I am very much grateful to my Supervisor Mr. Praveen G J of the Institute of Management and IT, who has been a guide for this Technical project.
I take this opportunity to acknowledge the efforts of our lecturers and college who provided valuable opinions and thus contributed to the compilation of this Project Report.
I am much indebted to many people, particularly my wife Lilian and others who directly or indirectly contributed to make this Project Report possible.
Procurement Information System is the database which involves collecting, recording, interpreting ,analyzing, reporting and disseminating Procurement data so as those data are available to be used for making critical management decisions as far as Procurement function is concerned.
Effective and Efficient Procurement Information System assist in making delivery of goods and services at appropriate cost through having a clear and agreed policy in relation to the procurement procedures of the company.
The general objective of the research was to assess the Procurement Information System to determine whether the system meets the current and future needs of the company.
The approach of the researcher was in the form of Case Study . collecting Data from BAKHRESA FOOD PRODUCTS LIMITED(BFPL) which is located at Dar es salaam.
Data were enquired through Inductive Method and SWOT was used by the researcher in analyzing data.
VISION , MISSION AND VALUES OF THE COMPANY
- To enhance and maintain the living standards of Africans by providing them with necessary products and services of global quality ataffordable prices.
- To exceed customers' expectations through innovation and harnessing technology.
- To be one of the internationally respected and professionally managed companies in the African Continent.
- To spread our wings to the other parts of the globe.
Passion for success
- We are determined to be the best at what we do.
- We are not content with the status quo.
- We have a compelling desire to innovate.
- We are conscious of our responsibilities towards all our stakeholders and discharge them in letter and spirit.
- We treat our employees as our assets, not an expense item in Profit & Loss account.
- We recognize that keeping the employee morale high is the key for achieving our success.
- Team spirit and synergy are the hallmarks of our work culture.
- Our employees have a sense of ownership in what they do.
- We have respect for and confidence in each of our stake-holders, namely, shareholders, employees, customers, suppliers, bankers, financiers and others.
- We believe thatmutual trust is the foundation uponwhich everything else rests on.
- We recognize that corporate responsibility towards society is an integral part of doing business.
- Thus we actively participate in community development programmes.
There are issues of strategic significance in Procurement Information System such as the Suppliers, Customers and Inventory codification, the Purchase Order preparation, Materials Receipts , Materials Issuance , Incoming Consignment Inspection , Material Release , On-line Stores Management
The process of coding each individual Supplier, Customers and Stocks maintained in the company involves the preparation of the list of Stocks, Locations(of the stocks), Suppliers as well as Customers and subsequently the allocation of codes for each is done to give its unique identification for each
The Purchase order is created in the system after a particular Proforma Invoice has been approved. All principal terms agreed in the transaction is shown in the Purchase order both in the soft and hard copy.
The process of receiving the material involves the inspection of the Purchase Order both in the system to see the position of the order whether is not received, partially received or fully received. The system give the list of pending orders waiting to be received as well as the list of orders fully received. Therefore there is no room for receiving items which were not order because the system can not accept the entry. At this stage the Goods Received Note is generated in the system which adds the stock in the special location in the system which has been designed as a Quarantine store.
The process of issuing materials involves the preparation of Issue Voucher which consists of all items involved in the preparation of the Final Product. The issue voucher reduces the stock in the system and adds the stock in another location in the system as a Finished Product.
After the consignment has been received into the system, the stock get updated in the specific location in the system whereby the Quality Department take the sample and once the consignment is passed, the Quality Department release the entry which subsequently update the stock position for that particular item.
The consignment is said to be release (or passed) by the Quality Department after the quantity is transferred from its respective to another both as a system transfer as well as physical transfer of the material.
The management of stores in the software has been made easier by the fact that each physical movement of stock is supposed to be supported by the system document which can not be printed unless a relevant entry has been passed in the system. Therefore the Receipt document as well as Issue document is system generated documents, since receipt of materials and the issuance of the same are the major functions in the daily stores management.
This task covers back ground information of the Case study, Scope of the study, Method of Enquiry and Hypotheses.
Bakhresa Food Products Limited (BFPL) is one of the largest and fastest growing Food Products manufacturing companies in East and Central Africa.
