooper and Schindler (2014) research design as the overall plan and investigate
structure to acquire answers to research questions and manage variances in the process. This
study used descriptive research design. Descriptive design uses statics that measures the cause
and effect relationships between variables. This method has an advantage of being cheap and
effective where sample sizes are applicable. Mugenda and Mugenda (2003) observed that the
survey method is best for collecting original data as it gives a certain degree of accuracy.

In order to attain the objective of the study and to answer the research questions; the researcher
adopted descriptive research. A descriptive study sets out to collect, organize and summarize
information about the matter being studied. To describe is to draw a picture of what happened, or
of how things are proceeding, or of what a situation or person or event is (or was) like, or means,
or of how things are related to each other. It is concerned with making complicated things
understandable (Keith, 2006).

According to Keith (2006) Research design on a practical level, it means connecting the research
questions to data. Design sits between the research questions and the data, showing how the
research questions will be connected to the data, and what tools and procedures to use in
answering them. Therefore, it needs to follow from the questions, and to fit in with the data.

3.2 Sampling Techniques and Sample size

Using a survey strategy should give you more control over the research process and, when
sampling is used, it is possible to generate findings that are representative of the whole
population at a lower cost than collecting the data for the whole population.

Non probability sampling (or non-random sampling) provides a range of alternative techniques
to select samples based on your subjective judgment (Mark, et al 2009).

26
Therefore, the researcher uses non-probabilistic sampling technique to conduct purposeful
sampling. It is possible to reach by taking selected samples which represent the population and
provide rich information. Purposive sampling enables to use judgment to select information-rich
samples that will best enable to answer your research question(s) and to meet objectives.

Therefore, the researcher used purposeful sampling techniques to select appropriate persons who
are believed to provide sufficient and appropriate information because of their experience and
positions.

3.3 Instruments of Data Collection

In order to gather data, the researcher employed questionnaires, interviews and via phone so as to
exploit their respective advantages.

3.3.1 Questionnaire
Questionnaire is one of the most widely used data collection techniques within the survey
strategy. Because each person (respondent) is asked to respond to the same set of questions, it
provides an efficient way of collecting responses from a large sample (Mark, et al 2009). The
researcher has distributed his questionnaires in person which consists both closed ended and
open ended questions so as to give the respondents a sort of flexibility and freedom, the
questionnaires were distributed online personally via email, telegram, and SMS to Those from 3
departments the researcher take 2 from each head office departments which are 6 samples, from
10 districts the researcher take 1from each districts which are 10 samples, and from
administration and logistic department the researcher take 41 samples. Generally, 57
questionnaires were distributed to the bank’s personnel who are assumed to represent head office
department, districts and administration and logistics based on the Krejice & Morgan (1970).

3.3.2 Interviews
Interviews are methods of gathering information through oral quiz using a set of pre-planned
core questions. The use of interviews can help you to gather valid and reliable data that are
relevant to your research question(s) and objectives (Mark, et al 2009). This interview was used
to collect data on how purchasing practice of Bank of Abyssinia, assessing the Variables that
influence its efficiency and examine the implication of the prevalent purchasing Practice on the
organization. To this end, a structured interview was designed.

27
The researcher has used semi-structured interviews which has features of both structured and
unstructured interviews. In order to be consistent with all participants, the researcher has a set of
pre-planned core questions for guidance such that the same areas are covered with each
interviewee. As the interview progresses, the interviewee is given opportunity to elaborate or
provide more relevant information if he/she opts to do so. The interview was conducted in phone
during working hours with one to one for 6 samples from administration and logistics department
were scheduled.

3.4 Procedure of Data Collection

The method of data collection techniques consists of questionnaire and interviews. The study
was conducted by distributing both open ended and close ended types of questions selected from
respective processes and bureaus by considering their exposures and the relationship they have
with other employees due to the responsibility they have in their work units. The questionnaires
were distributed online personally via email, telegram, and SMS to 57 population of the study.
With regard to phone interview 6 samples from administration and logistics department were
scheduled.

3.5 Methods of Data Analysis

The process of data analysis begins with the categorization and organization of data in search of
patterns, critical themes and meanings that emerge from the data. The goal is to create
descriptive, multi-dimensional categories that provide a preliminary framework for analysis.

An important aspect of data analysis is the search for meaning through direct interpretation of
what is observed by them as well as what is experienced and reported by the subjects.

During analysis, the non-standardized and complex nature of the data that will be collected will
be condensed (summarized), grouped (categorized) or restructured as a narrative to support
meaningful analysis (Mark, et al, 2009).

The collected data have been entered into Google Form and analyzed by using descriptive
statistics. In this study descriptive analysis is chosen because of its simplicity and clarity.
Percentages, diagrams and tables have been used for the analysis of the collected data.

28
 CHAPTER FOUR

4 Data analysis and Interpretation

4.1 Overview
The purpose of this study was Assessment of Purchasing Practice the case of Bank of Abyssinia
to achieve this purpose, data were collected from 57 respondents and the response rate is 95%.
This commendable response rate was attributed to the data collection procedure, where the
researcher personally administered questionnaires and waited for respondents to fill in, and
picked the questionnaires once after had been fully filled. The response rate demonstrates a
willingness of the respondents to participate in the study.

This Chapter presents the data analysis procedure and the findings based on the data obtained
from the surveys. First, the overall demographic characteristics of the respondents are illustrated
in detail. Then, the analysis is described using descriptive statistics to address the research
questions and meet its objectives. Descriptive statistics were employed including frequencies and
measures of central tendencies were employed. It was found that descriptive statistics are the
most appropriate statistics, since the nature of the study objectives and questions is to identify
Purchasing Practice and factors affecting the purchasing performance rather than testing
particular hypotheses.

4.2 Demographic characteristics of the respondents

This part of the analysis discusses about the general demographic characteristics of the sample
respondents. To provide information about the respondent's sex, age, educational level,
department, position and work experience. The information obtained from the questions
contained in is section is presented and discussed in figure as below.

