AN ASSESSMENT OF PURCHASING PRACTICE IN THE CASE OF

FINOTE SELAM PRIMARY HOSPITAL

A SENIOR PROJECT PAPER SUBMITTED TO THE DEPARTMENT

OF EDPM IN THE PARTIAL FULFILLMENT OF THE
REQUIRMENTS FOR BACHELOR OF ARTS (BA) DEBREE IN EDPM

ST. MARY’S UNIVERSITY

DEPARTMENT OF EDPM

BY
BEKALU GIRMAW
ID NUMBER:-D4ED127299/07

APRIL, 2019

FINOTE SELAM, ETHIOPIA

 ACKNOWLEDGEMENTS
Above all, I am owed to the Almighty GOD for giving me the blessing to be here and
granting sanctification of health, enthusiasm, energy and patience and without whose help
noting would happen.
Besides my heartfelt appreciation and special thanks goes to my families as a whole for their
heartfull assistance financially and morally to perform the intended task during my stay in the
university.
Last but not least, my special thanks goes to acknowledge all employees of Finote selam
primary hospital and institutions that helped me materially and morally during the preparation
of this project.
Table of Contents page
Acknowledgements...........................................................................................................I
Introduction........................................................................................................................1
1.1 Background of The Study............................................................................................1
1.2 Research Questions......................................................................................................1
1.3 Objectives Of The Study.............................................................................................1
1.3.1 General Objective.....................................................................................................1
1.3.2 Specific Objectives....................................................................................................2
1.4 Purchasing Defination..................................................................................................4
1.5 Major Tasks of Purchasing……………………………………………………………5
1.6 Purchasing Department Responsiblities........................................................................5
1.7 Objectives of Purchasing..............................................................................................10
1.7.1 General Managerial Level Objectives.......................................................................10
1.7.2 Functional Level Objectives......................................................................................11
1.7.3 Detail Level Objectives.............................................................................................13
1.8 General Procedure Of Purchasing................................................................................14
1.9 Purchasing Policy.........................................................................................................15
1.10 Examining Procedures of Purchasing Process In Finote Selam Primary Hospital…16
1.11 Assessment of the Purchasing Steps in Finote Selam Primary Hospital……………17
1.12 Examining the Purchasing Staff Performance...........................................................18
1.13 Conclusions................................................................................................................19
1.14 Recommendations......................................................................................................20
Bibliography ......................................................................................................................21