It is part of the Bakhresa Group of Companies, one of the largest and most respected business groups in East and Central Africa.
Group is one of the leading Industrial Houses in Tanzania, East Africa. Started in a humble manner with a small restaurant in the Port City of Dar Es Salaam, Tanzania, in mid seventies, it has now emerged as a respected business group in the Region. The Group has its operations spread in Tanzania, Zanzibar, Uganda, Kenya, Malawi, Zambia and most recently in Mozambique.
Objective of the study.
Reliable and consistent Supply of Food Products to the people is extremely vital. Manufacturing of Food Products requires conformity with the laid down procedures and regulations, as well as strict adherence to the good manufacturing practices which has been performed in a timely fashion and at a minimum cost.
But poor Manufacturing procedures and non adherence to the guidelines will definitely result into poor products. The public claims that sub-standard products have been in the market causing diseases as well as death.
Inefficient and Ineffective of the Procurement Information System in any company produces sub-standard products which eventually lead into huge losses in terms of market share as well as Profit.
It is due to problem of sub-standard products that compel the researcher to see the need of assessing the Procurement Information System in the case study of BAKHRESA FOOD PRODUCTS LIMITED (BFPL) located in Dar-es-salaam.
Scope of the study
The study has been conducted and focused on all different activities involved in the Purchase Cycle, from sourcing to dispatch and the entire material flow in the company. Also since the study was being carried out in Dar es Salaam, it was easy for the researcher to obtain all relevant information by site visits.
Method of enquiry
There are five types of enquiries
- Analytic - Deductive Enquiry
- Unbounded Systems Thinking
- Inductive - Consensual Enquiry
- Multiple Reality Enquiry
- Dialectic Enquiry
The main characteristic of this method is its ability to break down the issues into different part through reductionism, which is helpful in indicating a solution. The main problem will be broken into smaller and the solutions of smaller problems are incorporated together to get a final solution.
The Unbounded Systems thinking also termed as the innovative enquiry. These techniques state that everything interacts with everything, Problem is a mess, and it is not able to have rigid definition of the problem. It uses thinking system to scrutinize creatively the problem and therefore more helpful than other enquiry.
Inductive-Consensual mode of enquiry is a technique that enables us to have a result based on a limited set of observations. With these formulated observations, only one conclusion must be considered. In this method, the decision maker should first formulate a problem situation, after which, a set of observations or possible solutions can be provided.
The key element in the multiple reality enquiry system is the understanding that the observer or analyst actively participates in the definition of the problem by introducing the observed problem data against a theory or model which is personalized and exceptional to her/him and makes sense of the problem in these terms.
Dialectic is a technique of argument, Dialectic is based on the ordinary practice of a dialogue between two people who hold different ideas and wish to persuade each other. The assumption of a dialectical argument is that the participants, even if they do not agree, share at least some meanings and principles of inference.
For the purpose of this case study, the researcher has selected INDUCTIVE-CONSENSUAL METHOD.
The reasons for compel the researcher to select the inductive method are:
- It involves a small sample to scrutinize the problem situation compared to deductive which involves a large sample.
- It is a qualitative method therefore it involves qualitative data for analysis of the problem situation
- It is appropriate for method when time-available is sufficient for analysis of the problem situation.
The enquired information was analyzed by using SWOT Analysis.
- Non adherence to Good Manufacturing guidelines and procedures has resulted into sub-standard products.
- Poor understanding of benefits of a procurement information system by company's Management and other key players leads into ineffectiveness of purchasing quality raw and packing materials.
- The demand of the quality pharmaceutical products in the health sector is extremely high.
- The organization is seeking its International Standard Organization (ISO) certification which will assist to increase its Market Share in the International Market.
As a result of company expansion, the management was facing the challenges such as the company aimed at obtaining local certification as far as manufacturing standards is concerned from Tanzania Bureau of Standards and from International Standards Organization(ISO) in order for the company to export to the external markets.
Those two critical issues compelled the management to start considering the following actions:
- In order to increase the quality of its products, management decided to buy the site which used to be National Milling Company(NMC) at Mwalimu Nyerere Industrial area, and started the construction of state of the art milling plant.
- One of the requirement for certification of ISO in current Good Manufacturing Practices(cGMP), was to have skilled staff. At the same time, management decided to perform in-house training for existed employees.
