an assessment of challenges associated with centralized ... · note purchase requisition goods...

ISSN 2309-0081 Mudenda & Mwale (2017)

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www.irss.academyirmbr.com November 2017

International Review of Social Sciences Vol. 5 Issue.11

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An Assessment of Challenges Associated With Centralized

Procurement System in a Quasi-Government Company

MUDENDA COLLINS

Head of Department-Operations and Supply Chain

Copperbelt University

Email: [email protected], [email protected]

Tel: +260977 846337

MWALE IDAH

Supply Chain Graduate

Email: [email protected]

Tel: +260978 986045

Abstract

Purchasing activities in todays’ world are arranged using Centralized and Decentralized purchasing in

both Private and Public organizations. The drive is to achieve economies of scale in purchasing. However,

each one of the models comes with merits and demerits some of which adversely affect operations. This

study was aimed at assessing challenges associated with Centralization of procurement at the case

company. The purchasing design in the company follows the Centralized model. The current situation at the

case company is that operational sites away from Headquarters in Ndola, experienced late delivery of

requested items, delivery of wrong items and high costs of transportation. The research therefore undertook

to assess the challenges and ascertain the real challenges affecting operations. The research design was

based on a combination of descriptive and explanatory methods. A census was used to collect data in which

seventy (70) potential respondents made the population. A semi-structured questionnaire was used to

collect data from members of staff in the supply department as well as End-users from various departments.

The researcher targeted to analyze data using Mean, Standard Deviation and Pearson’s r because the data

was Likert scale. The study recorded a 70% response rate and the data was normally distributed thus the

target tools were used for analysis. The researchers identified twelve challenges which were subjected to

analysis and only six challenges proved to negatively affect operations. The six variables were ranked to

determine the most severe. Further, the researchers found the average response between requisition and

receipt to be 2.9 weeks for branches away from the headquarters.

Keywords: Centralise, Decentralise, Procurement, Model, Management.

Introduction

The Procurement function is vital to any organization and procurement strategies have become part of a

business’s success than ever before. Lysons and Farrington (2006) argued that the primary purpose of

purchasing is to contribute to the profitability of an undertaking by obtaining the best quality products and

services in terms of fitness for use. This study focused mainly on Centralized Procurement which is defined

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as a process where one branch (usually Headquarters) of an organization, representing the collective needs

of other branches carries out procurement functions (Dutton, 2006). Parikh and Joshi (2005) on the other

hand argued that Centralization is defined by the degree of hierarchy of authority. A similar view was

presented by Stanley (1993) who determined buying center centralization as the degree to which authority,

responsibility and power are concentrated within an organization or buying unit; centralized purchasing

implies that purchases are made from either the company headquarters or some regional or divisional level.

Purchasing is transforming from a part time activity conducted by many to a more specialized function. The

trend has been towards a stronger, more centralized function and greater participation in the firm’s strategic

planning process (Stanley, 1993; Cousins and Spekman, 2003; Dubois, 2003). The combination of focusing

more on collaborative relationships and increasingly strategic role of purchasing has resulted in a rise in

prominence of strategies of supply base reduction (Harland et al. 1999) and the quest for global efficiency

and effectiveness has led to increased centralization and coordination of purchasing function (Faes et al.,

2000). According to Joyce (2006), centralized purchasing may be able to obtain lower prices than

decentralized purchasing units if the higher volume created by combining orders to a common supplier

enables it to take advantage of quantity discounts. This can be achieved with centralized framework

agreement where volumes of all units are combined under one agreement event though ordering still occurs

at a local level. Many others (Arnold, 1999; Tella and Virolainen, 2002; Corey 1978) refer to the increased

negotiation power, which leads to better prices and terms.

The opposite of centralization is decentralized purchasing, where purchasing is done by individual plant or

division managers (Stanley, 1993) or where individual departments or separate locations handle their own

purchasing requirements (Joyce, 2006). Arnold (1999) further explains that centralization does not

necessarily refer to all procurement functions but at least to a centralized supplier management and contract

handling. Munson and Hu (2010) alluded that most companies in fact seem to practice some combination of

centralized and decentralized purchasing. Decentralized procurement is preferred due to the ability to

reduce incentives for corruption via large-scale protectionism or favoritism, users are able to ensure that

goods or services delivered match their needs and they are increased opportunities for local Small and

Medium-sized Enterprises (SME’s) to compete for contracts, flexibility, local specialized knowledge, speed

and responsiveness; an understanding of local needs; product development support; and ownership

(Monczka et al., 2010).

Analysis of the Current Situation

The company is geographically organised with operations in Ndola, Kitwe, Kalulushi/Lufwanyama,

Kawambwa and Shiwangandu. It is administratively divided into five (5) departments which include

Plantations, Corporate Services, Administration, Audit, Finance and Human Resources. The department of

interest in the current study is the procurement department which is headed by the procurement manager.

