Research consultancy

QUALITY MANAGEMENT AND PROCUREMENT EFFECTIVENESS

ACASE STUDY OF UGACOF LTD

CHAPTER ONE

INTRODUTION

1.0 Introduction

This chapter will cover the background of the study, purpose of the study, research questions, and scope of the study, significance of the study and definition of terms.

1.1  Background to the study

Quality management has become the prerequisite  for survival of today’s  global organizations, companies that have adopted quality management have designed  management practices and experienced an overall improvement in corporate performance including better employee relations, higher productivity, greater customer satisfaction, increased market share and improved profitability, (Lysons, 2006).

In today’s highly competitive markets to survive, companies have to make major changes in their quality programs and as many hire consultants and institute quality training programs for their employees a new concept of quality is emerging and therefore quality has began to have a strategic meaning in different organizations across the globe, (Ford et al, 2010).

The reason quality has gained such prominence is that organizations have gained an understanding of the high cost of poor quality as it affects all aspects of the organization and has dramatic cost implications and the most obvious consequence occurs when poor quality creates dissatisfied customers and eventually leads to loss of business however, quality has many other costs, which can be divided into two different categories however organizations have adopted quality management by following the different techniques of quality management including, using the six sigma techniques as used mainly by multinational companies in  the united  states, (Handfield et al, 2006).

According to (Farrington et al,  2006) an organization cannot achieve quality independently this therefore calls for an organization to consider where it  purchases its raw materials since the raw material greatly affects the output of the organization, he further asserts that an organization has to work collectively with its upstream suppliers in order to ensure that its supplies are got from the right source.

The reason quality has gained such prominence is that organizations have gained an understanding of the high cost of poor quality it affects all aspects of the organization and has dramatic cost implications, the most obvious consequence occurs when poor quality creates dissatisfied customers and eventually leads to loss of business however the attainment of quality in production is a universal issue and therefore all the companies have to check on their supply chain order to ensure quality output, ( Patterson, 2009).

Quality management in Uganda is of recent becoming such an important topic due to the increase competition from foreign manufacturers and also the consumer protection rules which have been put in place by government parastatals like UNBS to ensure that consumers purchase goods and services which meet their needs however the issue of quality management cannot work independently as the source of purchase of a goods is instrumental in determining the quality of the outputof a good , it therefore shows that quality management has a direct impact on procurement effectiveness.

UGACOF has been a coffee processor and exporter since 1994 however despite of the massive investments by the organization in its quest to achieve efficiency it has been meant by various challenges including procurement inefficiency characterized by expensive acquisition of the goods from its supplies, dissatisfaction of its customers and above all expensive  procurements it’s on this ground that this study intends to investigate the influence of quality management on procurement effectiveness  with specific reference to UGACOF located at plot No 236 Kireku zone Bweyogere, Kampala Uganda.

1.2 Statement of the problem.

Quality management in an organization can be realized through ensuring that organizations obtain their goods from the right suppliers at the right time and price he further asserts that the quality of a good or service is essential for an organization to attract customers so that they become repeat buyers however it cannot be achieved through purchasing at right customer himselfhaving a skilled workforce also play, Lysons, (2006).

Inefficiency in purchasing in an organization has been linked to different organizational challenges including leading to high costs in purchasing, poor quality purchase of goods and services, dissatisfaction of customers and loss of market of organizations goods and services to the competitors, (Rendon, 2006). This study therefore intends to investigate into the influence of quality management on procurement effectiveness.

1.3 Purpose of the study

The purpose of study is to establish the impact of quality management on procurement effectiveness in organizations.

1.4 Objectives of the study

The objectives of the study are;

1. To examine different methods and techniques of managing quality in an organization.
2. To evaluate the steps, benefits, and challenges of managing quality in an organization.

• To analyze the indicators and measurement of procurement effectiveness in organizations.

1.5 Research questions

1. What are the different methods and techniques of managing quality in an organization?
2. What are the steps, benefits, and challenges of managing quality in an organization?

• What are the indicators and measurement of procurement effectiveness in organizations?

1.6 Scope of the study

The study scope will cover the following aspects;

1.6.1      Content scope

This study will generally cover quality management and procurement effectiveness, but the study will specifically cover, different methods and techniques of managing quality, the steps, benefits, and challenges of managing quality and the indicators and measurement of procurement effectiveness in organizations

1.6.2 Geographical scope

The study will be conducted at UGACOF located at plot No 236 Kireku zone Bweyogere, Kampala Uganda

1.6.3 Time scope

The period of data to be considered in the organization will be from 2012-2015 and period of body of knowledge in reviewing literature will be from 2000-2015, while the study will be carried out from February to July 31^st 2015.

1.7.0      Significance of the study

The study will enable future researchers to assess the different ways of achieving quality purchase.

The study will also enable academicians to explore the various ways of achieving procurement effectiveness.

The study will help researchers to analyze the relationship between quality management and procurement effectiveness.

1.8.0 Definitions of key terms

1.8.1Procurements

According to Kenneth Lysons and Brian Farrington (2006), procurement refers to the acquisition of goods, services or works through purchase, rent, lease, franchise or any other legal means considering the 3 Rs like from the Right: place, time, price, quantity, and quality by use of shareholder’s money.

Procurement simply means acquisition by purchase, rental, lease, hire purchase, license, tenure, franchise, or any other, contractual means, of any type of works, service, or supplies or any combination PPDA ACT 2003.

• Procurement effectiveness.

World commission on environment and development (1989) define procurement effectiveness as procurement of goods, services, and works, to meet the needs of present generation without compromising ability of the future generation to meet their needs.

Procurement effectiveness is procurement of goods, service, works which are needed by end user and therefore meeting their expectations or purpose for which the item or service was meant for ( Lysons 2003).

