CHAPTER ONE

GENERAL INTRODUCTION

1.0 INTRODUCTION

This chapter takes into account the background of the study, problem of the study, objective of

the study, research questions and significance of the study, scope of the study, limitations of the

study, research methodology and organization of the study.

1.1 BACKGROUND OF THE STUDY

Purchasing has been considered as one of the basic functions common to all organizations and

view as a clerical function which other departments can perform such as accounts, marketing and

engineering. These functions have moved from clerical era to strategic era.

According to Lyson (2003), purchasing function is responsible for obtaining purchase lease,

equipment, material supplies and service required for usage in production. In broader view, all

organization needs inputs from suppliers to operate. Until recently, most organizations paid little

attention to purchasing; however, there is a recognition that purchasing activities contribute

significantly and profitably in an organization in greater extent.

Management started to give much more of attention to purchasing when they recognized its

potential contribution through the formulation of quality specification. The greatest scope for

saving lies in the areas of greatest expenditure. And for now, about 60% to 70% of organizations

expenditure goes to the purchasing department.

With this, commercial aspect of business has now been realized and appreciated by many

organizations, for that matter the recognition that organizations are given to purchasing has
encouraged them to come out with their ability and efforts to deliver quality goods. For

organizations to increase their profit and competitiveness, it depends very much on the ability to

purchase right requirement of the organization.

“Quality” according to Crosby, defines it as conformity to requirements not goodness. He also

stresses that the definition of quality can never make any sense unless it is based on what the

customer wants, that is, a product is a quality product only when it conforms to customer

specification. To the buyer, the correct quality is the degree of materials capable of performing a

specificfunction at a specific time .This would necessitate the employment of the personnel with

requisite skills and knowledge of the commercial aspect of purchasing.

1.2 STATEMENT OF THE PROBLEM

In an organization, Purchasing involves a lot of functions and these functions are, the

identification of need, specification, sourcing, invitation of quotations or tenders, negotiation,

contract award, expediting, receipt and inspection, payment procedures and documentation. To

achieve quality delivery of goods, specification function is taking into account to make the

necessary arrangement in specifying quality of materials and services needed by the

organization.

Many organizations pay little attention to the purchasing function. The purchasing department

finds it difficult to coordinate the activities of other departments of the organization in relation to

quality specification. Due to this, specification becomes too rigid causing suitable supplier being
excluded from bidding, tenderers wrongly or variously interpreting the requirement and also,

tenderers failing to submit satisfactory tenders.

However, for purchasing department to adopt quality specification, the research will seek to

identify the right descriptions of materials and services that are being specified by the purchasing

department to achieve quality delivery of goods at Benso Oil Palm Plantation (BOPP).

1.3 OBJECTIVES OF THE STUDY

1. To identify the process of drafting specification at BOPP

2. To identify the department responsible for formulating specification

3. To examine how quality is achieved through specification

4. To identify the challenges in formulating specification at BOPP

5. To give recommendation and suggestions towards improvement of specifications and quality

delivery at BOPP.

1.4 RESEARCH QUESTION

1. What are the processes of drafting specification at BOPP?

2. Which department is responsible for formulating specification?

3. How quality is achieved through specification at BOPP?

4. What challenges does BOPP faces in formulating specification?

1.5 SIGNIFICANCE OF STUDY

The study will enable the researcher to get more insight and understanding on how to achieve

delivery of quality goods through specification at BOPP.

It will serve as base line research to research to many researcher or writers who like to do further

study in the problem area in the future.

The study will also enable the organization to specify quality goods to the efficient purchasing

officers who are employed to help the organization achieve its ultimate goal as well as the nation

as a whole.

1.6 SCOPE OF STUDY

There are so many oil palm processing companies the researcher could concentrate on but due to

the problems stated above, the researcher decided to concentrate on BOPP.

1.7 LIMITATION OF THE STUDY

In an attempt to undertake this research work, certain problems were encountered which are

worth mentioning.

The first constraint was financial aspect, being the cost of transportation, printing, typing and

other related costs. Also, there was a problem of easy accessibility and availability of books. It

was very difficult coming by information. However, the researcher was able to get some

information.

And finally, there was constraint of time in sense that the researcher has to combine academic

work with the research.