INTRODUCTION
1.1 Background of The Study
Traditional research on purchasing practices was concerned with identifying the best
selection ways of suppliers based on supply characteristics (Kraljic, 1983). This project
helped shifting the focus of purchasing from supply management to supplier management.
The purchasing seminar is designed for executives and managers who are involved with
ingredient procurement, market analysis, risk assessment, supply chain management and
corporate planning, and provides significant networking opportunities for marketing and
purchasing professionals.
The purchasing framework presents business practitioners with robust and well-tested ways
of evaluating what they are doing, using indicators based on the exchange and managerial
aspects of purchasing practices. The measures used are general enough to have relevance
across the range of the said practices. This framework can provide a helpful reference point to
draw together thinking and existing purchasing practices. Additionally, purchasing practices
drastically have been transformed in recent years by factors such as the increasing exposure
of supply chains to risks, the development and adoption of information technologies, and a
growing attention of organizations to ethical practices (Lindgreen, Maon, Vanhamme, and
Sen, 2013).
1.2 Research Questions
The following research questions was addressed by the study.
1. What are the purchasing procedures and practices of the organization?
2. To What extent those purchasing procedures are used?
3. What factors affect the purchasing process?
4. Which improvements can be made to the whole purchasing process?
1.3 Objectives of The Study
1.3.1 General Objective
This study aims at reviewing the purchasing practice of Finote selam primary hospital,
assessing the Variables that influence its efficiency and examine the implication of the
prevalent purchasing Practice on the hospital.
1.3.2 Specific Objectives
In addition to the broad purpose, the specific objectives of the study was
1. To examine the steps involved in the purchasing process and assess their importance
2. To analyze the purchasing policy guidelines and manuals and the extent they are used for
the effective use of the purchasing process
3. To scrutinize the factors that affect the purchasing policy and manual on efficient
purchasing practice
4. To make feasible recommendations and improve the purchasing practice and Procedure
1.4 Purchasing Definition
Purchasing is the activity responsible for getting the right material to the right place, at the
right time, in the right quantity, at the right price (Herel, Encyclopedia 1996:994). Purchasing
refers to a function in business whereby the enterprise obtains the inputs for what it produces,
as well as other goods and services it requires. Purchasing is one of the basic functions
common to all types of business enterprise. These functions are basic, because no business
can operate without, them (Dobler1984: 327). Purchasing is the responsibility of buying the
kinds and quantities of materials authorized by the requisitions issued by production
scheduling, inventory control, engineering, maintenance and other department of function
requiring materials (Leenders, 1989)
In general purchasing can be defined as acquisition of required materials, services and
equipment used in the operation of an organization. It is one of the basic functions common
to all types of business enterprise. In order to fulfill the basic responsibility of optimizing
company profit, all business functions must mesh into a unified whole. The purchasing
function is usually performed economically and efficiently by a specialized, Centralized
Purchasing Department, directed by a skilled purchasing manager. But the purchasing
function does not have to be performed in such a manner. In practice it is sometimes
performed by any member of different executives or departments.
1.5 Major Tasks of Purchasing
"Purchasing in broader terms involves; determining the need, selecting the supplier, arriving
at proper price, terms and conditions, issuing the contract or order, and following up to ensure
proper delivery" (Alijan, 1975:270). "In simple terms the basic element involves in
performing the purchasing function are obtaining the proper equipment, material supplier and
service in the right quality, in the right quantity, at the right price and from' the right source" (
Alijan, 1973: 1 -3). It is a supplies management function that covers the acquisitions stage of
supplies from receipt of the 'notice of need' to the final clearance of the invoice including
negotiation, placing purchase orders, chasing delivery, recording purchases, clearing price
checks on the invoices related to purchases.
1.6 Purchasing Department Responsibilities
Purchasing is one of the basic functions of a given organization shouldering the following:
  Provide an uninterrupted flow of materials, supplies, and services required to operate
the health center.
 Keep inventory investment and loss at a minimum.
 Maintain adequate quality standards.
 Find or develop competent vendors / suppliers.
 Standardize where possible, the items bought.
 Purchases required items and service at lowest ultimate price.
 Improve the organizations competitive position.
 Achieve harmonious, productive working relationships with other departments
within the health center.
 Accomplish the purchasing objectives at the lowest possible level of administrative
costs (Leenders, 1989: 26).
1.7 Objectives of Purchasing
The objectives of purchasing can be classified into three levels including: general managerial
Level objectives, functional level objectives and detail / operational level objectives (Dobler,
1996:43).
1.7.1 General Managerial Level Objectives
"The standard statement of the overall objectives of the purchasing function is that it should
obtain the right materials in the right quantity, for delivery at the right time and place, from
the right source with the right service (after and before sale) and the right price " (Leenders,
1989:24). from the top managerial perspective, purchasing has the following objectives,
which can be explained in terms of the 5R's of purchasing.
1. Right quality -quality is defined as simply 'fitness for purpose' or the British standard
institution defines "the totality of features and characteristics of a production or service that
bear on its ability to satisfy a given need" (Nair, 1990: 125). In meeting, this objective
purchasing must select items, which have sufficiently quality to fit users’ requirements and
specifications. The term quality as used in the field of purchasing carries quite a different
meaning than the meaning that we usually associated with this word. In common usage, it
refers to the excellent features of the subject, "The right quality is the suitable of an item for a
given purpose" (Nair, 1990: 125).
2. Right quantity -The right quantity is more relevant to the purchase of consumables or parts
or assemblies for manufacturing than for project buying. Fulfilling these objectives will
enable to provide a continuous and uninterrupted material at the minimum cost. In most
organization the decision of how much to purchase is more important by the close
relationship of purchases quantity and schedule use. (Parson, 1982:25) The decision of how
much to acquire follows clarification of what is acquired. Therefore before making decision
considering factors that complicate that quantity decisions are essential, including:
 The larger the quantity is the lower the unit price.
 The larger the quantity the higher the storage costs.
 The larger the quantity is the higher the risk of damage.
 The larger the quantity the higher the cost of items in storage.
The larger the quantity the fewer orders that will be place and hence the lower the ordering
cost.
3. Right price -A traditional purchasing objective is to obtain the lowest possible purchase
price. However, the common practice is to obtain the best life cycle price or the lowest total
acquisition cost. "The factor that affect the price of items are quality and quantity required,
urgency of requirements, demand and supply of materials in the market, whether there is
room for competition or not, whether the past business relationship was good or not' strained
" (Parson,1982: 145).
4. Right time --The delivery of the contracted item to the right place at the right time is an
important procurement function. Proper buying enhances production schedules without
loading warehouse with excessive inventory and also minimizes the unfavorable effects of
price changes. In case of regularly used or procuring' items, right time may mean the time
when the stock reaches the minimum level adhering the responsibility shared both by the
purchasing unit, and the approving body.
5. Right supplier -the right source is fundamental component or the major purchasing
objectives. Basic information about the number and location of potential suppliers, the nature
of products, prices charged and forecasts of the economic condition can be acquired if we are
to analyze the supply market effectively rather than simply buy from traditional sources
which may not be competitive. But there are problems faced by the purchasing units securing
right and permanent source of supply. The first problem is identifying potential source of
supply, then selecting the right reliable supplier is also challenging. The most difficult
challenge is to secure long-term relationship with the right supplier because of the dynamic
nature of the business environment and continuous attempt of businesses to make better profit
relationship with the right suppliers might not last long. Hence periodic revision of the status
of the relationship and making the necessary amendments in agreements is required.