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter will review the study in line with study objectives according to different scholars

The study will use specifically three objectives which will include; examining different methods and techniques of managing quality in an organization, to evaluate the benefits, challenges and steps of managing quality and to analyze the indicators and measurements of procurement effectiveness in an organization.

The study will review the literature using information from; company documents, government reports, News papers, Magazines, text books and journals.

2.1 Over view of the key concepts

The study will generally review quality management and procurement effectiveness.

2.1.1 Quality management

Different definitions of quality management have been presented over the years. Some of these definitions are presented below.

Dale (2009) defines quality management, in accordance with ISO 8402, as “a management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society”. Dale (2009) further states tools and methodologies are used in quality management in order to improve the organization continuously.

while Hellsten & Klefsjö (2000) define quality management as a management system in continuous change and consisting of values, methodologies and tools , the aim of which is to increase external and internal customer satisfaction with a reduced amount of resources.

Mehra, Hoffman, and Sirias (2001) state that the 1980’s showed companies taking a serious look at the quality revolution and how to use it to attempt to bring about profitability, market share, and improvement. In that time, they explain there was no questioning of results that were achieved by quality systems and using any type of quality technique. As well, Mehra et al. (2001) goes on to explain, that persons, organizations, companies, etc. did not question the quality systems being used. “All quality improvement efforts were supposed to end in good results and nothing was expected to go wrong.” (Mehra et al., 2001)

Total quality management started with Deming. (ASQ, 2006). With his revolutionary works in Japan in the 1 9507s, total quality management became a popular quality system.

In 1987, IS0 was first published and widely used as the international standard for quality management (ISO, 2006). Organizations of all types were using this system and continue to do so today.

There are many types of quality management systems such as lean, six sigma, quality management, IS0 9000, Malcolm Baldrige (ASQ, 2004). The key to choosing the correct system that is best for your organization is not a small task and one that should be reviewed thoroughly (Mehra et al., 2001)

2.1.2 Procurement effectiveness

Procurement effectiveness is purchasing of goods, services, and works, to meet the needs of present generation without compromising ability of the future generation to meet their needs, (World commission on environment and development, 2002).

According to Country procurement Assessment Review, (CPAR, 2004) purchasing effectiveness of public goods and services is imperative for good economic management and addressing leakages of government funds it further states that purchasing effectiveness is acquisition of goods, services and works at the right time , place and quantity.

Thai, (2004) considers procurement effectiveness to involve the identification of procurement needs which involves clearly understanding the needs of the user department by carefully caring out procurement planning.

Purchasing law globally seeks to guarantee value for money spent by stakeholders in the supply chain. The law recognizes and promotes the necessity for procurement standards which should be enforced through implementation practices. It also seeks to deter procurement and disposing entities from undertaking shoddy procurement and regulates the conduct of officials involved for effective and efficient procurement. Consequently, procurement law makers expect compliance as the ultimate objective, but this is often not achieved as there are irregularities arising from buyers, suppliers or both.

In most developed countries, public purchasing takes place within a framework of international obligations, such as the World Trade Organization’s Agreement on Government Procurement or the Procurement Directives made under regional agreements such as the European Union or the North America Free Trade Agreement, this is specifically in order to realize purchasing effectiveness in the system, (Agaba and Shipman, 2008).

According to Public Procurement and Disposal of Public Assets Authority report, (2007), The Government of Uganda initiated reforms in the public procurement and disposal sector in 1997, following the enactment of the 1995 constitution and the demand for improved governance and public sector management. The  reforms  were  initiated against  the backdrop  of  lack  of  accountability  and  transparency  and  absence  of  a culture  of  value for  money  procurements.  According to the PPDA report 2007, the  development  partners  recommended to government to put in place appropriate public procurement practices based  on  international  standards  which  are  fair,  transparent,  competitive  and  non-discriminatory to all potential providers of goods, services and works.

The Act empowers all local Governments that receive funds have to ensure that those funds are spent solely on the procurements which are specified through bidding contracts. The Local Government Act was put in place to operationalize the policy of decentralization adopted by the Government of Uganda, (1996) which devolved powers and functions to the districts for improvements in service delivery, including procurement service delivery so that the country realizes purchasing effectiveness.

One of the provisions of the Act is that appropriate measures shall be taken to enable local government units to plan, initiate and execute policies in respect of all matters affecting people within their jurisdiction. The local governments shall oversee the performance of persons employed by government to provide service in their area and monitor the provision of services or the implementation of projects in their areas. These services include procurement and procurement auditing.

According to Lyson et al, (2006), effective purchasing must consider the five Rs of right price, quality, quantity, and time and from the right source, this therefore means that purchasing professionals must purchase the products at the right suppliers and from the right source.

According to the Bar, (2009), awareness of the purchasing law can determine the extent to which a purchasing entity becomes fraudulent. Awareness of the buyer’s law on supplier obligations, for example, implies buyer’s alertness on quality of deliveries and related aspects. On the other hand, the supplier should be aware of buyer obligations with respect to price. The law and its user awareness are both meant to be instrumental in curbing procurement fraud and promoting purchasing effectiveness.

2.2 Methods and techniques of managing quality

2.2.1 Methods of managing quality

Participative Management, The entire quality process, once started, will be an ongoing dynamic part of the organization, just like any other department such as marketing or accounting. It will also need the continuous focus of management. The implementation and management of a successful quality system involves many different aspects that must be addressed on continuous basis.

Developing organization vision and goals geared towards achieved quality, the starting point for the management and leadership process is the formation of a well-defined vision and value statement. This statement will be used to establish the importance of the quality system and build motivation for the changes that need to take place, whether the organization plans to exceed customer expectations, commit to a defined level of customer satisfaction, or commit to zero defects. The exact form of the vision and values is not as important as the fact that it is articulated and known by everyone involved. This vision and value statement is going to be a driving force to help mold the culture that is needed throughout the organization in the drive for quality. It is not the words of the value statement that produce quality products and services; it is the people and processes that determine if there is going to be a change in quality, (lysons, et a, 2006).