The Procurement Manager is in charge of the Procurement Department which falls under the Corporate

Services Department with the Corporation Secretary as the overall head. After the Procurement Manager

are two Assistants; the Purchasing Officer (in charge of all purchases made) and the Stores Officer (in

charge of the stores).

The procurement department has six (6) Purchasing Clerks who are spread out across all the branches. The

company has a total number of fourteen (14) employees working in the procurement department broken

down into five (5) general workers and nine (9) procurement professionals. The table below illustrates the

staffing situation in the procurement department.


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Table 1: Summary of employees in the procurement department

Site Procurement

Manager

Purchasing

Officer

Stores

Officer

Purchasing

Clerks

Total

Ndola 1 1 1 3 6

Ichimpe 1 1

Chati 1 1

Lamba 1 1

Total 9

Source: Authors, 2017, Based on the existing organizational structure.

The plantations offices are found in Ndola, Mufulira, Kitwe, Kalulushi, Lufwanyama, Chingola,

kawambwa and shiwanga’ndu districts and are divided into six (6) administrative plantation groups namely

Ndola, Chati, Ichimpe, Kawambwa, Shiwanga’ndu and Lamba. All these station are wide apart and far

from from the central station especially Kawambwa and Shiwanga’ndu which are located 700km and

800km, respectively, from the headquarters in Ndola. The purchasing process is similar in all branches; the

first step is for End-users to generate a demand note and send it to the main stores at the headquarters with

the assumption that all items are available in the stores. If the requested items are not available, the stores

clerks prepare a purchase requisition document which is authorized by the stores officer or purchasing

officer and later approved by the procurement manager. The second step is to collect a minimum of three

(3) quotations from potential suppliers and a purchase analysis form is prepared by the purchasing officer.

The purpose of the purchase analysis form is to enable all interested parties to analyze the quoted items

according to the commercial and technical specifications.

In the third step, a purchase order document is prepared and the original copy is taken to accounts to

process payment while a copy is sent to the supplier in order for them to supply the goods and the final

copy is kept in the stores in preparation for receipt of materials. Upon receipt of goods, a goods received

note (GRN) and materials entry note (MEN) are prepared to acknowledge the receipt of the goods at the

headquarters. For branches away from the headquarters, goods are only transferred to site after receipt by

the main store, thereafter a transfer document is prepared to allow goods to go to various destinations. The

figure 1 below shows the purchasing process at headquarters and figure 2 shows the one at branch offices.

Purchasing process at Headquarters

Figure 1: Purchasing process flow chart at head office

Source: Authors, 2017, based on company procedure.

Comparatively, the purchasing process is longer outside the headquarters by two additional processes both

of which consumes time to perform. This length elongates the entire process creating a bureaucracy to the

End-users.

DEMAND

NOTE

PURCHASE

REQUISITION

GOODS

RECEIPT PAYMENT

PURCHASE

ANALYSIS

ORDER

STORES


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Figure 2: Purchasing process flow chart at branch offices

Source: Authors, 2017, based on company procedure

The resulting predicament from this difference is longer time between requisition and supply, supply of

wrong items and increase in delivery costs as well as associated costs. Tables 2 and 3 below exhibits a case

variance between requested and supplied goods as well as identified costs due to centralization.

Table 2: Variance analysis of orders

Items Requested

For By Branch

Office

Items Purchased

By Head Office Corrective Action Implication

Moisture meter Multi meter Taken back to supplier and

the supplier was asked to

supply correct item

Lost use time,

Disc plough Rotary plough Taken to the mechanical

workshop for modification in

order for it to meet

specifications

Risk of

mis-modification,

Compromised product

performance,

Operational safety risk

Source: company procurement report, 2016.

Table 3: Summary of cost changes due to centralized problems between 2014 and 2015

Description 2014 2015

Fuel and lubricants 5,555,855 6,426,821

General expenses 1,327,166 1,415,761

Repairs and maintenance 4,550,160 5,413,551

Source: Zambia forestry and forest Industries Corporation limited report and financial statement for the

year ended developed from company financial statement for 2015

The company has been losing considerable amounts of money on fuel (transportation) and other expenses

therefore decreasing the profit margins to some extent. This predicament has a direct link to centralized

procurement among other reasons because decentralized procurement would shift the transportation cost to

the supplier of engage some cost sharing mechanism. The organization is very rigid and involves a lot of

paper work. This results in lot of wastage of time, effort and money and therefore extends the lead time.

There is somewhat unnecessary delay in decision-making resulting from formalities and rules. The

DEMAND

NOTE

PURCHASE

REQUISITION

GOODS

RECEIPT

PURCHASE

ANALYSIS

PAYMENT ORDER

STORES MATERIAL

EXIT NOTE TRANSFER

NOTE


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researcher therefore undertook to ascertain the challenges associated with centralized procurement in order

of severity and determine the average response time between requisition and response from distant sites.

