ASSESSMENT OF PURCHASING POLICY AND PROCEDURES IN

CASE OF ETHIOPIAN REVENUE AND CUSTOMS AUTHORITY

DIRE DAWA BRANCH

SENIORS ESSAY SUBMITTED TO DEPARTMENT OF LOGISTICS AND

SUPPLY CHAIN MANAGEMENT FOR PARTIAL FULFILLMENT OF
REQUIREMENT OF BACHELOR ART DEGREE IN LOGISTICS AND SUPPLY
CHAIN MANAGEMNT

BY: ABDULHAKIM SHITO

ADVISOR: ABDELLA KASSAW

DIRE DAWA UNIVERSITY

SCHOOL OF BUSSINESS AND ECONOMICS

DEPARTEMENT OF LOGISTICS AND SUPPLY CHAIN MANAGEMENT

DIRE DAWA, ETHIOPIA

JUNE, 2015

,
 Table of content

Contents Page

Acknowledgement.....................I

Abstract..........................................II

List of tables................................III

Table of content.....................IV

CHAPTER ONE

1. Introduction

1.1 Background of the study

1.2 Background of the organization.............................................2

1.3 Statements of the problems2

1.4 Basic research questions3

1.5 Objective of the study................................................... .......3

1.5.1 General objectives...............3

1.5.2 Specific objectives..3

1.6 Significance of the study......4 1.7 Scope of the study...............4

1.8 Limitation of the study4

CHAPTER T
2 LETIRETURE REWIEW.... 5

2.1 definetion of purchasing ..5

2.2 purchasing policy.........5

2.3 the essential purchasing policies and principles...........................6

 2.3.1 advantages of purchasing policy..................................................6

2.3.1 Disadvantages of purchasing policy…………………………………………7

2.4 methods of procurement…7

2.4.1. Open bidding…7

2.4.2. Restricted bidding7

2.4.3 Direct procurement8

2.4.4. Two stage bidding9

2.4.5. Request for quotation9

2.5 Purchasing procedures…………………………………………………………10

2.6 Purchasing process…10

2.6.1 Evaluation of potential suppliers………………………………………………11

2.6.2 Bidding Negotiation and Supplier selection…………………………….11

2.6.3 Purchase approval…12

2.6.4 Release and Receiving………………………………………………………………12

2.7 Objectives of purchasing

function……………………………………………12

2.8 Major problems that hinders purchasing

practice……………………13

2.9 Purchasing Manuals……14

2.9.1 Advantages of purchasing manuals………………………………………………14

2.9.2 Disadvantages of purchasing manuals…………………………………………15

2.10 Principles and standards of purchasing

practice…………………15
CHAPTER THREE

3 RESEARCH DESIGN AND METHEDOLOGY

3.1 Reseaerch Design.18

3.2type and source of data……………………………………………………18

3.3sampling techniques and sampling size……………………………18

3.4methods of data collection………………………………………………19

3.5 method of data analysis………………………………………………………

19CHAPTER FOUR
4. DATA ANALYSIS AND PRESENTATION............................................................20

CHAPTER FIVE
5 .SUMMARY, CONCLUSION AND RECOMMENDATION

5. Summary…………………………………………………………….………………....................33

5.2 conclusion…………………………………………………………….....…………………………34

5.3. Recommendation……………………………………………………………….....…………35

APPENDIX

REFERENCE
 LIST OF TABLE

Table 4.1 background information about respondents.............................20

Table 4.2 Response related to purchasing procedurs.................................22

Table 4.3 Respondents attitude towards purchasing policy............................22

Table 4.4 Response towards satisfaction of employees with purchasing

procedures.....................................................23

Table 4.5 Respondents response towards supply of items to the user

department..........................................24

Table 4.6 Respondents response towards supplier selection.........................25

Table 4.7 Response related to source of materials...........................................25

Table 4.8 Response towards procurement practice..........................................26

Table 4.9 Response towards procurement methods.........................................27

Table 4.10 Response regarding challenges faced during purchasing of

materials...................................27

Table 4.11 Response related to problems of poor purchasing process....................28

Table 4.12 Response towards purchasing problems.................................29

Table 4.13 Response towards principles and standards of purchasing..................29

Table 4.14 Response related to guidelines of purchasing.........................30

Table 4.15 Response related to principles of purchasing.......................31

Table 4.16 perception of employee towards principles and standards of purchasing
practice............................31
Acknowledgement
First and for most I would like to thank my"ALLAH" who helped me with his grace and
mercy give me throughout my life and who always with me.

Secondly,I would like to express my sincere appreciation and gratitude to my advisor

Abdela Kassew for his constant close encouragement,devotion of his precious from
time to time and correcting my paper invaluable guidance for successful completion of
this paper.

Eventually, I would also thanks to the employees and managers of Ethiopian revenue
and customs authority dire dawa branch.

Last not least,my deepest thanks goes to my father and my mother who supported
me financially, psychologically and consulting me to succeed this fruitful worke.
Abstract
The main objective of this study was assessing the custom clearance activity and
procedures in case of Ethiopian revenue and customs authority. The researcher used
descriptive methods of research design to describe the current situation of
organizations custom clearance activity and procedures. The relevant data have been
gathered from primary and secondary data. Primary data was collected through
questionnaire by using non probability sampling technique particularly randem
sampling to get first hand information and secondary data were collected by analyzing
different documents. After the relevant data were collected the researcher used
quantitative and qualitative data analysis techniques to analysis the collected data.
Finally, after data collected and analyzed the researcher interpreted the data collected
from different respondents and give recommendation and conclusion for the problems
observed from the organization.