29
 A. Gender
Figure 4.1 Genders of Respondents

Source: survey, 2020

Form the above Figure 4.1, 44 respondents representing 83% of the total respondents are male,
while 9(17%) of the respondents are female. These shows there were more males than females in
all the respondents sampled.

B. Age
Figure 4.2 Ages of Respondents

Source: survey, 2020

Form the above Figure 4.2, 21 respondents, representing 39.6% of the sampled was between the
ages of 30-39. 30.2%, which represent 16 respondents were within the ages of 40-49, 9

30
respondents were within the ages of 20-29 while 17% of the sampled, 13.2% which represent 7
respondents were within the ages of 50 or above.

C. Education level
Figure 4.3 Education levels of Respondents

Source: survey, 2020

Form the above Figure 4.3, majority 47.2% of the respondents has attained first degree, while
28.3% out of the total respondent were diploma holders. 24.5% had a master’s degree. none of
the respondents below diploma and third degree (PhD). These findings indicate that the
respondents were relatively highly educated hence understood and could easily interpret the
questions.
D. Department
Figure 4.4 Department of Respondents

Source: survey, 2020

31
Form the above Figure 4.4, as shown 71.7% of the respondents were administration and logistic
office. 17% of the respondents were district office and the remaining 11.3% of the respondent
were head office section, the result shows that the department of the respondent is best to answer
the research questions and to meet objectives.

E. Position of Respondents
Figure 4.5 Positions of Respondents

Source: survey, 2020

Form the above Figure 4.5, majority (56.6%) of the respondents were officer position and 24.5%
were managers. The supervisor positions represent 18.9% of the total respondent. Therefore
show that the respondents have relatively high knowledge of the purchasing function in their
company.

F. Work experience
Figure 4.6 Work experiences of Respondents

Source: survey, 2020

32
This deals with the longevity of staff in the organizations. Form the above Figure 4.6, shows that
21 respondents representing 39.6% have worked for their company within 4-6 years, 13
respondents representing 24.5% worked over 10 years, 22.6 % of the respondents represent
experienced within 6-10 years, 9.4% which represent 5 respondents were worked within 1-3
years and only 2 (3.8%) of the total respondent worked less than 1 year. This shows that most of
the staff have been with the Companies consistently and are more likely to know about
purchasing practice and performance of the company.

4.3 Descriptive Analysis of Purchasing Process and Practices of the

Organization
Table 4.1 Purchase requisition

Do you make purchase requisition? Frequency Percentage

Yes 52 98.1

No 1 1.9

Total 53 100

Source: survey, 2020

The other criterion to prove how much the respondents are familiar with purchasing practice is
their own experience with purchasing. In this regard, from the above Table 4.1, 98.1% of the
respondents are made purchase requisition and only 1.9 % from the total respondents they not
know makes purchase requisition. This indicates the majority of the respondents have experience
to purchase request.

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Table 4.2 Planned Purchase request

How many planned purchase request within a Frequency Percentage

year?

Once in a year 36 67.9

Twice in a year 11 20.8

Three times in a year 6 11.3

Total 53 100
Source: survey, 2020
The research revealed that majority of respondents (67.9%) make purchase requests once in a
year, as planned. the remaining respondents make additional requests, the 20.8 % made twice
and the 11.3% made three times in a year. This shows that majority of respondents the planned
purchase request with in once in a year, but 32.1% of the respondents request planned purchasing
process request twice in a year and three times in a year so there is some of the user not request
items on time.

Table 4.3 Unexpected Purchase request

How many unplanned purchase request within Frequency Percentage

a year?

at least once in a month 1 1.9

at least once in a quarter 2 3.8

at least twice a year 48 90.6

once in a year 2 3.8

Total 53 100
Source: survey, 2020
From the above Table 4.3, all of the respondents reported that they have urgent purchase requests
set at least once a year and 90.6% of them made at least twice a year. This shows that making
urgent request at least once is inevitable from the end user such as district office, branches.This

34
implies that the unplanned urgent requests from branch user put additional burden to the
procurement staff.

Table 4.4 Frequently requested items

How many unplanned purchase request within Frequency Percentage

a year?

Promotion & Printing Materials 12 22.6

Stationeries and pass book 35 66

Office supplies 4 7.5

Sanitary supplies 2 3.8

Total 53 100
Source: sample Survey, 2020

As indicated the above Table 4.4, 66% of the respondents identified stationaries and pass book
items as a first priority need, and promotion & sanitary supplies was taken as priority item by
22.6% of respondents. Office supplies and office supplies were stated as priority items by 7.5%,
and 3.8% of the respondents. This shows stationary and passbook items are one of the common
purchase requests.

Table 4.5 Average time it takes you to receive an item you requested

On average what time takes you to receive an

item you requested? Frequency Percentage
Less than a quarter
2 3.8
Two quarters
4 7.5
More than two quarters but less than a year
14 26.4
More than one year/ beyond the fiscal year
33 62.3

Total 53 100
Source: survey, 2020

35
On-time delivery is the ability of any organization to meet the customers' requirements and
deliver the products or services to the users on time. Perhaps time is one of the most important
issues users are concerned about. Those businesses that do not value time in their order taking
process do not tend to succeed. This is a fact, because users want every order to be delivered
according to their time and this is what every organization has to make sure that they achieve.

As seen from the above Table 4.5, the average time taken to receive an item they requested is
3.8% of the respondents answered that they can receive within less than a quarter, 7.5% of the
respondents replied they can receive within two quarters, 14% of the respondents replied that can
receive within More than two quarters but less than a year, and the majority of the respondents
62.3% answered that they can receive an item they requested with in More than one year. This
result showed that how the procurement process of bank of Abyssinia takes a long time to deliver
items requested.