1.7.2 Functional Level Objectives

The operational Functional level perspective probes more deeply to develop a set of
statements that provide practical and useful targets for decision-making purpose. This
Perspective contains eight basic objectives:
1. To support company operations with uninterrupted flow of materials and services.
2. To purchase competitively.
It involves keeping side by side of the forces of supply and demand and regulates prices and
availability of materials in the market place. It also involves understanding of the suppliers
cost structure and then negotiate price and service arrangement that are fair relative to the
suppliers actual cost.
3. To keep inventory investment and inventory loss of at a practical minimum.
Maintaining a large inventory is one way to achieve objective one, but it is also costly,
Hence the supply management job is to achieve a reasonable balance between the level of
inventory required to support operations and the cost of carrying the inventory.
4. To buy wisely:-Buying wisely involves a continual search for better values that yield the
best combination of quality, service and price relative to buyers' need. It may also involve
coordinating and reconciling user's need with supplier's capabilities, to achieve optional
values considering both Issues.
5. To achieve maximum integration with the other departments of the firm. It is essential to
understand the major needs of their using departments, so that these needs can be translated
in to materials support actions. The most common types of support actions are forecasting
future prices and business conditions, performing economic make or buy analysis etc.
6. To handle the purchasing and supplies management function proactively in a Professional,
cost effective manner. Management should expect the preceding the above objective to be
achieving in a professional manner at a cost that is appropriate with their value to the
organization.
7. To develop effective and reliable sources of supply. Cooperative suppliers that are willing
to work with a buyer to help solve the buying organizations problems and to minimize its
materials related costs are valuable resources.
8. To develop good relationship with the supplier community and good continuing
relationship with potential suppliers.
Dobler, 1996:42-44
1.7.3 Detail Level Objectives
At this level precise strategic buying plan are formulated. The focus is on the detailed
objectives that are developed when precise buying plans are made for each of the major
categories of materials the firm uses in its operation. These objectives are produced from the
second level objectives and are applied to fulfill the specific needs associated with each type
of purchase.
The precise set of objectives for each material typically varies because the usage requirement,
the operating conditions and the markets in which each material is purchased usually are
different. These objectives focus on points like quality, sourcing, pricing, production and
inventory planning.
1.8 General Procedure of Purchasing
Procedures used in completing a total transaction normally vary among different types of
purchases in different organizations. However, purchasing procedures refers to the way in
which a purchase transaction is carried through from its inception to its conclusion. A
purchasing proceeding usually begins with an investigation of new suppliers can be made for
renegotiating contracts with existing suppliers. The general cycle of activities in purchasing
most operating materials and suppliers is fairly standardized. The following steps constitute
the typical purchasing procedures.
1. Organizing of purchase requisition.
The need for a purchase typically originates in one of a firm operating departments or in its
inventory control section. It is a stimulus for purchaser to initiate purchasing. The essential
information which requisition should contain includes a description of the material; quantity,
date required; estimated unit cost; the date; an authorized signature.
2. Verification of purchase requisition.
The purchasing department verifies whether the requisition is appropriately filled or not.
3. Evaluation and selection of the supplier.
As soon as the need has been established and precisely describe, the buyer begins an
investigation of the market to identify potential source of supply. In the case of routine items
for which supplier relationship have already been developed, little additional investing may
be required to select a good source on the other hand the purchase of high-value or new item
may require lengthy investigation of potential suppliers to make a decision about the most
desirable supplier.
4. Preparation of purchase order.
Once a supplier has been selected the purchasing department prepares and issues a serially
numbered purchase order. In most cases the purchase order becomes a legal contract
document. For this and other reasons the buyer in preparing and wording the order should
take great care.
5. Follow up
Also called expediting, purchasing bears full responsibility for and order until the material is
received and accepted. When there is a reasonable chance that the supplier may not stay on
schedule important orders with critical delivery date should receive active follow-up
attention. There may be a need to speed up (expedite) or even delay (de-expedite) delivery if
the buyers timing requirements under go unexpected changes.
6. Receiving and Inspection
The supplier delivers the materials with the packing slip, which itemizes and describes the
contents of the items. The receiving clerk uses this packing slip in conjunction with his/her
copy of the purchase order to verify that the correct material has been received.
7. Payment
The typical procedure involved is a simultaneous of the purchase order, the receiving report
and the invoice. By checking the receiving report against the purchase order, the purchaser