1.8 DELIMITATION

This research work was being carried out solely at BOPP with regard to the numerous constraints

involved in the process.

Another reason was that obtaining information at BOPP was fast and there was a good

corporation from the management.

1.9 RESEARCH METHODOLOGY

The study will use both primary and secondary data source for the study. The primary data

source will consist of observation, questionnaires and survey. The secondary research will be

undertaken through literature review, internet and other existing information available.

1.10 ORGANIZATION OF THE STUDY

The study is organized into five (5) chapters. Chapter one embodies the introduction, background

of the study, statement of the problem, objectives of the study, research methodology,

significance of the study, scope of the study and the organization of the study.
Chapter two deals with the review of other related literature of the topic under study. The third

chapter is concerned with methodology of gathering data for the study, describing how the

research was conducted or how problems were investigated.

The next chapter, chapter four, deals with the findings, presentation and discussion of result and

analysis of data.

Finally, the fifth chapter constitutes of conclusion and recommendations.

CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION
This chapter deals with literature review related to the study. It talks about what other writers

have said about the topic. The research tries to find out the nature of specification, and its

benefits, purpose, types, processes, methods and also the challenges of specification in determine

quality.

2.1 DEFINITION OF SPECIFICATION

According to Lyson (1993), specification is a statement providing a description or list of

characteristics requirement laid down for materials, components, processes or services.

Specification is therefore the functional document without which a contract cannot be defined or

certified. He goes on to say that, specification communicate to the supplier on what the buyer

wishes to have supplied to him in terms of goods and services, also they provide criteria against

which the goods or services actually supplied can be compared.

A product specification does not necessarily prove the product to be correct, just because when

an item is stamped with a specification number, does not by itself, indicate that the item is fit for

any particular use. The people who use the item (engineers, trade unions etc) or specify the item

(government, industry etc) have the responsibility of ensuring available specification, specify the

correct one, enforce compliance and use the item correctly. Specification is therefore, the

fundamental document without which a contract is meaningless; a need cannot be designed or

satisfied or as well be increasing apparently and equally assessed. Specification is therefore a

singularly an important document.

Tooley et al (1998) also defined specification as a means of communicating the needs or

intention of one party to another.

Specification as defined by Leenders, Haroid and Fearon (2000) concluded that specification by

physical or chemical characteristics provides definitions of propertiesof the materials the

purchaser desires. They will represent an effort to state measurable terms those properties

deemed necessary for satisfactory use at least cost consistent with quality.

Oxford Advanced English Dictionary (2001) defines specification as the process of specifying

details or instructions for the design, materials, of something to be done or made. From our point

of view specification is a statement that provides a narration or a life of product feature laid

down for materials components to meet the requirements of users.

2.2 TYPES OF SPECIFICATION

According to Lyson (2003), there are two main types of specification: performanceand

conformance specifications.

2.3 PERFORMANCE SPECIFICATION

According to Lyson (2003), performance specification in theory is the perfect method of

describing a requirement instead of describing an item of it’s describes in words and quantitative

where possible, what the item is required to do. This type of description is used extensively in

buying highly technical military and space. Industry use performance specification to buy
expensive, complicated machines, a firm should make every effort to obtain the ultimate in

technological advancement. Often this can be done by using performance specification (Lyson,

2003). To reduce and control the expense associated with these approaches to describing

requirements, description should be written out explicitly as possible. Also the product being

purchased should be sectionalized into the greatest practical numbers of distinct components,

with potential required to quote on each component. (Lyson, 2001) Purchasing Management,

these practices help to solve the difficulties in comparing seller’s prices by allowing comparison

of individual components, proper supply selection is essential when performance specification is

used. In fact, the ability to select capable and honest suppliers is pre-requisite to the proper use of

performance of specification. This is because the supplier assumes the entire responsibility of

designing and making the product, quality is entirely in its hand. If the supplier is not capable, he

or she can not apply the most advanced technical and manufacturing knowledge.

Its materials and workmanship may be inferior when using performance specification; supply

managers must solicit competition among two or more capable sellers. A capable supplier

ensures quality and reasonable prices.