Developing the Plan, The plan for the quality system is going to be different for every organization, but there are similar characteristics; there should be clear and measurable goals, There are financial resources available for quality, The quality plan is consistent with the organization’s vision and values.

The plan for the quality system might also include pilot projects that would entail setting up small quality projects within the organization. This will allow management to understand how well the quality system is accepted, learn from mistakes, and have greater confidence in launching an organization-wide quality system. The plan should provide some flexibility for employee empowerment, because, as has been demonstrated, the most successful quality systems allow employees at all levels to provide input, (Handfield, 2010)

Communication, Change, especially a movement toward higher quality, is challenging to communicate effectively, yet the communication process is essential for the company’s leaders to move the organization forward. Communication is the vital link between management, employees, consumers, and stakeholders. These communication lines also bring about a sense of camaraderie between all individuals involved and help sustain the drive for the successful completion of long-term quality goals.

Communication systems also must allow for employees to give feedback and provide possible solutions to issues the company must face. Management needs to allow for this in both formal and informal ways, such as employee feedback slips and feedback round table meetings, (Lyson et al, 2006).

Customers, The inclusion of customers in a quality program can take many different avenues, including the cost of losing a customer, the customer’s perception of quality, and the satisfaction level of the customers. The customer portion of a quality program is going to be unique for every industry and organization, but it must capture how quality plays into the customer’s value system and how quality drives the purchase decision.

In service industries, in particular, quality is measured in customer retention rates and the cost of losing a customer. If typical accounting measures could capture the exact cost of losing a customer it would be easy for managers to allocate the exact amount of resources needed to retain customers. According to the

Harvard Business Review, companies can increase profits by almost 100 percent by retaining percent more of their customers. Customers over time will generate more profits the longer they stay with the same company, (Russell, 2003).

Rewards and Acknowledgment, Rewards, compensation, and acknowledgment for achievements in quality are very effective ways to motivate employees. They tell employees at the end of the day exactly what management is trying to accomplish. Rewards, compensation, and acknowledgment may also be seen as a form of communication they are tangible methods that senior management uses to let employees know that quality is important. This could come in the form of individual rewards or team rewards. Rewards, compensation, and acknowledgment take many forms, and it is up to management to ensure that this type of program is in line with the goals and objectives of the quality system and the goals and objectives of the organization. Organizations have found that the best and most cost-effective reward, compensation, and acknowledgment programs are geared to meeting specific criteria. These programs motivate managers who in turn motivate their employees to strive toward predefined goals, (West, John E. (2009).

Benchmarking is one of techniques used by TQM firms in their continuous improvement drive. According to Rank Xerox, cited in (Cross and Leonard, 1994) ‘benchmarking is defined as the continuous process of measuring product services and processes against strongest competitors or those renowned as world leaders in their field’. The idea behind this is to understand and evaluate the present position of a business in relation to the best practices and draw up areas for improving performance. As a tool in TQM, it helps to identify the processes involved in quality performance and facilitate the performance strategic function of a business (Vorley and Tickle, 2001).

For any organization to be competitive it must keep abreast the best practices in the industry, this will ensure that such organization meets the expectations of customers. Thus benchmarking should be a continuous process in strive to meet organizational objective of satisfying her customers.

The quest to deliver quality services in the Nigerian airlines requires airlines to continually update their services, so as to meet up with the demands of customers and remain competitive. While the old airlines which are regarded in this research as non-TQM need to update their service orientation by benchmarking their services with that of the TQM airlines, this can only be supported with an ideology which is focused on satisfying customers demand and which allows for continuous improvement. The TQM airlines on the other hand will have to continue to improve their services by looking at what obtains in other parts of the world in order to meet or surpass customers’ expectations.

Ensuring efficient Contract planning is an ongoing creative process aimed at ensuring that the tasks are distributed in the best way possible to achieve the organization targets, (Rendon, 2008), Bartrol and Martin (1998) define planning as the management function that involves setting goals and deciding how best to achieve them. Strategic planning involves defining the resources, policies and all the time required to accomplish objectives including defining the Resources and policies and the time required to accomplish the objectives and achieve the profits in light of the Resources, availability and the policy guidelines planning for the management of the contract commences in the procurement planning phase and continue right through evaluation and contract negotiation (Cole, 2004).

Cole, 2004 explains that the purpose of contract planning is to assist in developing an appropriate level of planning commensurate with the level of complexity and involvement by project managers and ensuring that service providers adhere to the organization’s policies and objectives, If planning is effective identification of various key stake holders, identifying risk and setting up migration measures is possible and effective.

Sharing Technology, Global companies like Toyota, Honda, and Isuzu share their new technologies with their suppliers so as they supply up to date products needed by these companies this also helps in quality improvement in both companies. Most companies like Volkswagen, fiat and Toyota share their new technological ideas with their suppliers (ford et al,2009). According to Wargner et al (2006) the success of Japanese automobile industry has been largely been because of supplier development in this situation the buyers share with the sellers different idea, technology, scientific research, and costs and future expectations so that each firm is able to produce as required by the other party (buying party).

2.2.2 Techniques of managing quality

Process maps, One of the important keys to understanding how to improve a process is to map the process. While there are several different approaches to process mapping, the key is to determine who does what at each step of the process. Often, the simple drawing of a process map is sufficient to solve many quality problems because the map makes it so obvious where defects can be introduced, BSI, (2003).

Poke-A-Yoke, This concept of the Japanese management philosophy is to make a process foolproof. The idea is to design the process in such a way that it is self-checking or incorporates process steps that cause immediate detection and possible correction of any defect. Simple examples include color-coding and special keying of parts to ensure that they are assembled the correct way, (Coşkun – ‎2002).

Statistical Tools, One of Deming’s major contributions to the quality movement was the introduction of statistically grounded approaches to the analysis of defects, without the use of these tools, one can of ten make incorrect decisions, (Farrington, 2006).