Table 4.6 takes too long to receive the items you requested

Do you think it takes too long beyond reasonable

time to receive the items you requested? Frequency Percentage
Yes
50 94.3
No
3 5.7

Total 53 100
Source: survey, 2020

On the other hand, respondents answered about their perception weather the period of time for
purchasing is long or not. On this issue majority(94.3%) of respondents replied that the time
from request to receive of the item is too long and only 5.7% of the respondents answered that
they can receive an item requested with in right time, this shows there is poor performance or
purchasing unit in the BOA based on the respondents response.

36
Table 4.7 Reasons the time to receive the requested item is too long

What do you think the reason the time is it takes

receive the items too long? Frequency Percentage

Lengthy purchasing process 34 64.2

Bureaucratic red tape 9 17

Work load on the purchasing staff 2 3.8

Lack of skill and experience by the purchasing 5 9.4

staff

Budget problem 3 5.7

Total 53 100
Source: survey, 2020
Respondents also asked about the reasons why the purchasing process takes too long time. Most
of them (64.2%) replied that lengthy purchasing process may be the reason for taking long time
to receipt the requested items. The rest 17%, 9.4%, 5.7% and 3.8% of respondents reported that
the reason may be because of, bureaucratic red tape, lack of skill and experience by the
purchasing staff, Budget problem and work load on the purchasing staff.

Table 4.8 Presence of purchasing items different from user's request

Are there instances that the purchasing unit

purchased items for you, which are different from Frequency Percentage
your request?

Yes 46 86.8

No 7 13.2

Total 53 100
Source: survey, 2020

From the result table 4.8 above, the majority, (86.8%) of the respondents answered that materials
purchased by the procurement unit is different from users request based on the specification This
indicated that users are not satisfied unless their request matches with purchased items of
materials purchased is not appropriate.

37
Table 4.9 Reason for procurement unit to purchases items which are different from user's request

Reason for procurement unit purchases items

which are different user’s request? Frequency Percentage
Unclear specification of items on the purchases
request 18 34

Purchasers lack of knowledge to identify the 25 47.1

item

Suppliers don't have the items requested. 10 18.9

Total 53 100
Source: survey, 2020

As seen from the above Table 4.9, the majority, 47.1% of the respondents revealed that the
reason is that purchasers lacks knowledge to identify items requested, 34% of the respondents
answered that the reason for purchasing items which are different is from the specification due to
un clear speciation, and 18.9% of the respondents reveled that suppliers don't have the items
requested. So, from this result, one can conclude that lack of purchaser's knowledge and unclear
specification of items are the two main reasons for procurement of items which are different
from user's request.

According to the interview done with the purchasing manager, BOA organized the procurement
unit centrally, and BOA has a procurement manual that describes the detail description of the
procurement process that branch offices follow. The procurement manual describes the setting of
purchase requests by branch offices, compiling to allocate budget in respective fiscal year, and
the selection criteria.

Branch offices prepare purchase request and estimate the budget needed, how much capital items
required related with additional man power, or related with expansion or other needs in a period
called a budget call for the upcoming year. These branch offices send their request with
justification to a district level on the 3rd quarter of the preceding fiscal year.

38
The district offices evaluate the purchase requests submitted by branch offices in the district to
justify and submit to a committee established to evaluate and prioritize purchase requests around
June – July of each year.

This ad hoc committee evaluates all budget requests for procurement from district offices and
approved the budget requests fulfilling the minimum criteria. All the budget requests are
categorized into three categories, IT equipment, furniture and office equipment. The evaluation
process includes trends of the previous year procurement. The committee assesses the request for
any under- or over- request and it has specific period to complete the evaluation.

Once a request is evaluated by the ad hoc committee, it is forwarded to the process committee
and this committee evaluates and forwards the request with the necessary budget to the board of
directors for final decision and approval of the procurement process. Significant amount of time
is elapsed before the procurement request is verified and approved leaving only 3 months for the
process of procurement and delivery.

After the quantity of items to be purchased is determined, the procurement department start
processing the purchasing process, preparing bid document, approval of the bid document by
technical committee, evaluation of suppliers, setting of purchase order, delivery of items with
quality check and the final dispatch to district office.
As per the BOA purchasing manual, there are a lengthy processes to get approval for quantity
and budget of the requested item. After the branch offices send the planned annual purchase
request to the district office, it takes long time to confirm the quantity with budget and send the
request to the purchasing department.

The procurement process encountered internal challenges from within the organization and
external factors. Respondents from the procurement unit identified internal problems as lengthy
budget approval process, late delivery of purchased goods/ service; and the external factors
related with the market are existence of few or limited number of suppliers for some items,
reliability of suppliers both in terms of availability & quantity for specific items or services and
the continuous market inflation.

39
Some suppliers enter into bid or even win the tender without having on hand the items both in
kind or quantity. Additionally they tried to supply items with different specification.

4.4 Challenges related with purchasing performance

Table 4.10 what are the major challenges related with purchasing performance
Scale
No Questions Strongly Disagree Neutral Agree Strongly
Respondents
Disagree Agree
Purchasing plan identify
1 Frequency 11 20 8 10 4
materials as per the company
needs Percentage 20.8 37.7 15.1 18.9 7.5
Purchasing planning helps to
2 estimate the time required to Frequency 8 16 10 14 5
complete the procurement
process Percentage 15.1 30.2 18.9 26.4 9.4
3 Purchasing planning involves Frequency 4 22 4 13 4
concerned all end users Percentage 7.5 41.5 7.5 24.5 7.5
End users provide clear
Frequency 14 31 1 5 2
4 specification for the
purchasing of goods and
services Percentage 26.4 58.5 1.9 9.4 3.8
End users are raised their Frequency 10 31 5 3 4
5 purchasing need on time as
per plan Percentage 18.9 58.5 9.4 5.7 7.5
6 Staff understands Purchasing Frequency 5 28 8 10 2
procedure Percentage 9.4 52.8 15.1 18.9 3.8
7 BOA Purchasing staffs highly Frequency 7 22 6 17 1
motivated Percentage 13.2 41.5 11.3 32.1 1.9
Purchasing staffs have the
Frequency 9 20 9 11 4
8 ability to understand users
need, supply markets and
suppliers Percentage 17 37.7 17 20.8 7.5
Trainings are provided for the
9 staffs based on the skill gap Frequency 27 10 3 11 2
identified Percentage 50.9 18.9 5.7 20.8 3.8
Purchased items are tested Frequency 3 9 9 25 7
10 and inspected accordingly at
the time of delivery Percentage 5.7 17 17 47.2 13.2
There is monitoring
mechanism to ensure that Frequency 6 23 12 9 3
11 goods supplied, or service is
rendered within the time to
agree Percentage 11.3 43.4 22.6 17 5.7