2.4 CONFORMANCE SPECIFICATION

According to Lyson (2003), explains Conformance specification as the type of specification

where the buying organization lays down clear and unambiguous requirement. This specification

is necessary for example, items for in-cooperation in an assembly to be bought or where a

chemical product is to be acquired for production process. Nevertheless the production of

effective performance specification, is rather difficult to achieve on occasion even in situations

where the greatest call has been taken, it is sometime the case that a supplier will deliver

materials that meet specification means something different and seeks to reject the suppliers.

Conformance specifications take a variety of forms and can be drawn up by various departments.

According to Burt (2003) simple or conformance specification requires less resource at times to

deliver then specification. In many cases simple specification have little need for collaboration

between functional areas or supply chain management. For example, the specification of an

accounting department for supply management to purchase 12 Tujitu life books series model

4542. Laptop with their default component package and warranty is a complete yet the simple

specification is nothing than the brand name, model and package time and warranty needed. The

astute reader will recognize that supply management could contribute to the specification by

working with the accounting department to meet their requirement with lower cost manufacturer

or pre-qualify suppliers (Lyson, 2003).

2.5 METHODS OF SPECIFICATION

According to Lyson (2003), there are various methods of specification; some of this includes

specification by sample, the use of brand or trade name, physical and chemical characteristics,

market grade etc.

2.5.1 Specification by sample

According to Bailey et al (1994), specification by sample is a simple method of specifying,

which is often used for such characteristics as color, feel, finish. Complicated minor components
may be specified by sample to save time and trouble of making sets of drawings if the quantity

required is small. Some purchase departments keep libraries of sample for the convenience of

colleagues and for use in talking to possible suppliers. Samples however can deteriorate. Thus,

may not be or stay uniform.

In the view of Lyson (1993), the sample can be provided either by the buyer or the seller and it is

a particularly useful method of specification in relation to printing and some raw materials, e.g.

cloth. In his view, there are implied conditions that where goods are sold by sample

The bulk must correspond with the sample in quality; the buyer must have a reasonable

opportunity of comparing the bulk with the sample, however, the goods must be free from any

defect rendering them unmerchantable which a reasonable examination of the sample would not

reveal.

2.5.2 Specification by brand or trade name

According to Starling (2003), brand or trade name products area among the simplest ways to

describe as far as specification is concerned on a purchase order. Brand names give a product

recognized reputation, protect the product against substitutes and maintain price stability. This

method, however, saves time and supply management expense. The inspection required is sight

verification of the brand labels. The brand is the quality ordered. The high price usually paid for

brand names thus are of set to some extent by reduced description, preparation and inspection

cost. The brand represents the manufacturers pledge that the quality of the product will be
consistent from purchase to next. A supply manager can be certain that a reputable manufacturer

will strive to keep their pledge.

In the view of Leenders et al (1993), description by brand or trade name indicates a reliance on

the integrity and the reputation of the supplier. It assumes that, the supplier is anxious to preserve

the goodwill attached to the trade name and is capable of doing so.

2.5.3 Specification by physical or chemical characteristics

According to Leenders et al (1993), specification by physical properties or chemical

characteristics provides definitions of the properties of the materials the purchaser desires. Every

definition of quality is based o some standard of measurement understood by both parties.

Physical test provides a measurement in respect whiles dimensional measurements indicate such

quality factors as precision finishing and conformance to stated tolerances.

According to Lyson (2003), specification by chemical analysis enables the goods delivered to be

checked either by the purchaser or by independent laboratories.

2.5.4 Specification by market grade

According to Leenders et al (1993), this applies to commodities graded by government or private

agencies. A commodity such as maple lumber is graded into several categories. The regulations

on commodities like lumber typically allow a wide range of opinion among inspectors. Standard

specify a percentage of straightness, clarity and the like, permitting subjective judgment by the

inspectors.

According to Starling (2003), grading is a method of determining the quality of a commodity. A

grade is determined by comparing a specific commodity by standards previously agreed upon.

Grading is generally limited to natural product such as lumber, wheat, hides, cotton, food

products etc. The value of grade as a description of quality depends on the accuracy with which

the grades can be recognized during inspection. In buying graded commodities, supply managers

often uses personal inspection as a part of their buying techniques as a means of inspecting some

of the commodities or items they buy in the primary markets.