Literature Review

Centralized procurement is nowadays a common way to leverage the benefits of indirect purchasing in an

organization (Karjalainen, 2009). In centralized procurement, the procurement is coordinated and regulated

from the headquarters of an organization. The main aim of it is to capture the economies of scale by

unifying the procurement processes of an organization’s different units (Karjalainen, 2009; Lysons and

Farrington, 2012), which usually involves a corporate-wide frame agreement set for all the procurements to

be made from certain preferred suppliers, and the amount of suppliers per product category is kept low

(Karjalainen, 2009; Iloranta and Pajunen-Muhonen, 2012).

Consequently, spend per supplier can be maximized and hence the procuring power of the buying

organization increased. This can lead to a better negotiation position regarding prices, quality, compliance,

and strategy with suppliers (Van Weele, 2010). Centralized procurement should be considered especially

when the needs for procured materials between different business units are similar (Iloranta and Pajunen-

Muhonen, 2012). Lohrey (2016) further alluded that long-term business goals and purchasing department

objectives often link more directly with a centralized purchasing structure.

Kabaj (2003) contends that an efficient procurement system is vital to the advancement of African countries

and is a concrete expression of their national commitments to making the best possible use of public

resources. Equally, Kakwezi and Nyeko (2010) argues that the procurement departments of public entities

and quasi- government entities are faced with the problem of not having enough information about the

procurement procedure, its inputs, outputs, resource consumption and results, and are therefore unable to

determine their efficiency and effectiveness.

Rotich (2011) admits that the evaluation or measurement of procurement performance has always been a

vexing problem for procurement professionals. He asserts that traditionally, firms concentrate on analyzing

their own internal trends which does not portray the true picture on how they compare well with

competitors.

Mamiro (2010) concluded that one of the major setbacks in centralized procurement is poor procurement

planning and management of the procurement process which include needs that are not well identified and

estimated, unrealistic budgets and inadequacy of skills of procurement staff responsible for procurement.

Similarly, Kakwezi and Nyeko (2010) argued that procurement performance is not usually measured in

most Procuring Entities as compared with the human resource and finance functions.

Empirical Literature

Baidoo (2014) conducted a study in which he undertook to find out the challenges facing the centralized

procurement system. The findings were that short-term leverage view, uncoordinated approaches, slow co-

ordination and communication, lack of system commitment and increase in transportation costs affected the

procurement function. According to Rozemeijer et al. (2003) the purchasing organizational structure can be

determined by the level of purchasing maturity and corporate coherence. The authors further stated that

Decentralization is appropriate for organizations that have low purchasing maturity and low corporate

coherence, due to the few similarities in purchase specification between business units, the synergy

opportunities lie in the exchange of information on supply markets, suppliers, and prices. The figure below

exhibits their view:


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Figure 3: Corporate purchasing organizational approaches

Source: Rozemeijer, Weele and Weggeman 2003.

Gadde, et al. (2001) and Quayle (2006) in their studies revealed that it can be noted that total centralization

and total decentralization are both extreme value of centralization continuum. The majority of companies

lay somewhere between these two extremes to utilize advantages of both configurations (Johnson, et al.,

2004). In such hybrid structures responsibilities and control and local organizations are divided with

accordance to business environment.

Theoretical and Conceptual Framework

Several theories have been developed in this area of study for instance Henry Mintzbergs’ organizational

structure, Henri Fayols 14 principles of management with a focus on centralization and decentralization, the

structural contingency theory and Max weber’s Beauracratic theory.

According to Carlisle (1974), top managements are guided by contingency theory in choosing the

appropriate management tools for a given situation. The core of contingency theory according to Carlisle

(1974) is that management concepts are universally not applicable but are only right if the appropriate

conditions exist in a given situation. In other words, the deployment of a number of administrative tools or

concepts is contingent on the particular situation.

According to the Structural Contingency Theory, there is no organizational structure that is most effective

for all organizations (Karlsen and Tollefsen, 2009). This situation can influence the selection of the

organizational structure as it can be affected by a number of contingency factors. Some of the factors as

enumerated by Karlsen and Tollefsen (2009) are task uncertainty, technology, environmental change,

technological change, size and strategy. Donaldson (2001) reduced the factors to size, task uncertainty and

task interdependence. Size as a contingency factor relates to the size of the organization i.e. the number of

employees. The size as contingency factor affects the organizational structure in some way. According to

Federal

purchasing

Central-led

purchasing

Decentralized purchasing Centralized

purchasing

coordinated purchasing

High Low

Low

High


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Karlsen and Tollefsen (2009), when an organization has a small number of members, a simple centralized

structure is satisfactory. Since the top manager has capacity and enough overview of the organization,

decision authority rest entirely on him/her.

According to Max weber Bureaucratic management approach emphasized the necessity of organizations to

operate in rational way instead of following the “arbitrary whims” or irrational motions and intentions of

owners and managers. He found different characteristics in bureaucracies that would effectively conduct

decision-making, controlling resources, protecting workers and accomplishment of organizational goals.