- All activities which were carried out in the company were supposed to be executed according to the steps stipulated in the Standard operating procedures which were prepared within the company.
- Management decided to buy new machines which were installed in the new site in order to increase machines productivity and efficiency. That was not only aiming at helping the company to obtain its ISO certificate but also to reduce the level of cost which company were incurred because of frequent machine break downs
COMPETITIVE ADVANTAGE ASSESSMENT
This task assess the use of IT in the Food Industry by using SWOT Analysis considering industry's competitive Pressures, its challenges and its effects to the company.
Company's IT Assessment
The company has a good IT Policy with enough IT equipments as well as full support from the top management
The company has no IT department while at the same time has inadequate number of IT personnel which eventually lead to the inability to train users when the need arise especially on preventive maintenance of the system.
The company can create IT department and recruit more IT staff which will facilitate training to the end-users
The company is facing the possibility of Losses in sales, Production as well as Profit resulted from mismanagement of IT system in the company, Losses of IT equipments and increase in the Cost of Maintenance of the Existing IT system
Peripheral factors and the use of IT
- Since the market expanded rapidly, management faced a challenge of handing too many customers at a particular time. Therefore, high level of customer satisfaction was needed to ensure the company continues to hold its shares of the market. The computerization of purchase, quality control, production and sales activities reduced significantly the time taken for processing Customer Order.
- The audit findings of Tanzania Bureau of Standards (TBS) suggested that due to high market demand , the company was supposed to use a customized software which gives detailed information for each individual products produced, example, the batch number ,date of arrival of raw and packing material, from which supplier, the date of collection of sample of Good received, Quality Control inspection/analysis results, date of raw / packing material issue to production, date of manufacturing of a required product, date of packing, date of transfer of Finished product to Sales ,date of sales to the customer etc .
- Since some raw materials are purchased from abroad in bulk quantity, the management decided to use the IT to facilitate the Purchase process. For example the company bought its materials mainly from India. In order to complete the business with such Suppliers, it requires a technology which not only facilitate communication to cover long distance exists between buyer and supplier but also a technology which reduce Purchase order processing cost for each individual consignment.
The competitive nature of Information Industry
- The number of large-scale companies in the local industry was only two, namely Bakhresa and National Milling Company which was state-owned until 1998 when its was finally acquired by Bakhresa. Todate the number has increased to 4.This increase in number of competitors in the industry gave rise to a need to high level of competition in terms of new competitive products, Price and Quality. The more number of competitive products in the market forced the company to revise its market strategy to ensure it continue to dominate the market and more to increase its market share.
- Due to high level of demand for Food products versus its domestic supply, the government decided to encourage the importation of the same into the market. Although the government intention was good, but on the other side it created more competitive environment for domestic producers of Food products. Also the formation of East Africa Community resulted in more importation of Food products from other member states like Uganda whereby its Food Industry is more advanced and has many Food processing companies than Tanzania
- Since the industry has new competitors, the level of investments made by most of them is high, so as to ensure that they produce new products which have low cost of manufacturing as a result of modern technology used by them while maintaining quality for their products
- The government has put a low level of taxes for all imported Food products to fill the gap which existed in the market. But this particular decision made by the government, tend to discourage the domestic producers of Food products.
- The Food industry of Tanzania is in great demand of skilled personnel. The number of college graduates in this field is very minimal. This compel most of Food companies to import skilled labour from India , Kenya and Uganda. There is a need to increase number of colleges as well as a change in teaching curriculum which will assist in the increase in number of the graduates hence lead into the overall development of the Food industry.
- As far as Tanzania is concerned, most of raw materials come from abroad as a result of decline in the agriculture production. This results into high level of expenditure of foreign exchange and make the entire Lead-time of processing customer's order, to become long and uneconomical. The government needs to encourage the foreign investments in the area of agricultural production.
Currently, the Government has initiated a programme aiming at increasing the agriculture production, the programme is known as " KILIMO KWANZA" generally meaning that Agriculture sector should be the leading sector of the economy.
Benefits associated with IT
IT help the company in the following ways:
- IT facilitates the evaluation of supplier performance since management of company had introduced the software whereby all purchases and receipts of consignment as well as their analysis is done through the computer .By doing so it becomes easy to evaluate individual performance of each Supplier at any give time. There is a customized report whereby when the user select the required dates for analysis, the system produce the analytical report in real-time.
