1.1 BACKGROUND OF THE STUDY
availability and input reliability shape productivity, especially in
developing coun-tries. For some resources like water, storage devices
can be used to manage unreliable services (Baisa et al. 2010). However,
electricity requires that agents respond in other ways, as power is
prohibitively expensive to store. A common response to sustained power
supply issues is for .rms to invest directly in technology in order to
generate electricity on site, or .self generation..1 By crowding out
other investment opportunities, blackouts reduce pro- ductivity
(Reinikka and Svensson 2002).2 In contrast to the literature, this paper
examines how the onset of blackouts aÂ¤ect productivity in an immense
and rapidly-growing economy, namely China. Using enterprise-level panel
data, we study how .rms respond to blackouts and estimate the resulting
lost productivity and environmental acts.
In the early 2000s,
industrial customers in nearly every province in China experienced
blackouts associated with resource scarcity (IEA 2006).3 Despite efforts
to build new power plants at a rapid rate, double-digit economic growth
has led to a tight market. Furthermore, retail electricity remains
under price-cap regulation with limited price response to shortages.
residential and commercial electricity consumers were given priority
over industrial customers. While historic in the magnitude of blackouts,
this remains a major concern for China. As recently as the summer of
2011, China faced substantial power shortages.
Although outsourcing is still at its developing stage in Nigeria, it
has benefited many companies (Orji, 2002) as well as created jobs
opportunities for many Nigerians as well. Firms outsourcing part of
their production process and services are benefiting from increased
efficiency and profits.
The decision to outsource comes with numerous responsibilities and
considerations by the company willing to outsource. The need to improve
and speedup the production process of a firm may lead to a firm deciding
to contract or outsource some of its production process to another firm
or vendor to handle. The issue of wastages in developing countries
including Nigeria has been a major issue. The in-ability of companies to
effectively manage their outsourcing process is alarming.
Having identified non-core activities, Domberger (1998) emphasises
the importance of developing a framework of analysis which provides a
structured, systematic approach to contracting decisions and
outsourcing strategies (p.9).
Farney et al. (2004) and Gay and
Essinger (2000) describe the importance of formal procurement procedures
in creating a global vision for outsourcing and selecting outsourcing
However, even when organisations set out to carefully
evaluate an outsourcing opportunity, making accurate comparisons of
internal processes relative to external providers can be extremely
difficult (Hayward & McDonagh, 2000).
There is a huge variation in how organisations define processes such as Order-
or Accounts Payable and little standardisation in how organizations
deliver and manage these processes. Davenport (2005) argues it is
therefore very difficult to compare what happens internally to what is
on offer externally.
Davenport goes on to describe the benefit of
establishing business process standards for use in outsourcing decisions
and to facilitate improvement of internal capabilities.
that specific skill-sets are required to outsource, then developing the
expertise and supply of outsourcing skills is likely to continue to
gain momentum. Govpro (2005) discussed the changing role of the Tim
Collins procurement professional and Hazra (2004) describes how it has
become critical to take a longer term, balanced, strategic view of
outsourcing opportunities. Gay and Essinger (2000) suggest that a
strategic approach to outsourcing is most effective when organisations
are prepared to adopt a new perspective on management control with the
focus on output rather than inputs, these views are supported by Quinn
in a recent interview; Companies might have brilliant designers, lawyers
etc., but might not have the capability needed for managing
outsourcing. They need to have the ability to evaluate alternative cost
structures and to understand the strategic risks of outsourcing to one
partner versus another. A good outsourcing manager must be able to
motivate partners to do what is needed. They must be able to monitor the
deal through software and personal contact â€“ without interfering;
to get lead signals they need to maintain strategic control. They need a
totally different set of management skills, and the real essence of
these skills is a learning capability and willingness.