According to him, bureaucracy is the most efficient form of organization because the organization has a

well-defined line of authority and clear rules and regulations which are strictly followed

Conceptualised Research model

The research depicts the relationships that exist among the variables. The conceptual model for the

challenges associated with centralisation of procurement was attributed to performance of the procurement

department.

Figure 4: Research conceptual model

Source: Authors, 2017

Operationalisation of concepts.

Quality as a variable represents the ability of the goods purchased by the central organization to satisfy

stated or implied needs. According to Juran (2010), quality means fitness for purpose. The following are the

adopted dimensions of quality in this study:

CENTRALIZED

PURCHASING

CHALLENGES QUALITY

1. Usable

2. Reliability

3. Standard

4. Function

5. Durable

LEAD TIME

1. Requisition vs receipt

2. Supplier service delivery

time

3. Time spent in identifying the

need

4. Vendor sourcing time

Supply Department

Performance

1. Department success

2. Cordial relationship

3. Commendable

EFFECTIVENESS

a) Supplier readiness (service)

b) Meet End-user request

c) System ability to serve End-

users


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a) Usability: The ability of the goods to be used to good effect and putting to purpose.

b) Reliability: The ability of the goods to function for the intended life time without failure.

c) Standardization: Established or acceptable level of achievement. The ability of goods to comply

with quality standards.

d) Functionality: The ability of the product to perform the function for which it was made.

e) Durability: The ability of the product to last long in the line of use.

Lead time is modelled to represent the time in which materials may be received. It is the amount of time

between the commencement and finishing of a process. Procurement lead time starts when the goods are

ordered and ends when they are received, this includes availability confirmation, ordering, order

acknowledgement, shipping notice, receipt of goods or services, invoice recording and payment.

a) Supplier service delivery time: The time taken for a supplier to deliver goods or services after

ordering.

b) Requisition vs receipt: The time difference between requesting for materials and products and

actual receipt of the requisitions.

c) Time spent in identifying the need: This is the time taken to identify materials and products needed

in the department and company. The model below shows the basic idea of automated store

ordering.

Figure 5: Basic idea of automated store

Source; Mikko Karkkainen, Group CEO, D.Sc. (Tech), 2016

d) Vendor sourcing time: The time taken to find, evaluate and engage suppliers for acquiring goods

and services.

Change in technology is a catalyst for change as well as an enabler across industries and the procurement

industry is no exception. New technology provides opportunities for procurement to boost market

coordination, introduce new suppliers, enable better compliance, increase capacity and speed, minimize risk

and increase trust by removing human error.

Effectiveness as a variable can be measured using the following terms;

a) Supplier readiness: The ability of the supplier to produce and deliver the required quality and

quantity of goods within the stipulated time.

b) Degree of success in procuring desired goods: How often procurement is undertaken successfully

without the need for corrections or modifications.

Order model and its

control parameters e.g safety stock levels

Forecast model History

Requisition data

Inventory balance

Demand forecast

Order suggestion

or order Order calculation

Goods received Stock Adjustments

Open orders


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c) Capability of procurement personnel: This includes technical knowledge (using new technology for

effective procurement decision-making), basic administrative skills (undertaking negotiations and

discussions) and advanced procurement process skills (essential skills for creating value and

strategic decision making).

Methodology

In order to attain the research objectives, the researcher adopted a combination of descriptive research

design (which entails collecting information by interviewing or administering a questionnaire to a sample

of a population) and explanatory research design and therefore applied these to the company as a case

study.

This research is a single unit case study. This means that, even though the company is one of the largest

parastatals in Zambia, the findings and results can neither be generalized to other similar companies. Due to

this, the case study approach has not always been recognized as a proper scientific method. However this

has changed during the recent years (Dubois and Gadde, 2002b). Despite these limitations, a case analysis

may provide good insights and explanations to a problem area and is aimed at analytical generalization

(Yin, 2003), and thus a qualitative single case is still a good research design for the current study because it

becomes an in-depth study of the case organization.

Target Population

The target population for this study was nine (9) procurement professionals and sixty one (61) End-users at

the company headquarters in Ndola and other operational stations outside Ndola. Procurement professionals

were targeted because they are responsible for implementing the procurement policies and procure for the

organization. Further, their perceived knowledge about procurement and problems affecting the processes

were additional attributes envisaged to contribute to the findings. The End-users were also important to this

research because they use and operate supplies on the front line hence were key to judge supplies from the

supply department. The table 4.1 below summarizes the target population.

Table 4: Summary of the target population

Description Target

Procurement Department 9

End-users 61

Total 70

Source: Authors, 2017.

The main data set was primary which was triangulated by secondary data. Primary data was collected using

semi-structured questionnaires while secondary sources included company reports and related literature.