determines whether the quantity and type of material ordered was in fact received. Then by
comparing the invoice with the purchase order and received.
8. Evaluating the purchasing performance
Purchasers need to evaluate whether the materials purchase from the supplier have satisfied
the need of the users. This evaluation will help whether to consider the supplier next [Link]
specific procedures employed by each should be designed to meet the unique needs of that
firm. Properly designed procedures should accomplish four objectives according to Dobler
These are:-
i. Fulfill each task satisfactorily with minimum of time, effort and proper work.
ii. Effectively communicates and coordinate the efforts of one work group with another.
iii. Minimize overlapping effort and group conflicts.
iv. Permit effective management by exception (Dobler, 1996:89).
1.9 Purchasing Policy
A policy is a statement that describes in very general terms may intend course of action. If
policies are to function effectively, it is very important that they be placed in written form. A
purchasing policy manual typically has two distinct sections, one containing company
policies which spells out in unmistakable terms the responsibility and authority at all
departments, and the other containing department policies which inform personnel of the
expected patterns of conduct for major buying activities and for relations with suppliers. The
purchasing policies should be clearly communicated to the staff. Medias for communicating
this information to the company employee can be published regulation, Company
informational booklet and departmental manuals (Alijan, 1973:2-31).
Purchasing policy places the authority and responsibly for purchasing in the purchasing
department. Every transaction between a buyer and seller involving the transfer to property is
a contract. From the beginning to the completion of a transaction between a buyer and seller,
many problems are involved and the paper handling of these and the administering of the
business features connected with them are vital factors in the successful operation of the
company. For this reasons, the authority and responsibility of purchasing rests with the
purchasing department.
The purchasing department is responsible to establish and administer purchasing policies,
institute reports necessary to permit analysis of purchasing performance, negotiate and
approve term contracts, analyze prices, paid for materials and generally define how to obtain
saving and to co-ordinate purchasing procedures (Westing, 1985:2 -3).
The specific style, format and contents of purchasing policy manuals vary widely. What is
important is that all major policies and operating procedures be communicated in writing.
They must be stated in simple and unambiguously words in a manual that is easy to use.
1.10 Examining Procedures of Purchasing Process In Finote Selam Primary Hospital
Through analysis of various documents and through questioner and interview, the researcher
revealed that the purchasing function of Finote selam primary hospital is organized as a unit
reporting to the logistics coordinator. The purchasing unit has a head (the procurement
manager) and four procurement officer and one senior procurement officer who are graduates
of purchasing and or related field with two or more years of experience. There are 3
categories of purchasing which are supplies, service and works and sometimes a hybrid
purchase will be made. Finote selam primary hospital uses four types of purchasing
procedures. These are:
1. Single Bid: One offer from a supplier listed in the vendor roster is required prior to the
confirmation of an order or contract. This is used when there is a low value transaction which
is below 350 Euro and categorized in procurement level I and II
2. Negotiated: Minimum of 3 offers obtained by contacting vendors on the vendor roster, for
that type of purchase or supply. Only vendors invited to submit offers may do so. Quotes
obtained from non-vendor roster suppliers should be justified by logistics and approved by
the Assistant country director system (ACD-S) at the Bid Analysis (BA) stage. Justification
should be recorded on the BA. This is used when the estimated price on the request is less
than 30,000 Euro and when supplier market is known and vendor roster is in place and
categorized in procurement level III - V.
3. Open National Tender: Allows national suppliers to participate, view the full tender
document and submit offers following the publication of Tender Notice. The Tender Notice
must be issued in a periodical published in the country of operation and giving adequate time
for suppliers to respond. Note: donor stipulated publication requirements must be fulfilled in
all cases. Therefore this procedure is used when there is a donor requirement and supplier
market is unknown.
4. Restricted: This is an alternative to Negotiated or Open Tender process and maybe used if
required. Used when supplies and services requested is, either very generic or very specific
and when the market information for the requested supplies or services is limited. It also used
to eliminate middle men or brief case suppliers It is a three stage process:
1) Publication of expression of interest (EOI) in periodicals
2) Vendors are shortlisted based on the EOI
3) Shortlisted vendors are provided with full tender document and invited to submit their
offers
However there are some exceptions which may deviate from the standard purchasing
procedures that allow purchases to go ahead on the basis of a single offer instead of a
negotiated or tender procedure. Depending on the reason for needing to deviate from standard
procedures it may be necessary to obtain a waiver from health center HQ (Head quarter)
before proceeding or it may be sufficient that the justification is documented by the
[Link] manual states the criteria to be used while classifying different types of