- IT reduces the order processing time as far as distribution of its products is concern since normally the order processing require the availability of the Finished goods in the store. The Enterprise Resource Planning(ERP) software which has been introduced, has been customized in such a way that, once the product is produced and packed, it is reflected in the system.
- IT reduces the lead-time of buying the materials from abroad since before the introduction of the Computer system and particularly the Enterprise Resource Planning(ERP) in the company ,the lead-time for most of the raw and packing materials was too long. Example lead-time for purchasing the consignment from India was 80 to 90 days and 150 days for China. But after the introduction of the same, the lead-time is expected to decrease to 60 days and 120 days respectively.
- IT helps the management to generate and analyze timely the financial as well as management reports since after the introduction of Enterprise Resource Planning(ERP) software, the management is able to generate reports in real-time and in an orderly fashion.
- IT helps to track(monitor) and control each stage of production process since each stage of physical movement of the materials, from the time Raw and Packing Materials entered the company's premises until Finished Product is dispatched to customers, is reflected in the system.
- IT reduces the machine idletime (caused by the delay in the availability of materials-to-be produced) since the use of computer and Enterprise Resource Planning(ERP) software in particular reduce the amount of losses resulted by a loss of man-hours and machine-hours due to non-availability of materials.
Changes in IT that affects the company
- A change in the company's IT management policy whereby any change affect its IT system, example a policy to use Intranet.
- A change in the supplier's IT policy since a change on the side of the Suppliers definitely affects the Company's policy on IT. Example is a policy on the use of extranet.
- A change in the government policy on IT , example a policy to remove tax on imported IT equipments particularly computers.
This task discuss the results obtained in the previous task while take into consideration the internal resources and capabilities of the Companies. The analysis or rather a discussion is based on Consequence Analysis tools.
CONSEQUENCE ANALYSIS TOOLS
Consequence Analysis tools are those used to analyse the problem situation or system. These tools aim at identifying the potential positive and negative impact of consequences on Information system.
Example of the Consequence Analytical tools are SWOT,PEST etc.
For the purpose of this project report, the researcher has decided to use SWOT Analytical tool.
SWOT is the analytical tool which is frequently used in analyzing the internal and external environment of the entity as part of the strategic planning process by identifying the Strengths(S) and Weaknesses(W) which are internal to the entity and those external to the entity are classified as opportunities(O) and threats(T).
- A good IT policy of the company, facilitate its IT Project Implementation. The project team composed by team of experts from all fields, like Finance, Procurement, Engineering ,Pharmacists etc who are the stakeholders for any IT project introduced within the company. On the human resource side, the company has a lot of educated employees on their respective fields especially on the middle and top management cadres .That gives the company competitive advantage on the implementation of such project. Also company's management consist of foreign experts with rich experience in their respective disciplines.
- Most of well equipped Projects tend to provide desired results. For IT projects to be successful requires a complete set of IT equipments required to undertake the project. Most of the IT Projects fail to take-off due to the fact that management has failed to finance the project. So since the Management has sound financial standing, it can facilitate to a great extent, the acquisition of the same.
- Top management has ensured that System rules and procedures are being observed and followed. That is crucial for any system to be able to survive since in year 2002, the management hired an Expert from South Africa who was paid equivalent of USD 30,000.00 Man month to set system rules and procedures for a newly introduced Enterprise Resource Planning(ERP) Software.
- Absence of IT department has definitely result into lack of long-term plans on how the company should prepare to cope with changes caused by the developments in the IT industry. Since management always rely on project teams and most of the Project teams do not have the element of long term Planning because the project team is concerning with the Implementation of the already existing plan. Inter-departmental relations with other departments within the company also becomes a matter of concern, since most of the system queries and complaints can not be handled in timely manner. Sometimes there has been complaints on the system misbehavior, whereby time taken to solve the same is long and becomes expensive to the company. The presence of IT department could have reduced the problem significantly.
- The limited number of IT personnel within the company ,give rise to poor supervision and support service to user departments. The company should ensure it has sufficient number of IT staff to cope with the high level of user's requirements on the support services. Frequently it resulted into unnecessary stoppage of the production, hence caused a rise in overall cost of manufacturing.