The questionnaires were physically delivered to the sites and face to face interviews conducted with the

staff while others were couriered to heads of units for units located far off urban areas such as Chatti in

Kalulushi after which telephone interviews were conducted.

Data Analysis and Interpretation

The data obtained from questionnaires was Likert scale type of data of which the parametric statistics such

as mean for central tendency and standard deviation for variance became the best methods of data analysis.

For correlation analysis, only the r value to show the strength of the correlation was used and not the p

value which is related to random chance in sampling. This is consistent with findings by Boone and Boone


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(2012) in Subedi (2016) who postulated that Likert scales items are created by calculating composite scores

and use parametric statistics such as mean for central tendency and standard deviation for variance.

Additionally, Pearson’s r, t-test, ANOVA and regression procedures (Brown, 2011) in Subedi (2016) are

equally useful tools.

To compare responses from the two independent groups (End-users and Supply staff), means and standard

deviations were generated and correlations analyzed. The table 4.2 below provides a summary of data

analysis procedures for Likert scale data.

Table 5: Summary of data analysis procedures

Statistical Methods Data

Central Tendency Mean

Variability Standard deviation

Associations Pearson’s r

Other statistics ANOVA, t-test, regression

Source: Subedi, 2016. International Journal of Contemporary Applied Sciences.

Results and Discussion

The researcher targeted a population of 70 respondents stratified into two strata, supply respondents and

End-user respondents. The table below reveals the actual situation of retrieval of questionnaires

administered to employees in the Procurement Department and to the End-users from various other

departments.

Table 6: Overall response rate

Description Target Respondents Actual Respondents Response rate (%)

Procurement Department 9 8 89

End-users 61 41 67

Total Population 70 49 70


The response rate from supply department stood at 89% because one questionnaire from one respondent

was not collected while a response rate of 67% was captured from End-user departments. This sums to an

overall response rate of 70%. The 30% of the respondents were on annual leave while others were out of

station on scheduled training programmes and other assignments. 82% of the total respondents were male

while 18% were female. The majority of the respondents were aged between 26 - 30years equivalent to

31%, followed by the ages between 31 – 35 years equivalent to 22%.

Education Level and Professional Memberships of Respondents in the Supply Department

In order for any institution to effectively perform, the level of qualification or education is very cardinal.

Education determines the quality of output and contribution a worker can make to the organization. In

procurement, this means that a worker must be educated enough to understand complex tendering issues

such as the bidding and bid evaluation, solicitation of bids, supplier selection, and contract administration.

These supply activities correlate very well with success in the supply function. An advanced supply

qualification should be associated with success during the sourcing and purchasing functions, further,

rightly trained graduates are expected to observe ethics and morality that goes with the field. It is also

required by law for every practicing procurement professional to have a valid procurement licence.


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The procurement and supply department was made up of 9 employees from which eight (8) participated in

this research whose average work experience was found to be 4 years. Additionally, from the data

collected, it was revealed that 13% of the respondents were high school certificate holders, 25% were CIPS

Certificate holders and 63% were CIPS Diploma holders. Considering the high number of staff with the

CIPS qualification (88%), it follows therefore that the members of staff should be able to practice supply

appropriately. Any action by the staff should be regarded as deliberate for or against the organisation and

that there should be efforts in the organisation to organise supply chain activities in a way that would

benefit the organisation. It is therefore expected that supplies arranged by the members of staff should be

appropriate to satisfy the internal customers and equally meet specifications.

In terms of professional membership, the findings were that 38% of the participants were not members of

ZIPS, 25% had student membership, 13% were professional members and 13% were associate members.

The rest of the 13% were not categorized in any case.

However, in Zambia, it is required by law for every practicing procurement professional to be a registered

member of the Zambia Institute of Purchasing and Supply (ZIPS) regardless of their experience in supply

activities. The ZIPS Act no. 15 of 2004, section 7 (1) and (2) states that ‘only procurement professionals

with a valid practicing licence are by law allowed to undertake purchasing obligations’.

As seen in the graph above, a large percentage of the procurement professionals in this organization are not

registered members of the ZIPS. Not only is this observation against the law but also disadvantages the

staff from receiving Continuous Professional Development (CPD) provided by ZIPS.

Education level of End-users

The education level of the End-users is important in order to assess the judgement made and operational

challenges stated. From the findings, 51% of the End-users were college diploma holders followed by 29%

who were university degree holders. High school certificate holders comprised 12% of the respondents and

others were 7%. From these findings, it can be concluded that the End-users have reasonable education

background and are well able to pass judgement and comment on the effectiveness of the procurement

department.

Descriptive statistics factors challenging Centralised Procurement

The following information was obtained using a seven-point Likert Scale as follows; one (1) = strongly

disagree, two (2) = disagree, three (3) = slightly disagree, four (4) = neutral, five (5) = slightly agree, six (6)

= agree and seven (7) = strongly agree.