purchases and the purchasing department shall abide to the manual and should follow the
procedures and instructions while categorizing a particular purchase and implementing the
same. According to the purchasing head and the purchasing documents, open purchase is the
critical both in terms of budget consumption and in meeting the operational needs. Since
health center is an international recognized governmental organization those items purchased
for Humanitarian purpose is considered very critical.
1.12 Assessment of The Purchasing Steps In Finote Selam Primary Hospital
The Purchasing step in finote selam primary hospital involves 11 Steps:
1. Assessing Needs: The Purchasing Units recognize the need for Purchase in two ways;
when users present purchase requisition and when store demands for replenishment of items
in the store or purchase of immediately requested items.
2. Prepare specification/TOR (Terms of Reference) and request purchase using OQRF
(Order Quotation Request Form): The user would have to prepare the request in detail so
that the purchase would be successful
3. Ensure that the OQRF is fully completed and Authorized: The first thing the senior
purchaser or the procurement manager does before accepting any request is checking the
request is properly completed and clearly specified and if it has been authorized with the
appropriate Budget holder.
4. Considering Donner Requirement: Each Donner has its own requirement regarding the
things that are purchased, on the tender notice period, on the budget allocation period and so
on. So checking the donor requirement before proceeding with the purchase is very critical.
5. Identifying the right purchasing Procedure: As discussed on the first section which
purchasing procedure to follow must be identified like if it’s single bid or negotiated and so
on.
6. Seek Quotations or offers: Contacting vendors for an offer
7. Receive and Analyze offers: After receiving the offers Bid Analysis will be done based on
the procedure listed above and the Bid analysis has to be signed by the technical person,
Budget holder, Finance Head and the Country Director to get approval but if it is a single bid
it goes straight to the next step which is giving order and the Budget holder and the finance
head will make the approval.
8. Placing Orders or Contracts: Binding the winner supplier with a contract.
9. Receive goods / ensure completion of services or works: Mostly the purchasers
themselves deliver the items to Health center Head office but sometimes when it is a very
large quantity the suppliers will deliver to the warehouse. The store Keeper will issue the
Goods receiving document after getting confirmation of the item’s quality against the request
by technical person.
10. File all Documentation:
11. Pay vendors:
- When the requirements are for communications equipment, satellite airtime, digital or video
cameras or vehicles. If vendors who can supply these items are also available in country then
offers should also be sought from these vendors based on a generic specification. Offers will
then be compared from both locations;
- When the requirements are for pharmaceuticals or medical equipment, the purchases must
be referred to Hospital HQ to ensure that acceptable quality is procured;
- Even if offers are readily available for a particular item in country, additional offers should
still be requested from Hospital HQ if there is any suspicion on the part of the purchaser that
the items are significantly more expensive than they would be outside the Country Region.
Through analysis of the purchasing process reveals a number of problems. The major
problems are:-
1. Lots of decision makers: Besides the lengthy purchasing process, involvement of large
number of decision makers delays the process.
2. Communication gaps: There exists communication gap among parties involved in the
purchasing process; this can be explained as follows.
a. The requesting unit might not clearly state the item required on the purchase requisition
form since the form doesn’t have enough room to write specification or sometimes the
requesting persons have limited knowledge on the requested item or service.
b. For purchases that experts and technique committee will not be involved (non- bid and
nontechnical purchase) suppliers might deliver different items that users didn’t request
c. Purchaser might purchase different items because they don’t have clear understanding of
the items requested or they simply assume the item they purchased can substitute the
requested one.
d. There are instances that for the items which are available in the store, purchase requisition
are issued and purchases were made, this is because users directly present their purchase
requisition to purchasing unit without the consent of the store.
e. A particular purchase might go back and forward because some information is missing and
this will further stretch the already long process.
3. Poor Record Keeping: There is a well-established record keeping for purchasing
activities which is called Order Tracking Sheet (OTS) however since there is a big gap
between the purchasers and the database officer specially on the single bid purchases, it’s not
getting updated as it needed to be.
4. Absence of Follow up: There is no systematic way for the user department to follow up
the purchasing process except the OTS and since the OTS may not be updated on time the
information on the purchase progress wouldn’t be known.
5. Absence of accountability: There is no practice that intentional or negligent delay in
purchasing would result accountability. If a particular purchase is taking too long no
consequences will follow. As a matter of fact, there are no positive or negative
reinforcements to make purchasers more committed to their work.
6. Least Price Selection Criteria: The purchasing manual only shows that all the