40
 Purchasing and Finance
Department facilitates
payment of the supplier by Frequency 4 21 11 15 2
12
providing necessary
documentation based on lead
time Percentage 7.5 39.6 20.8 28.3 3.8
The Purchasing manual is the Frequency 5 11 7 20 10
13 best and flexible to purchase
works on time Percentage 9.4 20.8 13.2 37.7 18.9
14 Allocation of resource is Frequency 5 14 2 23 9
adequate Percentage 9.4 26.4 3.8 43.4 17
Budget reviews to cater for Frequency 4 13 7 23 6
15 changes in the economic
environment Percentage 7.5 24.5 13.2 43.4 11.3
Tender award based on Frequency 5 7 10 24 7
16 resource availability and
confirmation Percentage 9.4 13.2 18.9 45.3 13.2
Source: survey, 2020

Table 4.10 shows the percentage and distribution of the respondents reply for the major factors
affecting purchasing performance. It represent strongly disagree, disagree, neutral, agree and
strongly agree respectively. The subsequent analyses were conducted based on table 4.10 above.

Purchasing plan identify materials as per the company needs, 20.8% of the respondents replied
strongly disagree, 37.7 % of the respondents replied disagree, 15.1 % the respondents replied
neutral, 18.9% of the respondents replied agree and 7.5 % the respondents replied strongly agree,
This shows that more majority of the respondents disagreed that Purchasing plan helps to
identify materials as per the company needs. This show there is a gap on the area of purchasing
plan

About 15.1% of the respondent replied that strongly disagree that Purchasing planning help to
estimate the time required to complete the Purchasing process, 30.2% of the respondent replied
disagree, 18.9% of the respondent replied neutral , 26.4 % of the respondent replied agree and
9.4 % of the respondent replied strongly agree . This indicates majority of the respondents’
disagreed that purchasing planning help to estimate the time required completing the Purchasing
process

41
It can be seen that 7.5% of the respondents strongly disagree with statement that BOA
Purchasing plan prepared through the involvement and participating of all end users, 41% of the
respondents disagree, 7.5.% are neutral, 24.5 % agree and 7.5% of the respondents strongly So,
from the result one can conclude BOA Purchasing plan did not involves concerned functional
unit

About 26.4% of the respondents replied that strongly disagree end users provide clear
specification for the purchasing of goods and services that are going to be purchased, 58.5% of
the respondent replied disagree, 1.9% of the respondent replied neutral , 9.4 % of the respondent
replied agree and 3.8 % of the respondent replied strongly agree. This shows majority of the
respondent response indicate disagree end users provide clear specification for the purchasing of
goods and services that are going to be purchased Most of the time the company to request the
clarification from supplier those who participating in the bid. This result impact on the lead time
of the purchasing process to long and is not procured goods or services as per the schedule, this
condition high mater on purchasing activities.

End users are raised their purchasing need on time and according to their plan,18.9% of the
respondent replied that strongly disagree, 58.5% of the respondent replied disagree, 9.4% of the
respondent replied neutral , 5.7 % of the respondent replied agree and 7.5 % of the respondent
Replied strongly agree. This indicates that almost more than half of the respondents replied
between strongly disagree and disagree in BOA end users are not raised their need on time.

As shown the table above, 9.4% of the respondent replied that strongly disagree with the
statement BOA purchasing staff understands purchasing procedure, 52.8%, 52.8%, 15.1%,
18.9%, 3.8% of the respondent respectively replied disagree, neutral, agree, strongly agree this
shows majority of the respondents has no understanding about purchasing procedure and
majority further disagreed that the organization does motivate purchasing staff, and Majority of
the respondents strongly disagree and disagree on that, procurement trainings are provided for
the staffs based on the skill gap identified . This shows the number of employees and its
competency is not as such adequate. There is also minimal effort on identify training needs of
employees and deliver capacity building training.

42
According to Berger & Humphrey (2007), a procurement function that is carried out
professionally is the heart of delivery of any service on value for money principle. Appiah (2010)
explains that training is a key element for improved organizational performance through the
increasing level of individual competences. This means that training will help employees to
master knowledge, skills, behaviours, sense of self-worth and confidence upon which they are
able to perform efficiently to improve on the performance of the organization.

About 11.3 % of the respondent replied that strongly disagree there is monitoring mechanism to
ensure that goods supplied or service is rendered within the time to agree, 43.4 % of the
respondent replied disagree, 22.6% of the respondent replied neutral , 17 % of the respondent
replied agree and 5.7% of the respondent replied strongly agree. This shows that most of the
respondents disagreed that main department does not have adequately monitoring mechanism to
ensure goods supplied or service is rendered within the time to agree , this short coming to
interrupt the purchasing procedure and functions. 7.5 % of respondent replied that strongly
disagree Purchasing and Finance department facilitates payment of the supplier’s by providing
necessary documentation based on lead time, 39.6 % of the respondent replied disagree, 20.8 %
of the respondent replied neutral,28.3 % of the respondent replied agree and 3.8% of the
respondent replied strongly agree. This shows that more than half of the respondent disagree that
there is a problem between Purchasing and Finance department to facilitate payment of the
supplier’s by providing necessary documentation based on lead-time.