Considering that only 70% of the population responded from the census, the researcher undertook to test for

normality of the data before subjecting it to further analysis. A descriptive statistical analysis was

undertaken as follows:

Quality Variables

The table 7 below shows the mean, median, mode, skew, kurtosis and standard deviation of the data

collected using a seven point Likert scale. The data in the table is a combination of responses from both the

supply department and end-user departments on the quality attributes of the supply.


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Table 7: Descriptive statistics of quality variables from all respondents

Source: Authors (2017), developed from SPSS version 21.

Standard deviation is a number used to tell how measurements for a group are spread out from the mean.

Basically, a small standard deviation means that the statistical data set is close to the mean of the data set,

on average, and a large standard deviation means that the values in the data set are further away from the

mean.

From the above table, the means range from 4.94 to 5.29 and the standard deviations range from 1.38 to

1.676. The skew and kurtosis of all variables range from -2 to +2 indicating that there is no much deviation

from normality. The distribution is therefore normal.

The majority of the respondents slightly felt that the supplies purchased into the organization are useable

(mean-5.29), functional (mean-5.18) and durable and reliable shared a mean of 5.02. However, the mean

response on whether supplies are standard was 4.94 which is strong enough to relate to slightly agree.

Further, the mode response for all variables was 6 which represents agree. It can be suggested therefore that

supplies into the organization are useable, functional, reliable, durable and of the right standard.

Lead Time Variables

Table 8 below shows the descriptive statistics of lead time variables from the combined responses.

Table 8: Descriptive statistics of lead time variables from all respondents

Source: Authors (2017), developed from SPSS version 21.

CQRELIABILITY CQDURABILITY CQSTANDARD CQFUNCTIONALITY CQUSEABILTY

Valid 49 49 49 49 34

Missing 1 1 1 1 16

5.02 5.02 4.94 5.18 5.29

5.00 5.00 5.00 5.00 6.00

6 6 6 6 6

1.534 1.601 1.676 1.380 1.404

-.866 -.988 -.785 -.940 -1.259

.340 .340 .340 .340 .403

.044 .061 -.197 .805 1.807

.668 .668 .668 .668 .788

Std. Deviation

Skewness

Std. Error of

Kurtosis

Std. Error of Kurtosis

N

Mean

Median

Mode

CLTGOODSDELIVERY CLTIDENTIFICATION CLTVENDORSOURCETIME

Valid 49 49 49

Missing 1 1 1

4.06 3.94 4.55

4.00 4.00 5.00

2a 2 6

1.676 1.941 1.646

-.128 .197 -.722

.340 .340 .340

-1.022 -1.558 -.761

.668 .668 .668

Skewness

Std. Error of Skewness

Kurtosis


N

Mean

Median

Mode

Std. Deviation


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Table 8 shows the mean, median, mode, standard deviation, skew and kurtosis of all variables. Most of the

respondents were neutral on the ability of the supply department to source vendors on time and the delivery

of goods within the intended time for use. The respondents did not agree that identification of goods for

supply take long.

The However, goods delivery within the time frame obtained a mode of 2 indicating that goods delivery

takes long while goods identification obtained a mean of 2 indicating that it doesn’t take long to identify

goods. Vendor sourcing obtained a mode of 6 indicating that the respondents agreed that vendor sourcing

doesn’t take long. The skew and kurtosis of all variables range from -2 to +2 indicating that there is no

much deviation from normality. The distribution is therefore normal.

Effectiveness

Table 9 below shows the mean, median, mode, standard deviation, skew and kurtosis of all variables. Most

of the respondents were neutral on the ability of the selected suppliers to deliver goods in the stipulated

time (mean-4.06) and that the supply departments’ ability to meet requests (4.78). However, most

respondents slightly agreed that the procurement system has a great impact on the ability to serve its end-

users (mean-5.63). The skew and kurtosis of all variables ranged from -1.5 to +1.5 indicating that the data

did not deviate much from normality.

Table 9: Descriptive statistics of effectiveness variables from all respondents

Source: Authors (2017), developed from SPSS

End-user Satisfaction

Table 10 below shows the descriptive statistics of End-user satisfaction.

Table 10: End-user satisfaction variables of cordial, commendable and success.

Source: Authors (2017), developed from SPSS

CEUCORDIAL CEUCOMMENDABLE CEDPTSUCCESS

Valid 41 49 49

Missing 9 1 1

5.22 4.96 5.04

5.00 5.00 5.00

5 6 6

1.107 1.541 1.471

-.692 -.856 -1.055

.369 .340 .340

.863 -.107 .834

.724 .668 .668

Std. Deviation

Skewness

Std. Error of Skewness

Kurtosis


N

Mean

Median

Mode

CESUPPLIERSERVICE CEUMEETREQUESTS CEUSERVICEABILTY Valid 49 49 49

Missing 1 1 1 4.06 4.78 5.63 4.00 5.00 6.00

5 5 6 1.547 1.418 1.253 -.106 -.453 -.976 .340 .340 .340

-1.031 .050 .574 .668 .668 .668

Mode Std. Deviation

Skewness Std. Error of Skewness

Kurtosis Std. Error of Kurtosis

N

Mean Median


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Table 10 shows the mean, median, mode, standard deviation, skew and kurtosis of all variables. Most of the

respondents slightly agreed that the relationship between the supply department and the End-users was

cordial (mean-5.22), and that the supply department is successful in procurement (mean-5.04). However,

the respondents were neutral on the aspect of commendable of the supply department (mean-4.96). The

skew and kurtosis of all variables ranged from -1.5 to +1.5 indicating that the data did not deviate much

from normality.