requirements shall be satisfied and procedures are followed so that utility will be maximized
at least cost possible. The importance of other elements in purchasing like right quality,
quantity, source and time is not given proper emphasis.
7. Poor store and inventory management: There is no stock of items which are frequently
requested. Every item will be purchased when the need arises.
1.12 Examining The Purchasing Staff Performance
In addition to the interview conducted with senior management staff, data was gathered
through interview with purchasing staff. It was found out that the purchaser staff is
responsible for a number of duties including: Summarizing and preparation of enquiry forms,
Collection of Performa Invoice, Evaluation and Verification of Suppliers, Preparation of
Purchase orders, purchasing the items, Processing and effecting the payment, Refueling
vehicles if it is rented, Petty cash (Float) disbursement and replenishment. According to them,
most of the purchases are Visibilities, IT Equipment, Vehicle Spare Parts, Kitchen Materials,
Construction Materials, Medicines, Stationery Materials and so on and the unit is overloaded
with lots of purchase in a month on the average they process around 143 purchases which is
over 30 purchases in a week and which also almost over a thousand documentation is needed
and this doesn’t even include the level I purchases that comes in the middle and settled by
float (Petty cash). The long process for the approval of a purchase makes it averagely a week
to finalize the acquisition.
In making purchases from Level I to Level IV the purchasers have the discretion to invite
particular suppliers for quotation. The discretion given for the purchasers is important
because as a result of their day to day work they would have information about reliable
suppliers. But the chance that purchasers might establish unethical relationship with suppliers
remains a threat. Having well established relationship with suppliers is important because one
of the problems practiced in the institution is lack of long term relationship with suppliers.
However the interview with both the purchasers and the senior management revealed that
there is always emphasis on low price items the simple rule to select among suppliers is the
least price and because of that user’s requirements are not well met and they all agree that
quality shouldn’t be compromised. According to the purchasers the main reason for delay in
purchasing is that the purchasing unit has to follow strictly the purchasing process which
involves verification and approval at different levels and this will take some time and
sometimes the requested items might not be available in the market so the requisition shall be
reprocessed specially in the case of Medicines. There are also instances users complaining
about quality claiming the items are either wrong quality or poor quality. Which means some
different type of the same product is purchased which might not met users requirement or the
item might be the same but it’s below standard and it doesn’t effectively serve the intended
purpose. Whereas users do not have many complaints on source, price and quantity of
purchases as much as they are complaining on the quality since the rule is least price and
sufficient quantity is often purchased besides users would not be concerned about how much
a particular purchase costs, Their concern is to get the right quality items at the right time in
sufficient. According the senior management the humanitarian response program consumes
more budget than the rural development program and the fundamental document that guide
purchasing process is the organization manual developed in head quarter but still
implementing it based on the situation takes the skill of the manager. Looking from the
interview it can be seen that the management is not playing satisfactory role mainly in
establishing long lasting relationships with reliable suppliers. This is principally important for
regular purchases, which will not require biding; and also nothing has been done to accelerate
the process and encourage efficient and promote purchases. The other thing is users are not
exactly specifying the items they request for purchase. The reason might be they lack the
knowledge of specification and the purchase requisition form doesn’t have space for this.
This is causing wrong quality purchase and sometimes the suppliers create problems in the
purchasing process like Participating in a tender without possessing the item to supply
assuming they can make it ready if they win the tender or Quoting prices with time limit,
assuming the purchasing process takes time and would give them room to demand for price
revision.
What do you think would be the reason for purchasing different or related item from the
requested one?
According to the survey/interview most mismatch of the purchase happen due to the suppliers
not having the required item that means the chosen supplier may get out of stock in other
words since it takes a very long time to order so instead of being the required item it will be
related to what the user requested. The other mismatch happens because of unclear
specification of items on the purchase request and this happens due to some receiving parties
lack the knowledge particularly with respect to Medicines.
Such mismatch between purchase requisition and item purchased has several consequences.
 The item purchased might not effectively substitute the item requested.
 Users might decline to receive the item.
 Suppliers will not be willing to change the item.
  The purchased items might seem to fit for the intended purpose for a while and might
not last long.
 Work will be interrupted.
 Users will be forced to wait for another lengthy purchasing process.
 Items will be simply discarded.
 Conflict between users and purchasers will happen.
 Waste of resource for items to be repurchased.