Based on (Eriksson and Westerberg, 2011), procurement perceptions are affected by the existing
organizational structure, quality of internal communication system, past experience and
resources available. Without elaborate and effective procurement procedures, government policy
objectives would fail to meet the desired objectives.

About 7.5% of the respondent replied that strongly disagree there allocation of resource is
adequate, 39.6 % of the respondent replied disagree, 20.8% of the respondent replied neutral,
28.3 % of the respondent replied agree and 3.8% of the respondent replied strongly agree.
majority of the respondents disagree on allocation of resources was and further the respondent
agreed that budget was reviewed to cater for changes in the economic environment, the
respondents further agreed that tender float based on resource availability and confirmation, one

43
can conclude that BOA resource allocation management is in a good status, but need more
improvement on it for purchasing activities doing better perform

The study showed that generally, the Purchasing plan is not identify materials as per the
company needs, that purchasing planning is not help to estimate the time required completing the
Purchasing process and Purchasing plan is not prepared through the involvement and
participating of all end users.

These results are not tandem with , Quentin (2003), procurement planning is important due to the
following reasons: it helps to decide what to buy, when and from what sources; it allows
planners to determine if expectations are realistic; particularly the expectations of the requesting
entities, which usually expect their requirements met on short notice and over a shorter period
than the application of the corresponding procurement method allows; it is an opportunity for all
stakeholders involved in the processes to meet in order to discuss particular procurement
requirements.

The study showed that purchasing staff competency is not such adequate and there is also
minimal effort on identifies training needs of employees and deliver capacity building training.
These results are in tandem with Banda (2009) who stated that many organizations lack
competent staffs with the proper knowledge for good procurement process management. He
further noted that authorities should give greater emphasis for developing competence to adopt
best practice more widely. According to Berger & Humphrey (2007), a procurement function
that is carried out professionally is the core of delivery of any service on value for money
principle. Furthermore, Sultana (2012) stated that in order to sustain economic growth and
effective performance, it is important to optimize the contribution of employees to the aims and
goals of the organizations. Therefore, competence can ensure that the benefits of new products
and services are brought to the attention of the right person in the organization.

Also the study showed that defer from (Knoppen & Saens, 2015), Ongoing education and
training: With the constant changing environment and the high pace at which technology
develops, the purchasing staff should be able to expand and up-date their knowledge. The
learning capabilities of the purchasers heavily influence the potential contribution of purchasing

44
to the organizational performance. A well-trained purchaser will communicate better, outside the
limits of conventional transactional-oriented price and availability information (Knoppen &
Saens, 2015).

4.5 BOA purchasing practices in terms of 5R’s purchasing principle

Table 4.11 Respondents’ replay on 5R purchase principle
Scale
Strongly
No Questions Disagree Neutral Agree Strongly
Respondents
Disagree Agree
It purchases the right Frequency 6 10 5 22 10
1 quality
Percentage 11.3 18.9 9.4 41.5 18.9
2 It purchases the right Frequency 9 24 4 10 6
quantity Percentage 17 45.3 7.5 18.9 11.3
3 Frequency 8 13 6 21 5
It purchases from the 15.1 24.5 11.3 39.6 9.4
right source Percentage
It purchases for right Frequency 7 14 5 22 5
4 price
Percentage 13.2 26.4 9.4 41.5 9.4
It purchases at right Frequency 15 24 3 7 4
5 time
Percentage 28.3 45.3 5.7 13.2 7.5
Source: Survey, 2020

According to the above Table 4.11 it shows that 11.3% of the respondent replied that strongly
disagree performance in purchasing of right quality, 18.9% of the respondents reply disagree,
9.4% of the respondent reply neutral, 41.5% of the respondent reply agree and 18.9% of
respondent reply strongly agree. From the above data majority (60.4%) of the respondent agree
strong performance with the purchasing of quality of the goods or services by the company, so
one can conclude the company of BOA Purchase goods that are of satisfactory quality and fit for
purpose. On the other hand, significant number (30.2%) of respondents reported that purchasing
unit is never making the right quality purchase. Thus, it is possible to say that majority of users
are satisfied with the quality of purchased items though significant number of users are
dissatisfied.17% of the respondent replied that strongly disagree performance in purchasing of
right quantity, 45.3% of the respondents reply disagree, 7.5% of the respondent reply neutral,
18.9% of the respondent reply agree and 11.3% of respondent reply strongly agree, it shows that

45
majority of the respondents (62.3%) of respondents replied that purchasing unit is never
making the right quantity purchase.

The above table 4.11, also shows that 15.1% of the respondent replied that strongly disagree
performance in purchasing of right quality, 24.5% of the respondents reply disagree, 11.3% of
the respondent reply neutral, 39.6% of the respondent reply agree and 9.4% of respondent reply
strongly agree, that majority of respondents replied that purchasing unit is purchase from right
sources. Thus, majority of users are satisfied with the source of supply. 13.2% of the respondent
replied that strongly disagree performance in purchasing of right quality, 26.4% of the
respondents reply disagree, 9.4% of the respondent reply neutral, 41.5% of the respondent reply
agree and 9.4% of respondent reply strongly agree, from the data shows that most of the
respondents agree the purchasing unit is purchase at the right price. Also 28.3% of the
respondent replied that strongly disagree performance in purchasing of right quality, 45.3% of
the respondents reply disagree, 5.7% of the respondent reply neutral, 13.2% of the respondent
reply agree and 7.5% of respondent reply strongly agree, shows that majority (73.6%) of
respondents replied that the purchasing unit is never deliver at the right time the requested items.