Tree Diagram, This tool is used to systematically map out, in increasing detail, the full range of paths and tasks that need to be accomplished to achieve a primary goal and every related sub goal. Graphically, it resembles an organization chart or family tree, (Lyson, 2006).

Prioritization Matrices, Prioritization matrices are one of a group of decision-making tools that help to prioritize tasks, issues, or possible actions on the basis of agreed upon criteria. While these tools cannot make decisions, they can help to ensure that all factors are evaluated and that logical decisions are reached, (Seddon, 2004).

Activity Network Diagram, This class of tools includes a wide range of project management tools used to plan the most a appropriate schedule for a complex project.

Typical examples are Gantt Charts and PE RT charts. These tools project likely completion time and associated effects and provide a method for judging compliance with a plan. Several excellent computer programs exist for automating the work associated with this class of tools, Basu, (2003).

2.3 Steps, benefits, and challenges of managing quality

2.3.1 Steps of managing quality

Understand and map all business structures and processes, this forces employees involved in designing a performance measurement system to think through and understand the entire organization, its competitive position, the environment in which it operates, and its business processes. This will also allow for complete understanding of customer touch points and how the different operations in the organization affect the customer’s perception of quality, (lysons, 2003)

Develop business performance priorities; the performance measurement system should support the stakeholders’ requirements from the organization’s strategy through to its business processes. This order of priorities must be in place well before the process enters the actual design phase, (Erstad, 2006).

Understand the current performance measurement system; every organization has some kind of measurement system in place. For this reason, there are basically two ways to approach the design and implementation of a new performance measurement system. Either you can scrap the old system and introduce a new one as a replacement, or you can redevelop the existing system. Both approaches can work, but the former approach is more likely to lead to trouble. People will cling to the old measurement system and either uses both systems simultaneously or use the old one and simply go through the motions of the new one, (Ouchi, 2003).

 Develop performance indicators. The most important element of a performance measurement system is the set of performance indicators you will use to measure your organization’s performance and business processes. This is the point in the design process where the top-down approach meets the bottom-up design approach and where the broad masses of the organization become involved. The purpose of this step is to develop the performance measurement system with an appropriate number of relevant and accurate performance indicators. Michael (June 2012)

Decide how to collect the required data, developing perfect performance indicators that will tell you everything you ever wanted to know about what goes on in your organization is one thing, but being able to collect the data required to calculate these performance indicators is a completely different matter. This issue must initially be addressed during the development of the performance indicators so that you avoid selecting those that can never actually be measured. There will be trade-offs of cost and time versus the benefits of collecting data, but a likely middle ground between perfect data/high cost and no data/no cost will be found, (Wargner et al (2006).

Design reporting and performance data representation formats. In this step, you decide how the performance data will be presented to the users; how the users should apply the performance data for management, monitoring, and improvement; and who will have access to performance data. After you finish, you should have a performance measurement system that has a solid place in your organization’s overall measurement based management system, (Ouchi 2003).

Test and adjust the performance measurement system. Your first attempt at the performance measurement system will probably not be perfect there are bound to be performance indicators that do not work as intended, conflicting indicators, undesirable behavior, and problems with data availability. This is to be expected. In this step you should extensively test the system and adjust the elements that do not work as planned, (Golden et al, 2003).

Implement the performance measurement system. Now it’s time to put your system to use. This is when the system is officially in place and everyone can start using it. This step involves issues such as managing user access, training, and demonstrating the system, ((Forster et al 2004).).

Customers’ inclusion in the design process, the inclusion of customers in a quality program can take many different avenues, including the cost of losing a customer, the customer’s perception of quality, and the satisfaction level of the customers. The customer portion of a quality program is going to be unique for every industry and organization, but it must capture how quality plays into the customer’s value system and how quality drives the purchase decision.

In service industries, in particular, quality is measured in customer retention rates and the cost of losing a customer. If typical accounting measures could capture the exact cost of losing a customer it would be easy for managers to allocate the exact amount of resources needed to retain customers. According to the Harvard Business Review, companies can increase profits by almost 100 percent by retaining percent more of their customers. Customers over time will generate more profits the longer they stay with the same company, Russell T. (2003).

2.3.2 Benefits of managing quality

Improvement in performance of suppliers; Quality management leads to improvement in the performance of suppliers, According to Wargneret al, (2006) the success of Japanese automobile industry has been largely been because of supplier development in this situation the buyers share with the sellers different idea, technology, scientific research, and costs and future expectations so that each firm is able to produce as required by the other party (buying party), this therefore leads to technological advancement on the buyers side and an improvement on performance and efficiency. Supplier development improves performance of suppliers along with in supply chain.  Supplier development surely accomplishes beneficial outcomes for buyer and supplier.  A number of studies confirmed several benefits out of supplier development activities, According to (Ouchi, 2003) companies that are engaged in quality management development stand out to perform far much better than its counter parts that didn’t.

Quality enables just in time technique to be possible, Systematic Quality management generates the outcome such as up-gradation of just-in-time capabilities of suppliers this has helped organizations to minimize risks in storage and inventory most of the Japanese automobile have benefited from the just in time technique which helped the Japanese automobile car manufactures to out compete most of the western manufacturers including the Americans and later many companies in the world adopted this technique. Krause et al, (2003),

Reduction in cycle time of suppliers , According to Golden et al, (2003) , cycle time the time between the ordering time and the time of receiving the item is greatly reduced when the buyer and the seller are in a collaboration, helps buyers to reduce on their ordering process and also saves time for the suppliers to get act upon the demands of their customers in a shorter time since the orders become obvious to suppliers.