- Lack of training to users has resulted into System failure to produce the desirable outputs to the management, hence caused a loss of time, money and production not to mention Sales. In most of the IT project before its implementation, there is always a User Training programme so a s to equip the user with all rules, procedures as well as features involved in the particular project, before its take-off. Most of the computers and other system failures, has caused a great loss to the company which could have been avoided if the users were well trained.
- The formation of IT department lead to increase in the ability to cope with system related problems. By establishing the same, the company can be able to budget, hence put itself into a competitive position against all problems and challenges evolved during system implementation as well as maintenance.
- The recruitment of more IT staff help to solve the problem of loss of sales and production, resulted from frequent system failures.
- Training of Users give rise to the reduction in the loss of machine-hours and man-hours caused by the System failures which were mostly caused by the inability of Users to understand the system in their individual workstations
- The Loss in Sale and Production caused by the mismanagement result into loss of market and reduce the company's ability to pay its debts
- Losses of IT equipments due to theft and mismanagement of the same result into the system failures which eventually result into loss of Production and Sales
- An increase in the cost of Maintenance of the existing IT system due to inability to manage the information system might compel the top management to replace the existing system.
Internal process, management and strategy
The internal process of the Information System involves the following :
Strategic planning of the company has involve a process of developing long-term goals and use tools like SWOT technique to assess the current situation of the information system and therefore the company created implementation plan to achieve those goals.
Feasibility study has been conducted by determining the feasibility(possibility) of a project on which the conclusion will determine if a decision can be made. The company has used the study to provide the information whether IS project can be done, whether the final product can benefit users and also to look for alternatives among available solutions. The findings of the study had enabled management to make "yes decision" on the need to start the project.
As far as software project of the company is concerned , the analysis stage involved documentation of technical requirements for the needs of users which is crucial to the success of the project. The successful Analysis of Information Systems was involving the a comprehensive introduction and user-friendly survey to all aspects of business transformation and analysis.
That provided the complex set of tools covering all types of systems and database. Analysis helps to create systems that meet the needs of users, to enhance set of techniques and tools that the analyst required.
In designing a Software project, the company has considered technical requirements for the needs of users for the success of the project. Successful Design of Information Systems gave a complete introduction and user-friendly survey to all aspects of business transformation and provide complex set of tools covering change control, and data warehouse system design.
Management of the Information System in the company is done through the in-house training of all users on how to work with Computer without creating damages to it ,also encourage its IT staff to obtain further and more formal training on the IT since it is a profession or discipline which is changing with time. Management of IT also insist on Upholding of the law and be honest in the implementation of the projects and make necessary contributions.
The company's strategy involves the possibility of acquiring new software which support the level of production which is ever-increasing. Also the company looks at the possibility of creating the specific IT department and the same time increase the number of IT staff to copy with the ever-increasing in-house customer satisfaction.
This task contains definition of the System Development, key issues involved, impacts of internal and external forces on System development and the overall Conclusion of the Report.
Software/System Development Cycle (SDLC) is the multi-stage process which involves system study (Feasibility study), analysis, design, implementation and evaluation. This process is done, when existing System requires to be replaced by the new system.
Key factors involved in system development life cycle
- Economical factor whereby is concerning with the assessment of budgetary and financial constraints of the proposed system
- Legal factor whereby is concerning with the assessment of the existing legal requirements on the business and determines the whether any conflict exists between the proposed system and the paramount legal and statutory obligations on the organization
- Operational factor whereby is concerning with the determining whether existing or proposed procedures and practices are adequate for the purposes of the proposed system
- Technical factor whereby is concerning with determining the possibility and practicability of using existing and modern IT to develop the proposed system
The following are internal and external factors( or forces) and their impact on system development of the company taking into consideration the initial three stages of System Development Life Cycle, namely Feasibility Study, System Analysis and System Design:
Effects of internal forces on system development
The internal forces which affect the development of the system are Management and Employees. The following is the assessment of the impact at each individual stage of system development
- At Feasibility Study Stage, as far as Management is concerned, focus on the Study was to determine how the proposed system of organization structure help to meet the new challenges of having too many departments and divisions in the current system of organization structure which become too expensive to maintain and as for Employees aspect study focus was to determine how the proposed system help to meet the existing challenges example on the changes in the statutory obligation on the benefit scheme for both permanent and casual employees.