Table 4.12 Respondents’ replay on 5R purchase principle regards to improvement

Scale
No Questions Respondents Right Right Right Right Right
quality quantity price source time
In which area do you think
1 the purchasing function Frequency 22 7 6 15 3
doing well?
Percentage 41.5 13.2 11.3 28.3 5.7
In which area do you think
2 the purchasing function Frequency 3 10 13 8 19
needs improvement Percentage 5.7 18.9 24.5 15.1 35.8
Source: Survey, 2020

Table 4.12 shows that 41.5% of respondents replied that right quality is doing well by the
purchasing unit. On the other hand, 13.2% of respondents replied that right quantity is doing
well. The rest respondents (11.3%) replied that on right price, 28.3% of respondents replied that
on right source and 5.7% of respondents replied that on right time. This shows that
comparatively purchase unit may be doing well sometimes regarding in quality than other areas.

46
In addition that the respondents replied that purchasing performance as badly in all areas 40.0%,
right time 31.4%, right quality 11.4%, right price 7.1%, Right source 7.1% and right quantity
2.9%. Thus, the report shows that even if the problem of right time and right quality requires
critical attention, there are problems in all areas.

Significant number of the respondent (35.8%) voted that purchasing function needs improvement
on right time. 24.5 % &18.9% of the respondent needs improvement on right price & right
quantity purchase respectively, 15.1% & 5.7% of the respondent replayed that right source and
right quality of items purchased, purchasing function needs improvement respectively. Thus,
shows that even if the problem of right time and right price requires critical attention.

The study showed that BOA purchasing unit is working well in terms of purchase right quality
and from the right sources, But poor concert in the right time and right price. These results are
not fully implemented as Lysons and Gillingham (2003) who state that, purchasing is usually
defined as obtaining the right quality material, at the right time, in the right quantity, from the
right source, at the right price.

End users does not provide clear specification for the purchasing unit of goods and services that
are going to be purchased, According to the interview done with the purchasing staff most of the
time the company request clarification from supplier those who are participating in the bid, this
result impact on the lead time of purchasing process and is not procured goods or services as per
the schedule. This condition high challenges on purchasing performance. These results are not
tandem with Janipha (2015) who state that, the internal customer has to draw up accurate
specification documentation to assure receiving the right supplies. Plus, the experiences of the
internal customer can contribute to recommendations on improving the purchasing process and
activity.

47
 CHAPTER FIVE
5 SUMMERY, CONCLUSIONS AND RECOMMENDATION
5.1 Introduction
In this chapter the general study are described ,It is organized as follows: first it presents the
summary of the findings organized as per the research objectives then the conclusions drawn
from those findings and gives recommendations.

5.2 Summary
The purpose of this study was to assess the Purchasing practice and its challenges in the case of
Bank of Abyssinia. The research was mainly designed based on the following three specific
research objective. These were: 1.What are the purchasing procedures and practices of the
organization, 2. What are the major challenges related with purchasing performance in BOA, 3.
How the 5R’s of purchasing principle are practiced in BOA. This study used analysis is
described using descriptive statistics to address the research questions and meet its objectives.
The demographic characteristics of the respondents were formed from Head office departments,
district office and administration and logistic office whose total was 57. This study applied
stratified sampling followed by non-random sampling technique. The sample size was 57 but the
responded rate is 95%. Primary data was collected online Google form by questionnaires to the
respondents. The collected data was analysed from www.googleform.com and exported and
edited in excel form for as a summary results. The data was represented in form of figures and
tables.

BOA has a regulation of putting purchase requests for upcoming fiscal year in the third quarter
by branch offices as stated in the company’s procurement manual. Implementing this planning of
procurement, the procurement department faces urgent requests for purchase from some district
offices, branches and central office the approval process of these unplanned urgent requests
brings extra burden and pressure both on the procurement department and the concerned
approving bodies. Urgent requests set from branches aggravate the delay in the procurement
process. Also department, districts and branches they can receive regular or planned items they
requested with inmore than one year this is too long and matter on organizational productivity.
These outcomes pop up form the reason of lengthy purchasing process. Also the users are not
satisfied unless their request matches with purchased items is not appropriate because of

48
purchasers lacks of knowledge to identify items requested and unclear specification of items are
the two main reasons for procurement of items which are different from user's request.end users
not provide clear specification for the purchasing of goods and services that are going to be
purchased most of the time the company to request the clarification from supplier those who
participating in the bid. This result impact on the lead time of the purchasing process to long and
is not procured goods or services as per the schedule, this condition high challenges on
purchasing performance.

Purchasing planning did not helps to identify materials as per the company needs, estimate the
time required completing the purchasing process and did not involves concerned functional unit.
Purchasing staffs has no understanding about purchasing procedure; has no ability to understand
users need, supply markets and training are not provided for the staffs based on the skill gap
identified. Resource allocation management is good status, but need more improvement on it for
purchasing activities doing better perform. There is no procurement follow up and monitoring
mechanism in the procedure. Absence of procurement follows up mechanism result in delay in
delivery of items and will yield customer satisfaction or users of the procurement unit. BOA
purchasing unit is working well in terms of purchasing right quality and from the right sources,
but poor performance in the right time and right price.

5.3 Conclusion
The study researcher sought to examine whether goods are purchased in accordance with
specification or not. End users request Items without clear specification. But specifications are
one of the most important elements of the purchasing process. The preparation of good
specifications is probably the most difficult but very important task in the process. Inadequate or
poorly written specifications are the cause of many bidder challenges and can considerably delay
the procurement process; in addition there are lengthy processes to get approval for quantity and
budget of the requested item.

The purchasing department faces urgent requests for purchase from some district offices,
branches and central office the approval process of these unplanned urgent requests brings extra
burden and pressure both on the purchasing department and the concerned approving bodies.
Urgent requests set from branches aggravate the delay in the procurement process.

49
Practice of preparing annual purchasing plan among users of the bank was found very poor. This
the major challenges on purchasing performance. purchasing planning endeavours to answer the
questions as to what one wants to procure; when to procure it; where to procure them from; when
the resources be available; the methods of procurement to be used; how timely procurement or
failure will affect the user of the items; the procuring and disposing entity; efficiency in the
procurement process; and the people to be involved in the procurement. The results further
revealed that the department’s prepared annual purchasing plans and that the purchasing plans
were prepared and the goals set participatory. Procurement plans therefore influence purchasing
performance in the sense that they provide focused and efficient utilization of available
resources, help in budgeting and planning and therefore with adequate provision of budgets due
to purchasing plans, performance is assured.