Correlation Analysis of Responses from End-users and Procurement Staff

The responses from the two populations were therefore correlated to determine if there were any significant

differences in the responses. Correlation refers to a technique used to measure the relationship between two

or more variables. When two things are correlated, it means that they vary together. Positive correlation

means that high scores on one are associated with high scores on the other, and that low scores on one are

associated with low scores on the other. Negative correlation, on the other hand, means that high scores on

the first thing are associated with low scores on the second. Negative correlation also means that low scores

on the first are associated with high scores on the second.

Correlation coefficients can vary numerically between 0.0 and 1.0. The closer the correlation is to 1.0, the

stronger the relationship between the two variables. A correlation of 0.0 indicates the absence of a

relationship. If the correlation coefficient is –0.80, which indicates the presence of a strong relationship. A

positive correlation coefficient means that as variable 1 increases, variable 2 increases, and conversely, as

variable 1 decreases, variable 2 decreases. In other words, the variables move in the same direction when

there is a positive correlation. A negative correlation means that as variable 1 increases, variable 2

decreases and vice versa. In other words, the variables move in opposite directions when there is a negative

correlation. Table 11 below shows the finding as follows:

Table 11: Paired correlation of the aspects of the Centralized purchasing

Pair No. Variables Correlation Sig.

Pair 1 EQREILABILITY & SQRELIABILITY 0.945 0

Pair 2 EQDURABILTY & SQDURABILITY 0.577 0.134

Pair 3 EQSTANDARD & SQSTANDARD 0.763 0.028

Pair 4 EQFUNCTIONALITY & SQFUNCTIONALITY 0.798 0.018

Pair 5 EQUSEABILTY & SQUSEABILTY 0.533 0.174

Pair 6 ELTGOODSDELIVERY & SLTGOODSDELIVER 0.564 0.146

Pair 7 ELTIDENTIFICATION & SLTIDENTIFICATION 0.348 0.398

Pair 8 ELTVENDORSOURCETIME &

SLTVENDORSOURCETIME 0.655 0.078

Pair 9 EESUPPLIERSERVICE & SESUPPLIERCERVICE 0.589 0.124

Pair 10 EEDPTSUCESS & SEDPTSUCCESS 0.743 0.035

Pair 11 EEUMEETREQUESTS & SEUMEETREQUESTS 0.928 0.001

Pair 12 EEUSERVICEABILITY & SEUSERVICEABILTY 0.898 0.002

Source: Author, 2017. Developed from SPSS

The table 11 shows agreement that supplies are reliable (sig. 0.00), are of a right standard (sig. 0.028),

supplies are functional (sig. 0.018), requests are met (sig. 0.001), the supplier service is good (sig. 0.002)

and the supply department is managing the function successfully (sig. 0.035). These variables were found


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positive and significant. A statistically significant relationship is one that is large enough to be unlikely to

have occurred in the sample if there's no relationship in the population and is represented by a p-value of

less than 0.05. Therefore, these aspects were found to be well handled by the supply department.

However, there were disagreements on a number of variables such as product durability (sig. 0.134),

product usability (sig. 0.174), product delivery (sig. 0.146), supplier identification (sig. 0.398), supplier

sourcing duration (sig. 0.078) and supplier service (sig. 0.124). These correlations were found positive but

insignificant because the p-values were above 0.05. This indicates that these aspects were not well handled

by the supply department in the centralized structure. This translates into the challenges that Centralized

procurement comes with at this company.

One of the objectives of the study was to enumerate some of the challenges facing the companys’

centralized procurement system. In order to develop good centralized procurement strategies, O‟Brien

(2009) suggests that the procurement team should match internal spends requirements with external market

places and make sure the strategy supports the overall purchasing objectives. This corroborates with the

findings above.

Rank of Severity of the Challenges

The researcher undertook to rank the challenges by rate of response from the End-user respondents. The

researcher used a comparison of the means to arrive at the finding. The table 12 indicates that Identification

of the need for goods within the organization was the most critical challenge with a mean of 3.94 followed

by goods delivery and supplier service delivery (mean – 4.06). Vendor sourcing time was ranked number

four (4) with a mean of 4.55 while Durability of the goods and Useability ranked 5 and 6 with means of

5.02 and 5.29 respectively.