Quality management improves the quality of life of goods,  a quality management program improves quality of the items since during quality management all parties come to understand the needs of one another it specifically makes suppliers aware  of the needs of the buyers therefore they will have to adjust , apart from that , suppliers also share technology with their buyers in order to produce quality (Forster et al, 2004).Furthermore supplier development  improved the quality of products  in automobile for example the Japanese automobile industry which adopted the supplier development program was very successful in automobile manufacturing , quality improvement were manifested when giants of automotive industry (General Motors, Ford, Chrysler, Nissan, Honda and Toyota) followed through supplier development programs to reinforce their suppliers, Talluri et al, (2003)

Quality management promotes just in time,  Systematic quality management approaches generates the outcome such as up-gradation of just-in-time capabilities of suppliers this has helped organizations to minimize risks in storage and inventory most of the Japanese automobile have benefited from the just in time technique which helped the Japanese automobile car manufactures to out compete most of the western manufacturers including the Americans and later many companies in the world adopted this technique, (Krause et al, 2003),

Improvement in performance of suppliers, According to Wargner et al (2006) the success of Japanese automobile industry has been largely been because of supplier development in this situation the buyers share with the sellers different idea, technology, scientific research, and costs and future expectations so that each firm is able to produce as required by the other party (buying party), this therefore leads to technological advancement on the buyers side and an improvement on performance and efficiency. Supplier development improves performance of suppliers along with in supply chain.  Supplier development surely accomplishes beneficial outcomes for buyer and supplier.  A number of studies confirmed several benefits out of supplier development activities.

According to (Ouchi 2003) companies that are engaged in supplier development stand out to perform far much better than its counter parts that didn’t.

Improvement in quality,  a quality management program improves quality of the items since during quality management all parties come to understand the needs of one another it specifically makes suppliers aware  of the needs of the buyers therefore they will have to adjust , apart from that , suppliers also share technology with their buyers in order to produce quality (Forster et al 2004).Furthermore supplier development  improved the quality of products  in automobile for example the Japanese automobile industry which adopted the supplier development program was very successful in automobile manufacturing , quality improvement were manifested when giants of automotive industry (General Motors, Ford, Chrysler, Nissan, Honda and Toyota) followed through supplier development programs to reinforce their suppliers, Talluri et al (2003).

Reduction of costs in manufacturing, Quality management programme enabled companies to reduce costs in the production process such costs include costs of advertising, cost of production of poor quality products, cost in testing of manufactured item, Japanese Automobile industry which was a pioneer in Quality management can cut a great deal of costs on the course of its policy of this made it to have a great mark as production  supper power in turn it was able to out compete its competitors, (Clark et at, 2007).

2.3.3 Challenges of managing quality

The process of quality management is labor intensive, quality management process in an organization requires a lot of highly skilled manpower therefore this process tends to be labor intensive, this may also involve teaching of suppliers about new products which is needed by the buyers, training them on the recent technologies, giving suppliers workers access to better education in other academic institutions in order to be well conversant with products needs of suppliers ‘products. (Milgrom, 2010). This process will therefore tend to appear very labor intensive on the side of the buyers and such it will require the buyers to spend so much on labor so that supplier development practice is achieved.

Financial costs are often high; supplier development requires a lot of massive investments in the technology department. This process involves a lot of financial sacrifice from both parties this financial aid to the supplier may help the supplier in improving their capability, and such many global company companies like Toyota, Nissan, and Honda among many others spend millions of dollars involving suppliers in the production stage of new products and in assisting them in carrying out research so as to improve on their quality conformance. (Adler, 2008).

Japanese companies, in particular, are known to send a large number of Japanese engineers and technical support staff to train local suppliers not only to meet the rigorous Japanese product quality standard but also to improve on their production and delivery capabilities.  (Linker et al, 2006).

Creates dependency, since quality management involves ensuring that both the first tier and second tier suppliers supply quality products to the manufacturing firms it’s therefore difficult for an organization to manage quality independently, Due to competitiveness in business companies have decided to concentrate on their core competencies and outsource other products or services from suppliers however this prevents companies from the idea of self-reliance and makes buyers vulnerable to suppliers decline (Handfield,2009).

According to Sawada Y,(2005) dependence may put the company at risk of collapse in case of break down by the suppliers, in this period the seller may be able to exploit the buyer since the seller appears to be a monopolist.

Quality management creates limited privacy, Due to over involvement of suppliers in the product development stages, buyers’ loose privacy of most of their technological, scientific and financial secrets to the buyers who may end up giving it to the competitors.

Prohibits the development of new furniture, supplier development creates mainly creates long term commitment with suppliers and the such relationship is maintained normally for long time this therefore prevents new industrial players to compete in the market, according (leong et al, 2009) to Japanese automobile manufacturers have used the same suppliers for decades to supply them with the necessary components

Quality management is a time consuming exercise, this process involves mainly identifying suppliers in the first place, mentoring the suppliers so that they are able to meet the buyers required standards and also involving the suppliers in the new product development stages, giving suppliers financial aid whenever necessary so such a process may appear very time consuming to a new seller in the market, (Lysons, 2006).

Weak firms may be out competed in the quality management process, with all its related benefits when one organization acts as the sole supplier of a certain need to the buying organization, if such scenario happens for long the other organizations (competitors) are denied the chance of competition and hence it may lead to a monopoly situation in a country, thereby preventing most of all the growth of new furniture in a country.(Mahapatraet al, 2008).

Financial costs are often high, The process of supplier development is one that involves a lot of financial sacrifice from both parties this financial aid to the supplier may help the supplier in improving their capability, and such many global company companies like Toyota, Nissan, and Honda among many others spend millions of dollars involving suppliers in the production stage of new products and in assisting them in carrying out research so as to improve on their quality conformance. (Adler 2008).

Japanese companies, in particular, are known to send a large number of Japanese engineers and technical support staff to train local suppliers not only to meet the rigorous Japanese product quality standard but also to improve on their production and delivery capabilities.  (Linker et al 2006).