The findings of the study concluded that purchasing unit staff has no ability to understand users
need, supply markets and there was never takes trainings and development based on the skill
gaps that are identified at BOA. Also the staffs were not motivated, competency is the
application of knowledge and skills, performance delivery, and the behaviour required to get
things done very well. Besides competency indicates adequacy of knowledge and skills that
enable someone to act in various situations Hence employees need to acquire core competencies
like knowledge, skills, experience and abilities to enhance procurement function.

The majority of the respondents further answered that resource allocation technique for
procurement activity is based on relevant evidence, appropriate and enough amounts. So the
impact off resource allocation in purchasing performance at BOA is minimal or has no challenge
in its purchasing performance.

The study researcher sought to examine the procurement follow up mechanism. The result of this
study identified that there is no way of procurement follow up mechanisms. So, absence of
procurement follows up mechanism result in delay in delivery of items and will yield customer
satisfaction or users of the procurement unit.

50
According to the 5 R's of purchasing which are at the right time, from the right source , at the
right price, at the right quality and right quantity, the purchasing unit is working well in terms of
purchasing right quality and from the right sources, but there are the poor performance at the
right time.

5.4 Recommendations
Based on the findings, the following recommendations are forwarded by the researcher:-
1. BOA has to develop standard specification for some items in order to save a lot of time and
effort when it comes to delivering. By making items requirements clear there's no room for
confusion or doubt which can only make for a more efficient and effective process.
2. Identify frequently requested items and handle separately. Establishing effective stocking of
supplies and accessories which are frequently requested by users like stationary and passbook
item will reduce the delays and subsequent work interruptions and also unnecessary rush
order expenses.
3. Redesign the procurement process in order to minimize the quantity approval period and
establish tracking system to expedite and follow the purchasing process, and establishing
systematic ways of expediting and follow up of the purchasing process.
4. Organizations should strive to strengthen their purchasing plan and make a good culture so as
to ensure successful implementation of their organizational plan and to achieve their
organizational goals and objectives. Purchasing plan is specifically designed to assure that
funds are available for the procurement, that the proper method of procurement is undertaken,
and that the type of contract chosen will be suitable for the particular procurement of goods,
works, or services. Since the results of the data processed disclosed poor planning culture by
the users, top level managers should urge the users to plan what they want to be performed the
next budget year. Awareness creation forum should be prepared and at the same time, Short
term training with regard to as to how to plan should be organized. In addition, it is
recommended that relevant staffs to procurement be involved in the process of plan
preparation. It is advised that preparation of annual procurement plans be participatory,
frequently reviewed so as to improve on the company’s performance.
5. It is worthwhile that staffs be adequately trained and sensitized in order to boost the skills and
competency levels required by staffs involved in the purchasing process. The company would

51
 benefit if the management support the procurement department by allocating more resources
and encourage trainings to improve the skills and knowledge of the purchasing staff.
6. The BOA top management should also device mechanism to motivate qualified staffs by
adopting different motivating factors such as through recognizing and rewarding efficient
employees while making sure intentional inefficiencies would result in substantial
accountability.
7. Finally, it is recommended from the study that districts, branch offices and central office shall
train or make familiar the branch and head offices staff on annual planning and budgeting
fairly & minimizing the number of unplanned purchase requests process cost and totally it
increase the efficiency of the procurement process.

Area of further study

This research paper lacked of well documented materials of the company secondary
sources. Further research can be done and upgrade this study when they can obtain
adequate secondary sources of data from the company.

52
 References

Aketch, J., & Karanja, P. (2013), Factors Influencing Procurement Performance in Constituency
Development Fund (CDF): Case of CDF Use in Makadara Constituency. International
Journal of Social Science & Entrepreneurship, 1(2), 41-55.

Eriksson, P. E. Westerberg, M. (2011), Effects of cooperative procurement procedures on

construction, project performance: A conceptual framework, International Journal of
project Management, 29 (2011) 197–208.

Carr, A. S., & Smeltzer, L. R. (1997), An empirically based operational definition of strategic
purchasing. European Journal of Purchasing and Supply Management, 3(4), 199 – 207.

Alijan G. (1973), Purchasing Management, 2nd edition. New York: Mc Grow Hill Inc.
Handbook 2(4), 19-25.

Donald, W. Dobler (1984), Purchasing and Materials Management; 4th edition New York:
McGrew-Hill Inc.

Leenders I. Fearon and England (1989), Purchasing and Materials Management; 9thedition.
NewDelhi: Richard Irwin Publisher.

Lysons, K. 2000. Purchasing and Supply Claim Management.5th edition. Great Britain: Herry
Ling Limited, Dorchester, Dorset (Prentice Hall).

Fearon,E and England,B (1992), Purchasing and Material Management, 9th edition, New Print
India Pvt. Ltd. New Delhi, India.

53
Saunders, M. (1997), Strategic Purchasing & Supply Chain Management, (7th Ed.). Harlow
Essex:Pearson Education Ltd.

Moncska, R. M., Handfield, R. B., Guinipero, L. C., & J.L.Patterson, (2010), 4 th Ed. Purchasing
and Supply Chain management.

Saunders, M. (1997). Strategic purchasing and supply chain management. (2nd ed.). London,
Prentice Hall.

Leenders I. Fearon and England (1989), Purchasing and Materials Management; 9thedition.
New Delhi: Richard Irwin Publisher

Van Weele, A. (2002) Purchasing and Supply Chain Management, Analysis, Planning and
Practice, Thomson Learning, 3rd Edition

Leenders, R. M., & Fearon, E. H. (2002), Purchasing and Supply Management, (12th
Ed.).Chicago:McGraw-Hill Companies.

