Supplier Selection a Strategic Tool of the Purchasing Function: Its Role in Profit Maximization

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue VI, June 2020 | ISSN 2454–6186

Supplier Selection a Strategic Tool of the Purchasing Function: Its Role in Profit Maximization

OKPIGHE, Spencer G. O.¹, OGBOLU, Emeka B.^2
1Department of Marketing, Delta State Polytechnic, Ozoro, Nigeria
²USAID Global Health Supply Chain Operations Program-Procurement and Supply Management, Abuja, Nigeria

Abstract – The profit potentials of a manufacturing firm through an efficient and effective supplier selection process of the purchasing function is high and guaranteed. Profit is the ultimate goal of shareholders in establishing business enterprises. This paper attempt to examine supplier selection a strategic tool of the purchasing function and its role in profit maximization. The authors discussed three dimensions of supplier selection such as negotiation, competitive bidding, and constrains in the contemporary supplier selection process. Since purchasing function is responsible for controlling a dominant share of the company’s revenue. The authors, therefore, recommend that it should be the duty of the purchasing personnel to negotiate, select supplier(s) and execute all company commitments within the purchasing framework to get the optimal profit — right quality at the lowest cost, to develop the satisfactory supply chain and maintain good partnering relationships with suppliers. Thus, to maximize profit, manufacturing firms in Nigeria should adopt a well-organized and functional purchasing systems where the supplier selection process is handled by highly qualified professionals in line with the purchasing ethics, principles, and practice.

Keywords: Supplier Selection, Strategic tool, Purchasing, Profit maximization

I. INTRODUCTION

There is a growing awareness of the specialized nature of the purchasing function in current literature as a profit-making hub of a business. Profit is the ultimate motive of most established business enterprises in the world today. According to Dwivedi (2014), the primary objective of a business firm is to make a profit. Profit is the excess of income over expenditure accruing from an investment or a business transaction. Profit is a residual and essential tool for business growth and survival. According to Ohwovoriole (2019), Dangote Cement was the most profitable firm on the Nigerian Stock Exchange, with a profit after tax of N390 billion recorded in the 2018 financial year. Kolakowski (2019) Saudi Aramco is the most profitable company in the world with a profit of $110.9 billion in 2019 Fortune Global 500. For being profitable, a company must work in conditions of profit, which means that the revenue has to exceed costs involved in achieving the activity (Achim and Borlea, 2010).

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