THE EFFECT OF COOPERATIVE PURCHASING ON THE ORGANIZATIONAL PERFORMANCE OF LUWEERO HEALTH CENTRE IV (2013–2015)
CHAPTER ONE: INTRODUCTION
1.0 Introduction
This study examines the effect of cooperative purchasing on the performance of Luweero Health Centre IV for the period 2013–2015. The research proposal is organized into three chapters: the general introduction, literature review, and methodology. This chapter specifically presents the background of the study, statement of the problem, purpose, objectives, research questions, scope, significance, and definitions of key terms.
1.1 Background of the Study
Globally, cooperative purchasing originated from the cooperative movements of the early 19th century in England and the United States (Wooten, 2003). It emerged when small organizations with similar procurement needs combined their purchasing efforts to form a larger buying entity, enabling them to benefit from economies of scale and competitive bidding processes. This collective approach strengthened their bargaining power and reduced the likelihood of market exploitation. These cooperatives were founded on principles such as democracy, equality, solidarity, and mutual support (Wooten, 2003).
Tella et al. (2004) note that cooperative purchasing has traditionally been common in the public and retail sectors, but has recently expanded into the industrial sector. It is widely practiced in major global economies such as the United States, China, the United Kingdom, Germany, Japan, and Russia. Cooperative purchasing is not merely a self-help mechanism but a strategic approach used by supply managers to enhance procurement efficiency. It is commonly applied in acquiring office supplies, vehicles, services, insurance, and other high-value items (Bishop, 2003).
In the United States, the first healthcare Group Purchasing Organization (GPO) was established in 1910 by the Hospital Bureau of New York. Growth in GPOs accelerated significantly due to healthcare reforms such as Medicare and Medicaid, increasing from 10 in 1962 to over 40 in 1974, and continuing to expand thereafter. By 2007, the majority of hospitals in the United States participated in group purchasing arrangements. However, rising healthcare costs and regulatory changes also forced hospitals to adopt cost-control strategies, including cooperative purchasing, despite challenges such as lack of trust, changing environments, and reluctance to share sensitive information.
In Africa, cooperative purchasing is deeply rooted in traditional communal practices characterized by mutual support and collective effort (Schwettmann, 2014). Informal cooperation among communities, such as shared agricultural activities, led to the formation of informal cooperatives like Rotating Savings and Credit Associations (ROSCAs), commonly known as “Tontines.” These systems remain prevalent across African countries including Uganda, Kenya, Tanzania, Nigeria, and Ghana.
Formal cooperative systems were later introduced during the colonial era, particularly in agriculture, where they played a major role in production, marketing, and processing. Over time, these practices influenced modern sectors, including healthcare and trade. Governments and private entities began adopting cooperative purchasing to reduce costs, improve access to quality goods, and enhance supply reliability (Schotanus & Telgen, 2007). However, implementation challenges such as cultural differences, limited resources, and lack of trust have affected their effectiveness, especially in the private sector.
In East Africa, cooperative purchasing gained prominence during the colonial period with the establishment of formal cooperatives. In Uganda, structured group purchasing in the health sector began after the 1979 Uganda–Tanzania war, when donor support to health facilities lacked coordination. This led to the establishment of the Joint Medical Stores (JMS) by religious institutions to streamline procurement and distribution of medical supplies. Later, the government established the National Medical Stores (NMS) in 1993, which was granted full authority in 2012 to procure and distribute medicines to public health facilities.
The use of third-party procurement agencies like NMS has improved cost efficiency, product availability, and quality assurance. However, challenges such as differences in organizational culture, lack of trust, fear of information sharing, and loss of control continue to hinder effectiveness (Gray, 2002; Schotanus et al., 2005).
At Luweero Health Centre IV, cooperative purchasing is practiced through NMS. While this approach has led to benefits such as reduced costs, improved availability of supplies, and enhanced operational efficiency, the health centre also faces challenges including delivery errors, stock shortages, bureaucratic procedures, limited staff involvement, and conflicting organizational interests. These challenges have negatively affected its overall performance.
1.2 Statement of the Problem
In an increasingly globalized and dynamic environment, cooperative purchasing has enhanced procurement efficiency by reducing costs, eliminating duplication, and improving supplier responsiveness (Kamann, 2004; Schotanus et al., 2005). Despite these benefits, organizations continue to face challenges such as poor employee motivation, limited supplier options, weak collaboration, and high operational costs (Gray, 2002; Williamson, 1985).
Although Luweero Health Centre IV has fully adopted cooperative purchasing through NMS, it continues to experience challenges such as limited staff involvement, delivery of incorrect medical supplies, bureaucratic inefficiencies, and weakened relationships with former suppliers. Efforts to address these issues, including involving procurement staff and improving order specifications, have not yielded the desired results. Reports indicate persistent problems such as incorrect deliveries, lack of staff participation, poor service delivery, low employee productivity, and stock shortages. This study therefore seeks to examine the effect of cooperative purchasing on the performance of Luweero Health Centre IV between 2013 and 2015.
1.3 Purpose of the Study
The purpose of this study is to examine the effect of cooperative purchasing on the organizational performance of Luweero Health Centre IV.
1.4 Specific Objectives of the Study
- To determine the benefits of cooperative purchasing as a procurement strategy.
- To identify the critical success factors for effective implementation of cooperative purchasing at Luweero Health Centre IV.
- To examine the relationship between cooperative purchasing and organizational performance.
1.5 Research Questions
- What is the relationship between cooperative purchasing and organizational performance at Luweero Health Centre IV?
- What are the benefits of adopting cooperative purchasing in daily operations?
- What are the critical success factors required for effective implementation of cooperative purchasing?
1.6 Scope of the Study
1.6.1 Subject Scope
The study focuses on the effects of cooperative purchasing on organizational performance, with particular emphasis on its benefits and critical success factors.
1.6.2 Geographical Scope
The study will be conducted at Luweero Health Centre IV located along the Kampala–Luweero–Gulu Highway in Luweero District.
1.6.3 Time Scope
The study will review literature from 2010 to 2013 and conduct fieldwork over a five-month period from May to September 2018.
1.7 Significance of the Study
The study will provide valuable insights to procurement managers on the benefits and challenges of cooperative purchasing, enabling them to improve implementation strategies. It will also help organizations identify practical solutions to overcome procurement challenges. Policymakers will benefit from the findings in formulating policies that promote cooperative purchasing. Additionally, the study will contribute to academic knowledge and serve as a reference for future research. Finally, it will fulfill the academic requirements for the award of a Bachelor’s degree in Procurement and Logistics Management from Kyambogo University.