1.13 CONCLUSIONS
To gather information for the paper primary sources including questionnaire and interview
were used, and also secondary sources including purchasing documents and manuals were
revised. Both the primary and secondary sources revealed that the purchasing department of
Finote selam Primary Hospital has some problems which made it inefficient in some areas.
The major areas of poor performance or in other words the research findings can be
summarized as follows:
1. The management is not giving sufficient emphasis for the purchasing function. This can be
observed from the following:
• Not establishing systematic ways of expediting and follow up of the purchasing process.
• Not establishing long term mutually benefiting relationship with reliable suppliers.
• Not devising mechanism to reward efficient purchases and penalize inefficiencies
2. Purchase requisition (OQRF) forms are not filled properly which creates misunderstanding
with purchasers and the items delivered might not be in the exact shape as the requester
thought it would be or it may not perform as intended to be.
3. Even though there exist a system which is called order tracking sheet the database for
recording the purchasing activities is not updated on timely basis which makes it difficult to
regulate and check the status of the purchasing process and also it creates a big
communication gap between purchasing department & Program department.
4. The receiving process is not properly organized, sometimes parties assigned lack expertise
to verify quality of items.
5. There is no direct and immediate consequence for inefficient purchases given by the
manual
6. Items are requested without checking with stock and this exposes to additional cost
7. Everyone is giving high emphasis for least price other principles of purchasing to secure
right quality, quantity; sourcing and timing of purchases are not given as much attention as
the least price as the manual explicitly states utility will be maximized at least cost possible,
proper emphasis is not given to other elements like quality, time & source.
8. The purchasing process is very long with lots of decision makers and still nothing will be
made for a particular purchase that is taking too long which means no reinforcements to make
purchasers more committed to their work.
9. There is a huge store & inventory management there won’t be items on the stock which are
frequently asked and also there is an instance of newly purchased items while there is
sufficient amount in the stock. This might also be caused by the user presenting the
requisition directly to the purchasing unit without the consent of the store but still it is very
hard to get updated information on time.
In General all the levels in the purchasing procedures helps to minimize the fraud that might
exist along the way, but it still slows down the process to deliver an item or service on time.
The manual states all the process that any purchaser has to follow in every process and this
also helps to track down all the levels however it lacks to give proper emphasis on quality
and time.
 1.14 RECOMMENDATIONS
To alleviate the above mentioned problems the following recommendations are forwarded.
1. The management should give more emphasis to the purchasing process by giving due
consideration to the following:
Assigning qualified staffs who can check and receive the requested items.
Effectively communicating the importance of having efficient purchasing
management which can be met by securing the purchase of right quality item, in the
right quantity, from the right source, purchased for the right price and delivered at the
right time.
Establishing systematic ways of expediting and follow up of the purchasing process.
Seeing ways to establish long term mutually benefiting relationship with reliable
suppliers since this will reduce suppliers cheating problem and to a higher extent
tackle low quality purchases and delayed deliveries.
The management should also device mechanism to motivate purchasers through
recognizing and rewarding efficient purchases while making sure intentional
inefficiencies would result in substantial accountability.
Above all if they implement e-procurement method to process the purchasing activities it
would really help to expedite the longer process. It certainly will make communication
needed in competitive bidding, purchase order placement, order tracking, and follow-up are
enhanced by the speed and ease afforded by establishing online systems. In addition,
negotiation may be enhanced and reverse auctions will be facilitated. This will allow the firm
to specify a requirement and receive bids from suppliers, with the lowest bid winning. The
use of e- procurement technologies in some firms has resulted in reduced prices for goods
and services, shortened order-processing and fulfillment cycles, reduced administrative
burdens and costs, improved control over off-contract spending, and better inventory control.
Therefore the implementation of this technology will drastically change the problem faced by
the time delay.
2. In addition to the management effort the purchasing unit shall improve its performance by
considering the following:
 Maintaining comprehensive records for purchasing activities.
 Designing suitable forms to process purchases including purchase requisition and
purchase order having sufficient space for specification.
 Developing and understanding ways to expedite purchases like by making a clear
communication with the requesting parties before going ahead with the purchasing
process.
 Revising the purchasing process and avoiding steps which are redundant like
processing the payment & PO simultaneously if the purchaser is sure &
communicated with the supplier by phone that the item exists, and make sure the
parties involved are mandatory in the process.
 Bibliography
Alijan George ( 1973),Purchasing Handbook ;2nd ed. New York: Mc Griw hill inc.
Alijan George ( 1975),Purchasing Handbook ; 3rd ed. New York: Mc Griw hill inc.
Biruk Assefa ( 2006), Evaluating the purchasing procedure in Ethiopian grain trade
Enterprise; AAUCC
.C.R. Kothari (2004). Research Methodology. New Age International (P) Limited
Publishers.
Contemporary Purchasing Practices Special issue call for papers from Journal of Business
and Industrial Marketing
Donald W. Dobler ( 1984), Purchasing and Materials Management; 4th ed. New York :
Mc Griw hill inc.
Donald W. Dobler ( 1996), Purchasing and Supplies Management; 5th ed. New York :
McGriw hill inc.
Getachew Zeleke (2006), Purchasing Management in Commercial Printing Enterprise;
AAUCC.
GOAL Ethiopia (2014), Logistics manual
Herel Encyclopedia of Management (1996)
J. H. Westing ( 1985), Purchasing Management Materials in Motion; New Delhi : J.
Weng and sons Inc.
Leenders I. Fearon and England (1989), Purchasing and Materials Management;
9th ed. New Delhi: Rechard Irwin Publisher
N.K. Nair (1990), Purchasing and Materials Management; 2nd ed. New Delhi: Vikas
Pubilshing .
Paul [Link], Donald [Link] and Gerald Albaum, (2004). Research for marketing decision,
5th ed, prentice hall of India private limited.
Parson W.J ( 1982), Improving Purchasing Performance; London: Gower Ltd.
Tewodros Walelgne (2006), Purchasing Practice and Problems in Addis Modjo Edible
Oil Factory; AAUCC.

Interview questions for purchasing staffs of Finote selam Primary Hospital

1. Briefly describe the nature of your job?
2. What different types of purchases do you make?
3. How many purchase requisitions do you receive per year on the average?
4. How long a particular purchase would take you on the average?
5. How do you identify the right supplier?
6. What do you think is the most important objective to be met in a particular purchase?
Interview questions for senior management staffs of Finote selam Primary Hospital
1. Which purchases consume more budgets?
2. What are the fundamental documents guiding your purchasing process?
3. What are the steps involved in the purchasing process?
4. Have you practiced problems in implementing a purchase process due to any of the steps
involved?
5. Which of the five rights of purchasing [right quality, right quantity, right price, right time
and right source] is/ are given more emphasis in your purchasing process?
6. Do you think the purchasing manual gives more emphasis to some of the five rights of
purchasing?
7. Are there incentives to encourage efficient and prompt purchases?
8. How do you expedite the purchasing process?