Quality management is a time consuming exercise, this process involves mainly identifying suppliers in the first place, mentoring the suppliers so that they are able to meet the buyers required standards and also involving the suppliers in the new product development stages, giving suppliers financial aid whenever necessary so such a process may appear very time consuming to a new seller in the market.

Quality management Creates dependency: Due to competitiveness in business companies have decided to concentrate on their core competencies and outsource other products or services from suppliers however this prevents companies from the idea of self-reliance and makes buyers vulnerable to suppliers decline (Handfield 2009).

According to(Sawada ,2005)dependence may put the company at risk of collapse in case of break down by the suppliers, in this period the seller may be able to exploit the buyer since the seller appears to be a monopolist.

Supplier development may prevent competition, with all its related benefits when one organization acts as the sole supplier of a certain need to the buying organization, if such scenario happens for long the other organizations (competitors) are denied the chance of competition and hence it may lead to a monopoly situation in a country, thereby preventing most of all the growth of new furniture in a country.(Mahapatra et al 2008).

The process of quality is labor intensive, this involves teaching of suppliers about new products which is needed by the buyers, training them on the recent technologies, giving suppliers workers access to better education in other academic institutions in order to be well conversant with products needs of suppliers’ products. (Milgrom 2010). This process will therefore tend to appear very labor intensive on the side of the buyers and such it will require the buyers to spend so much on labor so that supplier development practice is achieved.

Lack of privacy; Due to over involvement of suppliers in the product development stages , buyers loose privacy of most of their technological, scientific and financial secrets to the buyers who may end up giving it to the competitors.

Prohibits the development of new products in an organization, quality management creates mainly creates long term commitment with suppliers and the such relationship is maintained normally for long time this therefore prevents new industrial players to compete in the market, according (Leong et al, 2009) to Japanese automobile manufacturers have used the same suppliers for decades to supply them with the necessary components

Sharing Technology, Global companies like Toyota, Honda, and Isuzu share their new technologies with their suppliers so as they supply up to date products needed by these companies this also helps in quality improvement in both companies. Most companies like Volkswagen, fiat and Toyota share their new technological ideas with their suppliers (ford et al,2009).

According to Wargner et al (2006) the success of Japanese automobile industry has been largely been because of supplier development in this situation the buyers share with the sellers different idea, technology, scientific research, and costs and future expectations so that each firm is able to produce as required by the other party (buying party).

Financial help to suppliers, companies give suppliers money in order to purchase new equipment perhaps which may be needed for the new product development or even improving the skills of workers by giving them education in required institutions of learning so that they are able to produce products which are needed by the buyer. Ford the American automobile manufacturer spend nearly 30 million dollars in giving financial aid to its suppliers of spare parts so that they are able to improve their technological capability in line with ford standards (monecza et al ,2006). Financial help to suppliers is very imperative in the supplier development process and by 2000 multinational companies total expenditures in supplier development has changed from 91 billion dollars to 416 billion dollars in the last 20 years (Tunstall, 2002).

Manpower development, this is when buyers train the workers of suppliers so as they adapt to new techniques or technologies that the buyer needs and upgrade to the current standards or even to the goals of the buying organization during this process buyer sends employees to the suppliers site to train suppliers employees so as they are able to adapt to the current trends as desired by the buying organization and in turn help the buying organization fulfill its objectives and goals  which may sometimes be in introduction of new products in the market (Novak, 2008).

Sharing ideas and yet other companies are unwilling to share ideas, This is when buyers share knowledge with suppliers about the future product to be developed and this enables the supplier to adjust their production techniques accordingly, this knowledge is mainly in science and technology and how the future of the industry will be adjusted in relation to perhaps the market needs and competition in the global market, (Farrington et al, 2006).

In 1970s Japanese auto makers implemented the system of supplier development made their own modifications for example Honda developed a system called best practices in which among many things the system involved sharing of the ideas with their suppliers, (sako,2004).

Employee exchange; Multinational organizations exchange employees with their suppliers so that employees can learn from one another and ensure that they both sides can learn from one another’s culture and organizational ways of working. Sometimes Toyota exchanges employees with its suppliers of spare parts so that they both learn from one another (clarke, 2007).

In 1939, Toyota purchasing department rules stated that Toyota suppliers must be treated as part of Toyota. And Toyota will  continue doing business with suppliers in areas like exchanging of employees so as they are able to understand the needs of Toyota, apart from that Hyundai does not financially support its suppliers but gives personnel support to it suppliers this kind of personnel exchange is aimed at developing suppliers, (handfield et al,2000).

2.4 Indicators and measurements of purchasing effectiveness

2.4.1 Indicators of procurement effectiveness

Proper specification development, Specification is a statement of the attributes of a product process or service and in the success of any purchasing venture specification is vital (Lysons, 2006) .Specifications have two basic functions i.e. communication and comparison, when prepared by the purchaser they inform the supplier what is required and when prepared by the supplier they provide a prospective purchaser with the description of the attributes of a product. Specifications also provide criteria against which the products and services supplied or available can be compared (Lysons et al, 2006).

An organization which develops a clear specification will be able to inform the supplier of the different products it needs and how it is made this therefore enables the suppliers to check if they possess such products and supply it accordingly (Bailey et al, 2006).

Proper purchasing planning

Planning can lead to improved efficiency and effectiveness in delivery of goods and services and planning is a deliberate attempt to design a future course of action with view to optimize the use of resources (Cole ,2004)..

Coordination of various future activities of an organization is by preparation of plans actions for future periods this minimizes risks and increases the degree of purchasing effectiveness (Drury, 2000), Drury also further says that procurement plans made by the district should be to help in organization control and facilitate communication to ensure success in achievement of the required objectives.

Organizations were purchasing planning is inadequate; it has resulted in short comings of poor purchasing practices made (Procurement news, 2005). Sakire& Unit (2006) in their analysis of the public procurement procedures in Turkey singled out more specifically that the first step as an important activity of procurement planning or procurement law is determination of needs. Therefore procurement planning has to be done after knowing needs of end-user. According to UN (2006), Good procurement planning is essential to optimize the contribution of the procurement function towards achieving the overall goals of the organization.