Michael A. Hitt, R. Duane Ireland and Robert E.Hoskisson, (2007), strategy management, 7 th
Edition, Thompsom South Western.

Quentin W. Fleming (2003), project procurement management. Quality Books, Inc. First Edition,
FMC Press, USA.

Saunders, M. (1997), Strategic Purchasing & Supply Chain Management, (7th Ed.). Harlow
Essex:Pearson Education Ltd.

BOA Official Website

https://www.bankofabyssinia.com (last accessed June 5/2020)

54
 APPENDICES
APPENDIX I: QUESTIONNAIRE

Admas University School of Postgraduate

Studies MBA Degree in Business Administration

Questionnaire to evaluate an Assessment of Purchasing Practice: a case of

Bank of Abyssinia

The current study is aimed an Assessment of Purchasing Practice a Case of Bank of

Abyssinia. Your participation will enhance the quality of this project and the result obtained.
Kindly answer the following questions honesty and feel free to ask any questions or clarification.
Your name is not required and your responses will be kept strictly confidential and will be used
only for the purpose of this study.

Instruction: This questionnaire contains four sections: I, II, II, and IV. Tick the appropriate box
and give brief explanation in the black spaces provided.

Section I: General information

1. Gender
[ ] Male
[ ] Female
2. Age
[ ] 29 -29
[ ] 30-39
[ ] 40-49
[ ] 50+

3. Educational level

x
 4. Department
] Head Office Departments
[ ] District Office
[ ] Administration and Logistic office

5. Current position:
[ ] Managers
[ ] Supervisors
[ ] Officers

6. Work experience in the BOA

>1 4-6 10+

1-3 6-10

Section II: Purchasing procedures and practices of the organization

1. Do you make purchase request?

A Yes
B. No

2. How many planned purchase request do you send to procurement department within a year?
1. Once in a year
2. Twice in a year
3. Three times in a year
4. Other ___________________________

3. How often do you send purchase requisition that should be treated in urgent case, other than
the planned request? _
A. at least once in a month
B. at least once in a quarter
C. at least twice a year
D. once in a year
E. Other ____________________________

4. List the following categories in the order of priority to your respective needs?
A. Promotion & Printing Materials

xi
 B. Stationeries and pass book
C. Office supplies
D. Computers and accessories
E. Sanitary supplies
F. Others_____________________________

5. On average what time takes you to receive an item you requested?

A. Less than a quarter

B. Two quarters
C. More than two quarters but less than a year
D. More than one year/ beyond the fiscal year

6. Do you think it takes too long beyond reasonable time to receive the items you requested?
A. Yes
B. No
7. If you answered yes for question 8, what do you think the reason is?
A. Lengthy purchasing process
B. Bureaucratic red tape
C. Work load on the purchasing staff
D. Lack of skill and experience by the purchasing staff
E. Lack of motivation
F. Suppliers problem
G. Budget problem
8. Are there instances that the purchasing unit purchased items for you, which are different from
your request/Specification?
A. Yes
B. No
9. Reason for procurement unit purchases items which are different user’s request
A. Unclear specification of items on the purchases request
B. Purchasers lack of knowledge to identify the item
C. Suppliers don't have the items requested.

xii
 Others (mention)
______________________________________________________________________________
________________________________________________________________

Section III: Challenges related with purchasing performance in BOA

The following table contains questions on the extent of challenges of related with
purchasing performance in BOA Company. Rate the statements indicate by ticking on the
appropriate space provided for a scale of: Strongly disagree, Disagree, Neutral, Agree
and strongly agree.

Scale
No Questions Strongly Disagree Neutral Agree Strongly
Disagree Agree
1 Purchasing plan identify materials as
per the company needs

2 Purchasing planning helps to

estimate the time required to
complete the procurement process
3 Purchasing planning involves
concerned all end users
End users provide clear specification
4 for the purchasing of goods and
services
5 End users are raised their purchasing
need on time as per plan
6 Staff understands Purchasing
procedure
7 BOA Purchasing staffs highly
motivated
Purchasing staffs have the ability to
8 understand users need, supply
markets and suppliers
9 Trainings are provided for the staffs
based on the skill gap identified
Purchased items are tested and
10 inspected accordingly at the time of
delivery
11 There is monitoring mechanism to
ensure that goods supplied, or

xiii
 service is rendered within the time
to agree

Purchasing and Finance Department

12 facilitates payment of the supplier
by providing necessary
documentation based on lead time
The Purchasing manual is the best
13 and flexible to purchase works on
time
14
Allocation of resource is adequate
15 Budget reviews to cater for changes
in the economic environment
16 Tender award based on resource
availability and confirmation

Section IV: 5R’s of purchasing principle are practiced in BOA

The following table contains questions on the extent of 5R’s of purchasing principle
practiced in BOA Company. Rate the statements indicate by ticking on the appropriate
space provided for a scale of: Strongly disagree, Disagree, Neutral, Agree and strongly
agree

Scale
No Questions Strongly Disagree Neutral Agree Strongly
Disagree Agree
1 It purchases the right quality

2
It purchases the right quantity

3
It purchases from the right source

xiv
 4 It purchases for right price

5 It purchases at right time

Rate the statements indicate by ticking on the appropriate space provided for a scale of:
Right quality, Right quantity, Right price, Right source and Right time.

Scale
No Questions Right Right Right Right Right
quality quantity price source time
In which area do you think the
1
purchasing function doing well?

In which area do you think the

2 purchasing function needs
improvement

APPENDIX II: Interview Question

1. What are the basic objectives of the purchasing function?

2. Describe the purchasing procedure?
3. You take Training related to the task?
4. What are the major challenges in procurement process?
5. Is there a mechanism to encourage efficient and prompt purchase in the organization?

APPENDIX III: Google form, questionnaires sample output

xv
APPENDIX IV- Google Form, 53 respondents summary sample output

xvi
APPENDIX V: Google form, Individual response sample output

xvii
xviii