2.5.5 Specification by engineering drawing

According to Leenders et al (1993), it is combined with other information regarding the

requirements of the user. This method is sometimes the only way of communicating

requirements in respect of items used in engineering e.g. jigs, castings, tools and patterns.

On the contrary, Arnold (1995) also expressed that, engineering drawings describes in details,

the exact configuration of parts and the assembly. They also give information on such things as

finishes, tolerance and materials to be used. He described drawing can avoid the need for

excessive description text to be an advantage of engineering drawing. But getting a specialist to

produce the drawing would be a disadvantage if it is difficult to come by.

2.5.6 Specification by standardization

Dobler (2003) defines standardization as the process of establishing agreement or uniform

identification for definite characteristics of quality, design, performance, services etc.

However, according to Bailey (1996), standardization is a process carried out at many levels

within one organization, between all organizations that belong to one industry, nationwide and,

indeed, worldwide.
In the view of Lyson (1993), a standard differs from a specification in that while every standard

is a specification, not every specification is a standard. The distinction lies in the intention of

recurrent use.

2.6 REASONS FOR FORMULATING SPECIFICATION

According to Baily and Farmer (2000), the reason for formulating specification is to get the best

quality, thus specifying the exact product needed by the organization. If the right characteristics

are not stated the right quality of products cannot be purchased. So in order to get the best quality

it is important to state from the beginning of the product to its end without mistakes or

ambiguity. For example the color, size, shape etc should be stated to get the exact requirement

that is fulfilling the need of the company by supplying whatever they request for by conforming

to the specification of the buyer.

2.7 COLLABORATIVE DEVELOPMENT OF SPECIFICATION

According to Starling (2003), development of specification should be viewed as a collaborative

process whenever economically justified. Through collaborative inter-reaction of various

department representatives and relevant suppliers, the specification output can balance goals that

often conflicts with each other performance goal such as quality and delivery should be

balanced. Supplier’s goal should be considered. The balancing process is best done in an

atmosphere of collaboration and mutual desires to develop specifications outcome where win-

win opportunities are maximized.

2.8 DEVELOPMENT OF SPECIFICATION

According to starling (2003), developing specification can be difficult to manage because it

involves many variables, including the problem of conflicting human sensitive and orientations.

Many departments are capable of contributing to specification development. They are frequently

thwarted from fully doing so, however because of conflicting views. Before the optimum is

designed to achieve this major conflicting view must be reconciled. Several approaches to

develop balanced specification are used individually or jointly by most companies. These

approaches are in order of collaborative orientation from lowest to highest.

2.8.1 Informal approaches

The informal approaches emphasis on the concept of a supply managers responsibility to

challenge materials. At the same time, top management urges designers to request advice from

supply managers and work with them on all items that may involve commercial consideration.

Emphasis at all times is placed on person to person communication and corporation between

individual supply managers and designers. Using this approach, a common oriented cost

considered attitude is developed at the pass root level throughout the organization Baily and

Farmer (2000).

2.8.2 Early supplier involvement

Early supplier involvement is widely used by many organizations. To implement early supplier

involvement, a buying company should first establish the policy of involving supply

management in the design process. After such policy is enacted thus early supplier involvement
can actively engage. Early supplier involvement coupled with early supplier involvement can

improve product quality and reliability whilst compressing development in terms of reducing

total material cost (Starling, 2003).

2.8.3 Cross functional teams

The cross functional team approaches recognize that a good specification is a compromise

among basic objectives. A specification cross functional team establish, with representatives

from various user department within the organization throughout the department of the product

and its specification. A common variation to the above approaches is for the development of the

specification being received by the cross functional teams (Starling, 2003).

2.9 CHALLENGES OF SPECIFICATION

Purchasers are not able to state the requirements clearly, concisely, logically and unambiguously.

This contains enough information for the suppliers to decide and cost the goods or services they

will offer, but contain only the essential features or characteristics of the t requirement.

Also, the criteria for acceptance of goods and services and permit offered goods or services to be

evaluated against these criteria are not clearly stated.

Again, most organizations do used the internationally recognized standards which will cause a

problem to the buying organizations. And also, materials do not comply with any legal

obligations (Lyson, 2003).