Proper coordination between end user with procurement staff, Procurement staffs decide on the contracts to take on, the tenders to award preparation of bids, advertisement of bids and also proposing appropriate procurement methods (PPDA ACT and regulations 2003).

Public procurement contracts provide the mechanisms by which the national development goals of states can be attained. According to Arrow (1997), public procurement contracts are means of achieving national development objectives and therefore coordination between end user with procurement staff is important towards achieving procurement effectiveness.

According to (Basheka, 2006) Public procurement is often plagued with corruption, unfair practices and price collusion in view of the huge amounts of money involved and there should coordination between different departments to encourage effectiveness in the system.

According to the PPDA ACT (2003) section 34 (a) it states that end user liaise with and assists procurement and disposal unit thought the procurement or disposal process to the point of contract placement.

Basheka B.C (2009) observed that in the last five years, corruption has been placed high on the international agenda. Corruption has taken an alarming dimension in recent years at the same time spreading in geographical and growing in intensity and most of this happens because of lack proper coordination between end user with procurement staff.

Developing Proper Purchasing Policies, If policies are ineffective, employees lack comprehension and it is difficult to explain to end users the why of the policies, ( Lysons, 2006).

Purchasing Policies are essential to achieve purchasing effectiveness, it’s because policies help in guiding purchasing professionals on what to do and therefore creating efficiency in the system (Erridge, 2001).

Policies are only good if everyone understands them and can explain and defend them. Planning is deciding in advance what to do, how to do it, who will do it and when it will be done. If your employees don’t know why your business does what it does, where the business is going and how you will measure success, then it’s difficult to communicate your business value to your end users therefore good procurement policies need to be adopted and developed in order to achieve procurement effectiveness Erridge (2001).

Maintaining an effective communication with the supplier. In order to supplier what is needed According, to Nicol w (2003), all correspondence and communications with the vendor regarding problems, proposed changes, or the implementation of the procurement decision should be effective , According to McIvor (2005), in managing outsourcing relationships, communication with the vendor is of utmost importance during the life of the contract. Knowledgeable internal staff must be available to identify problems and work with the vendor to resolve them. Vendor selection should have provided a vendor whose business/functional culture aligns with that of the organization, so that communication is fostered and developed to support the effort should be documented and kept in order to resolve disputes or identify areas of strengths and weaknesses.

Public entities involved in procurement should practice and encourage competition

and accountability, Purchasing organizations should deliberately enable bidders to compete with one another under the same terms and conditions using a relevant procurement method with a view to maximizing value for money and a competitive purchasing system encourages improvement in quality amongst service providers this therefore creates purchasing effectiveness in an organization and a good purchasing systems should be one which is non-discriminative, (Hatley et al,2009).

2.4.2 Measurement of procurement effectiveness

Level of trust between suppliers and buyers, trust is something that no money can buy and if there is lack of trust between both parties of buyer and supplier then enforcing purchasing effectiveness program is difficult and hard to enforce. (Krause et al, 2006).

Level of support from managers are a common pitfall, Many managers state that suppliers are sometimes unwilling to accept help in the form of supplier development. Perhaps they are too proud. Perhaps they do not see the value in improving quality or delivery performance. Or perhaps they do not recognize they have a problem. Acknowledging that unsupportive managers are a potential pitfall, buyers can devise remedies, perhaps based on our findings, which provide the greatest overall benefits. Management attitudes significantly affect the success of a an effective purchasing system, so they must be monitored and addressed continually.(Hanfield et al, 2006).

Financial capability, purchasing effectiveness development programme is a long-term programme which requires large amount of money to enforce and realize its success, Japanese automobile companies of Toyota, Honda and Suzuki spend billions of dollars in enforcing a supplier development programme, After the programme was adopted by American companies of recent the ford automobile manufacturer spent over 30 million dollars enforcing a supplier development programme with a view of achieving purchasing effectiveness, (Handfield et al, 2006).

Level of information sharing in an organization, sharing proprietary information is a concern for many senior organizational executives; most companies treat their new ideas with a lot of secrecy and are reluctant to release information concerning perhaps their new technology, production techniques and future plans, this hinders supplier development and purchasing effectiveness since the system requires openness with information. (Handfield et al, 2006).

Level of  organizational investment, to concentrate purchasing effectiveness requires enough time between both parties to concentrate on supplier development programme , Honda of America has supplier development programme with a view of purchasing effectiveness that many envy because the company has extensive  thirteen week programme in which Honda employees spend up to four days a week at a supplier site and work on continuous improvement programme this  practices consumes a lot of employees time and waste organizational resources (Krause et al, 2006).

Level of commitment between both suppliers and consumers, Purchasing effectiveness programme requires both firms to commit, capital and personal resources and create an effective means of measuring performance this requires companies to ensure long term commitment between both companies . Commitment is when both companies share long term goal together and are willing to fore go anything for the betterment of a future goal (Fornell et al , 2006).

2.5 Conclusion

The literature shows that methods of managing quality in an organization include; participative management, developing organizational vision & goals geared towards achieved quality, developing the plan, communication from top management to staff, the inclusion of customers in quality management, rewards and acknowledgement of achievement of employees.

The literature further asserts that techniques of quality management in an organization includes; process mapping of quality output, statistical tools, tree diagram, developing prioritization matrices and designing network diagramme.

The study indicates that  the steps an organization needs to follow while managing quality includes; an organization needs to understand and map all business structures and process, understand the current performance measurement system, develope performance measurement system, develop performance indicators,  decide how to collect the required data, test and adjustments the performance measurement system.

The study indicates benefits of managing quality as; improvement in performance of suppliers, quality management allows just in time techniques to be possible, reduction in cycle time of suppliers, quality management improves on quality of life of goods, reduction of costs in manufacturing.