- At System Analysis Stage as far as Management is concerned, Human, Technological, Physical and Financial Analysis of the new organization structure is carried out, by defining and stating the scope and objectives of the new system of organization structure but also investigate and identify problems and areas of concern while describing the business as well as system requirements and later integrate the same and as for Employees aspect ,Policy, Socio-cultural, Managerial and Financial Analysis of the new benefit scheme is carried out, by defining and stating the scope and objectives of the new benefit scheme, but also investigate and identify problems and areas of concern while describing the business as well as system requirements and later integrate the same.
- At System Design Stage as far as Management is concerned, the creation ,documentation and modeling of both the Logical design specifications and physical design specifications are being performed as far as the new organizational structure is concerned. Generally, this means drawing of the new organization structure which solve a problem of high maintenance cost of the organization structure and as for the Employees aspect ,the creation ,documentation and modeling of both the Logical design specifications and physical design specifications are being performed as far as the new scheme benefit is concerned. This means a drawing process of the new scheme benefit for all employees in the company both permanent and casual employees.
Effects of external forces on system development
The external forces which affects the development of the system are Suppliers and Customers. The following is the assessment of the impact at each individual stage of system development
- At Feasibility Study Stage as far as Suppliers are concerned, the study focus was to determine whether the proposed System of Inventory management required by the company solve the problem of frequent stoppages of production due to non-availability of materials and as for customers, study focus looks at whether the new system of invoicing was reducing the problem of customers complaints of over-invoicing.
- At Analysis Stage as far as Suppliers are concerned, Insurance, Security and Financial Analysis of new system of inventory whereby the old system was aiming at bringing the material at the time it is needed for production popularly known as Just-in-time(JIT) while the new system aims at building up a large inventory to ensure that is never out of stock due to high level of demand from the market and as for Customers, Market, Operational and Financial Analysis of new system of invoicing which solve the problem of over and under invoicing of the consignment sent or collected by the customers is carried out by defining and stating the scope and objectives of the new system of invoicing , but also investigate and identify problems and areas of concern while describing the business as well as system requirements and later integrate the same.
- At Design Stage as far as Suppliers are concerned, the creation, documentation and modeling of both the Logical design specifications and physical design specifications are being performed as far as the new inventory system is concerned. Generally, this means drawing of the new system of inventory which remove the problem of material stock-outs and as for Customers, the creation ,documentation and modeling of both the Logical design specifications and physical design specifications are being performed as far as the new invoicing system is concerned. Generally, the entire process of system designing is concerning with drawing of the new invoicing system which eliminate the problem of over and under invoicing for the sold consignments.
The company has been a leading Manufacturer of Food Products in Tanzania and is aiming at maintaining its position and expands outside the borders of the country.
The company faced challenges in its Procurement Information System. After a thorough study and analysis of its information system Management decided to initiate a process of replacing the old system to meet the current as well as the projected needs of the company. Therefore taking all factors into account, management decided to introduce an Enterprise Resource Planning(ERP) System to replace the old system of Information.
The decision of the company management to upgrade its Procurement information system is not an option in this technology-driven era, it is a requirement .Companies that use an up-to-date procurement information system to gather, assimilate, and evaluate internal as well as external information regarding its procurement gain competitive advantage over other firms.
Management of the company was quicker to respond to customer's needs and complaints. With the growth of communication networks, there are almost no barriers between the company, customers and suppliers.
A procurement information system enables companies to monitor all activities of the purchasing cycle from souring of materials to sell or dispatch of the final product to customers
Furthermore, a good procurement information system can facilitate direct communication between the company, suppliers, dealers, and marketers. Together, they can create a value chain as though they were in one organization.
Moreover, in the era of IT like this, Procurement information has become valuable organizational asset . A good procurement information system enables companies to react, respond, store, retrieve, disseminate and control procurement information. Currently , a good procurement information system within a company is no longer an option, it becomes a compulsory in determining success.
The company is expecting to increase its Sales and Profit significantly once the new system is fully operational.
- http://www.bestpricecomputers.co.uk/glossary/enterprise-resource- planning.
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