The implication of this finding is that the supply department is mostly challenged by the inability to identify

products needed in the department and company. The next important challenge is the inability to deliver the

products within the intended time for use followed by poor supplier service delivery. The table 12 below

indicates the rankings of the various challenges.

Table 12: The ranking of the various challenges


Effects of Centralization on Delivery Time

Later Delivery of Goods

The majority of the End-user who responded revealed that supply of requisitions takes longer than four (4)

weeks. The figure 5.8 below shows this perspective:

Description Mean Rank

Identification 3.94 1

Goods Delivery 4.06 2

Supplier Service 4.06 3

Vendor Source time 4.55 4

Durability 5.02 5

Useabilty 5.29 6


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Figure 6: Delivery period of requisitions

Source: Author, 2017

Response time to requirements is slow which leads to operational stoppages and many requisitions from

various departments pressures the work pace of the supply personnel. The operational branches away from

the headquarters wait for a long period of time before they receive the items requested for. This makes

these branches less effective and it leads to procurement of wrong goods because End-users are rarely

involved in the procurement process.

Consequently, they forego the opportunity to take advantage of the local purchases, payment processing

delays because invoices pile up. Additionally, demanded quantities pile up putting sourcing and supply

pressure on the suppliers.

The table below determines the average mean for the above grouped data which will indicate the average

delivery time for requested goods.

Table 13: Average delivery time for goods.

Number of order Frequency (f) Mid-point

(X) fX

Mean

(x)

1 - 2 weeks 6 1.5 9

2 - 3 weeks 13 2.5 32.5

3 - 4 weeks 21 3.5 73.5

40

115 2.9

Source: Authors, 2017.

Discussion

The challenges found by the study are similar to what other researchers have found on centralised

procurement system in government or parastatal institutions. Baidoo (2014) find out the challenges facing

the centralized procurement system of PPS and its effect on the main activities of the company and the

following were the challenges provided by the respondents in his survey : Need for formal contracting and

commitments to suppliers; Benchmarking process intimidating; Trust issues abound; Short-term leverage

view; Separate, uncoordinated approaches; Co-ordination and communication may be slow and difficult;

Lack of system commitment; and Increase in transportation costs.

0

5

10

15

20

25

1-2weeks 3-4weeks above 4weeks

Delivery Period


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After the challenges were determined, the researcher attempted to rank them according to the severity using

the means. It was established that identification of the need was the most severe factor followed by goods

delivery, supplier service, vendor sourcing time, durability and usability.

The third research objective was to determine the average response rate between requisition and receipt of

the products and it was found that response time to requirements was slow which leads to operational

stoppages and many requisitions from various departments pressures the work pace of the supply personnel.

The operational branches away from the headquarters wait for a long period of time before they receive the

items requested for which makes them less effective. The average response time was 2.9 weeks for

branches away from the headquarters.

Conclusion

The aim of this study was to highlight the main operational challenges associated with Centralized

Procurement in the company and the following were the objectives:

To ascertain the main operational challenges associated with centralized procurement at the

company.

To rank the challenges according to severity.

To determine the average response time between requisition and receipt of products.

Analysis of data with regard to the first objective shows that the goods procured by the central procurement

unit were not very durable but were somewhat useable. The central procurement unit takes a longer time to

find, evaluate and engage suppliers (vendor sourcing), Goods are not delivered within the intended time for

use, The central procurement unit faces challenges in identifying materials and products need in the

organization.

For the second objective, it was established that identification of the need was the most severe factor

followed by goods delivery, supplier service, vendor sourcing time, durability and useable.

The third objective was responded to by determining the average response time between requisition and

receipt and it was found that the operational branches away from the headquarters wait for a long period of

time before they receive the items requested for which makes them less effective. The average response

time was 2.9 weeks for branches away from the headquarters.

Recommendation

In light of the conclusion and findings above, the researchers recommended that the company:

Adopts a hybrid system were branches are allowed to buy non critical cheap items can work better

in order to improve operations in the procurement department.

Must ensure that appropriate candidates are employed on the basis of merit qualifications, skills,

and experience with their roles and responsibilities clearly defined to avoid role conflicts with

other professions and departments. Strategies must also be put in place to retain the employees.

Must pay for professional membership to the Zambia Institute of Purchasing and Supply for all

employees in the procurement department.

Adopts Procurement as a strategic functions were the Managing Director participates in the

procurement of specific materials).


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Procurement department must improve the way of identifying suppliers by establishing an up-to-

date supplier base and categorizing these suppliers according to what they supply. This will also

reduce the response rate between requisition and receipt.

Should procure goods that are durable in order for them to last long in the line of use.

Should procure goods that can be used for their intended purpose.

Acknowledgment

The researchers wish to thank management and the members of staff at the company for allowing the study

to be undertaken at the company and for active involvement in the data collection.

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