The results in the literature indicates that challenges of managing quality in an organization include; quality management is labor intensive as it requires highly skilled work force, financial costs are often high, creates dependency, limits privacy of suppliers and above all it’s a time consuming exercise.

The study indicates that indicators of procurement effectiveness in an organization include; proper specification development, proper purchasing planning, proper coordination between end users with procurement staff, developing proper purchasing policies, maintaining an effective communication with suppliers and public entities involved in procurement  should practice and encourage competition.

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter presents the methodology which consists of the research design, area of study, study population, sample population and selection, sampling technique, data collection method, data quality control, data collection procedures and limitations of the study.

3.1 Research design

Across sectional research design will be used with a blend of qualitative and quantitative approaches. Qualitative approach: this approach gathers information based on an in depth understanding of human behavior and the resources that govern the behavior depending on thewhy and how. This is used because it deals with smaller population and it puts emphasis on uncovering more about people’s experiences.

Quantitative approach: this is the approach that deals with numerical expression in figures in terms of quantity which involves measurement of quantity and amounts.

However quantitative approach will be used because of the following reasons; this approach eliminates behavioral biases were by the behavioral beliefs are done away with, the approach leads to accuracy were by results are not guessed, operational risks are reduced. This approach will be used in away of getting actual figures and taking on calculations then getting answers.

3.2 Population and area of the study

The study will include the organizational workers from different departments who will include; procurement department, accounting department, Marketing department and administration. The study will be carried out at UGACOF located at plot No 236 kireku zone Bweyogere, kampala Uganda

3.3 Sampling design

3.3.1 Sample size and number of respondents

The study will target UGACOFF employees including; the administrators, procurement staffs, accounting officers and marketers.

  Table: 3.1 showing Sample size of the respondents

Source: Primary data

3.3.2 Sampling Techniques

According to (Amin, 2005) sampling involves selecting a sample of the population in such a way that samples of the same size have equal chances of being selected.

The respondents will be selected using purposive sampling techniques. Berg (2006) purposive sampling, the researcher chooses the sample based on where they think would be appropriate for the study. A Purposive sampling technique will be used because it’s cheap.

The study will also use stratified random sampling technique, according to Amin, (2005) this is were the researcher divides the population into separate groups called strata and all the respondents are given equal chances of being chosen.

This will be used for selecting respondents in marketing department; the researcher will use the above technique since the marketing department has a large population.

3.4 Data Collection methods and instruments

The methods and instruments of data collection will be;

3.4.1 Questionnaires

The questionnaires will be used to collect quantitative data. The researcher will administer the questionnaires to respondents in different departments including, procurement, administration, accounting and secretaries, which will be designed basing on study objectives and questions. Respondents will read and write the questionnaires themselves. The questionnaires will be close ended and will be considered convenient because they will be administered to the literate and its anonymous nature will fetch unhindered responses.

3.4.2 Interviews

Qualitative data will be collected from the informants using interviews. The interview guide will be structured. The interviews will be held with administration and procurement staffs, and will take approximately thirty to sixty minutes. This will be used since it’s the best tool for getting first-hand information /views, perceptions, feelings and attitudes of respondents. Both formal and informal interviews will be used to get maximum information from the different respondents to participate in the research.

3.5 DATA SOURCES

Source of data will be from both primary and secondary sources.

• Primary data

Primary data will be obtained from the questionnaires administered on the target respondents to gain opinions and practices on impacts of quality management and procurement effectiveness at UGACOFF.

• Secondary sources

Secondary data is data which has been collected by individuals or agencies for purposes other than those of a particular research study. It is data developed for some purpose other than for helping to solve the research problem at hand (Bell, 1997). This will comprise of literature related to impacts of quality management and procurement effectiveness in relation to the case study. Secondary data will be sourced because it yields more accurate information than obtained through primary data, and it is also cheaper

3.6 Data quality, validity and reliability

  3.6.1 Data quality

The instrument will be taken to the supervisor to check its correctness there after pretesting study will be carried out to find out if it measures what it is meant to for.

3.6.2 Validity

According to Amin (2005), face, content and construct tests can be done to determine the validity of the instrument. In this study, content and face validity of the questionnaires will be ensured by pre-testing the instrument and consultation with the supervisor; and by use of professionals/experts who will be given the instrument to assess the concept and rate it by trying to measure and determine whether the set items accurately represents the concept under study.

3.6.3   Reliability

Reliability of an instrument is the consistency of an instrument in measuring what it is intended to measure (Amin, 2005). In order to ensure that the instrument is capable of supplying consistent results, its reliability will be checked using the internal consistency method. This will determine the internal correlation between scores on items within the instrument by pretesting them on a sample of 10 respondents after which some of the questions in the questionnaire will be rephrased and others removed while putting new ones.

3.7  Procedures of data collection

Upon receiving the letter of introduction from Research Coordinator School of Management and Entrepreneurship to carry out research, the area of study will be visited for the purpose of familiarization.

The researcher will seek permission with staff and when allowed, to proceed with research, questionnaires will be issued and interviews carried out with the selected staff. Documentary evidence from both primary and secondary sources of data will be considered; taking into account of what is reported on quality management and procurement effectiveness.

• Data analysis and presentation

Quantitative analysis of raw data will be done. Raw data will take a variety of forms, including measurements, survey responses, and observations. Tabular and percentage calculations will be used to list questionnaire responses. Analysis and interpretation of the raw data will be based on the responses and opinions. Qualitative and Quantitative data analysis techniques will be used to manipulate data during the analysis phase to draw conclusions. The method will be ideal in providing the theoretical framework which will be central in the construction of the study.

3.9 Anticipated limitation

Respondents may delay in filling the questionnaire and some may fear to give information, but they will be persuaded that the information will be kept secret.

The researcher may not get enough time to interview all the respondents but this will not affect the study since the researcher will budget for the time appropriately.