1.2 STATEMENT OF THE PROBLEM
is still at its developing phase in Nigeria and has brought numerous
benefits to companies in Nigeria practicing it. Never the less, wastages
of raw materials and human resource have been a major challenge with
companies outsourcing. A study conducted by Farney et al (2004) revealed
that most companies in developing countries fail due to wastages
leading to scarcity of materials, poorly structured outsourcing process
and decision. Low labour cost countries like China and India have
experienced huge growth providing outsourced products and services to
more developed Western economies in recent years. However the internal
infrastructures in developing countries are often not adequate to cope
with such rapid growth, therefore resulting in the accumulation of waste
Companies might have brilliant designers, lawyers etc., but might not
have the capability needed for managing outsourcing. They need to have
the ability to evaluate alternative cost structures and to understand
the strategic risks of outsourcing to one partner versus another. A good
outsourcing manager must be able to motivate partners to do what is
needed. They must be able to monitor the deal through software and
personal contact without interfering; to get lead signals they need
to maintain strategic control. They need a totally different set of
management skills, and the real essence of these skills is a learning
capability and willingness.
1.3 OBJECTIVES OF THE STUDY
The main aim of the
study is to examine the impact of outsourcing decision on material
availability. Specific objectives of the study are:
- To evaluate the criteria used when making the outsourcing decision in seven up bottling company, Lagos.
- To identify outsourcing challenges of seven up bottling company.
- To examine the effect of outsourcing decision on material availability in seven up bottling company, Lagos.
- To suggest better outsourcing strategies that can be adopted by seven up bottling company.
1.4 RESEARCH QUESTIONS
In-order to achieve the stated aim and objectives above, the researcher developed the following research questions:
- What outsourcing process does the management of seven up bottling company pass through before outsourcing?
- What outsourcing challenges do seven up bottling company face?
- What are the effects of outsourcing decisions on material availability?
1.5 RESEARCH HYPOTHESIS
To validate findings from the study, the researcher formulated the following hypothesis:
- Ho: There is no significant relationship between outsourcing strategy and the performance of an organization.
Hi: There is a significant relation between outsourcing strategy and the performance of an organization.
- Ho: Outsourcing decisions do not directly affect material availability in the production process.
Hi: Outsourcing decisions directly affect material availability in the production process.
1.6 SIGNIFICANCE OF THE STUDY
The study will
highlight various outsourcing strategies that will be beneficial to both
management and staff of seven up bottling company. The study will also
show case outsourcing challenges to enable procurement managers and
officers in organizations to have a deep understanding of these
challenges and develop strategies to tackle them effectively.
1.7 SCOPE OF THE STUDY
study will cover the impact of outsourcing decision on material
availability using seven-up bottling company, Lagos as a case study. All
findings and recommendations from the study may not reflect the true
view of outsourcing management and strategy in Nigeria, as the
researcher could not cover a wider area due to financial and time
1.8 LIMITATIONS OF THE STUDY
However, there were some constraints that impinged on the research, these are;
- Financial constraint: The cost
of sourcing information and collecting samples of bread was quite on the
high side, which included visiting various small businesses in the
various towns that made up the local government.
- Time Constraint: The limited time frame given to achieve the research was also a constraint to the study.
1.9 DEFINITION OF TERMS
Outsourcing: Outsourcing is the contracting out of an internal business process to
a third-party organization. Outsourcing sometimes involves transferring
employees and assets from one firm to another, but not always.
Material: Material is anything made of matter, constituted of one or more substances.
Wood, cement, hydrogen, air, water and any other matter are all
examples of materials. Sometimes the term "material" is used more
narrowly to refer to substances or components with certain physical
properties that are used as inputs to production or manufacturing. In this sense, materials are the parts required to make something else, from buildings and art to airplanes and computers.
Material Management: Materials management can deal with campus planning and building design for the movement of materials, or with logistics that deal with the tangible components of a supply chain. Specifically, this covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping, and warehousing the said parts.
Material Availability: Materiel
Availability is a measure of the percentage of the total inventory of a
system operationally capable (ready for tasking) of performing an
assigned mission at a given time, based on materiel condition.