CHAPTER ONE

1. Introduction
1.1 Background of the study

Today most major companies and even some government organizations have
purchasing or procurement department as part of everyday operations. This department
provides services that are the back bone of manufacturing, retail, military and other
industrial organizations. Many individuals, even someone who works for these
companies or organizations are unaware of what the purchasing department does why it
exists or what purpose it serves (Donald 2010)

Purchasing refers to a business or organizations attempting to acquiring goods or

services to accomplish the goals of its enterprise. Though there are several
organizations that attempt to set standards in the purchasing process can vary greatly
between organizations. Typically the word purchasing is not used interchangeably with
the word procurement since procurement typically includes expecting supplier’s quality
and transportation and logistics in addition to purchasing (www. purchasing business
dictionary 11 Dec. 2014)

Purchasing is an essential management activity which is used to fulfill the material

requirement of all organization either profit oriented or nonprofit oriented, smaller or
larger, government or nongovernmental purchasing responsibilities are to be obtain
purchase material and services in required at minimum cost. Therefore, purchasing is a
key sub function of management uniquely involved in frequently contract with different
groups. Purchasing must cooperate closely with other management function such as
manufacturing as well as important contract with supplier of goods and services, good
communication with these various groups is essential (Dobler 1996).

An international level purchasing has a vast role in economy to source goods and
services among countries in the world and help countries economy by decreasing total
cost of goods and services. However, if there is good purchasing within the organization
the total expense of the organization decreased. Purchasing is also important to strength
international partnership. (Donald 2009)

In general based on the idea and prospective of different authors the aim of the
researcher to conduct this study is try to aware of those workers who have no awareness
about the purchasing department and assess the purchasing policy and procedures of the
organizations as well as the factors that affect the Organizations purchasing policy and
procedure of case organization

1.2 Background of the organization

The Ethiopian revenue and customs authority (ERCA) is the body responsible for
collecting revenue from custom duties and domestic taxes. in addition to raising
revenue ,ERCA is responsible to protect the society from adverse effect of
smuggling .it sizes and take legal action on the people and vehicle involved in the
act of smuggling while it facilitates the legitimate movement of goods and people
across the border .according to article three of the proclamation number 587/2008’
the authority is looked upon as an autonomous federal agency having its own legal
personality the authority come in to existence on 14 July 2008 by merger of the
ministry of revenue ,Ethiopian customs authority and the federal inland revenue
authority who formerly were responsible to raise revenue for the federal government
and to protect contraband. ERCA is led by director general who reports to the prime
minister and is assisted by five deputy directors general. namely: deputy director for
program designing of operation and development business, deputy directors general
for branch offices coordination and support, deputy directors general of enforcement
division, deputy directors general of corporate function division, change
management and support sector and enforcement sectors. Both the director general
and the deputy are appointed by prime minister. Dire Dawa branch office of ERCA
is one of the branches of ERCA found in dire dawa that is responsible for collecting
revenue from domestic and custom taxes. It has a total of 301 employees and its
public organization which is owned by government.

1.3 Statement of the problems

Purchasing department in government organizations operate under authority granted to

them by proclamation states and in the case of government ordinates. Many state and
local government also operate in accordance with regulations developed by policy
boards created specifically for that purpose purchasing by government organizations
tends to be somewhat more regulated by legal requirements and more open to public
scrutiny (Nair 2006).
Today most companies and government organizations have a separate purchasing
department and should have their own purchasing policy and procedures to achieve
their goals and manage their purchasing department because of purchasing department
provide goods and services to which is the back bone of any organization (Donald
2010)

The Ethiopian revenue and customs authority also have a separate purchasing
department to sustain their goals but there are problems and challenges such as poor
performance of purchasing process, little consideration to principles of purchasing and
luck of authority delegation to user department and other problems related to
purchasing policy and procedures in the organization which motivates the researcher to
conduct this study.

1.4 Leading research questions

The main intention of this study was to core or answer the following questions.

1) How look likes the practice of purchasing policy and procedures of the
organization?
2) How the purchasing activity is performed in the organization?
3) What are the major problems of purchasing policy and procedures in the
organization?
4) What are the principles and standards of purchasing practice that the
company applies?

1.5 Objective of the study

1.5.1 General objective

The general objective of the study is to assess the purchasing policy and procedures of
Ethiopian revenue and customer’s authority.

1.5.2 Specific objectives

The specific objectives of this study are:

1) To assess the practice of purchasing policy and procedures of the organizations.

2) To assess the practice of purchasing activity in the organization.
 3) To find out the major problems of purchasing policy and procedures in the
organization.
4) To examine the principles and standards of purchasing practice that the
company applies.

1.6 Significant of the study

The study will have the following signification

 The information going would be help the organization to develop effective

purchasing policy and procedures
 The study would help there searcher to get more experience and provide
directions to those who wants to make further study
 To enables the organization and organizations which have the same policy
and procedures to solve the problems of purchasing.
 The recommendation given at the end of the study would help the
organization to identify their weakness in performing the purchasing policy
and procedures and to take corrective action on their weakness Ares and to
take corrective action on their weakness.

1.7 Scope of the study

There are many companies and government organizations that have purchasing policy
and procedures to sustain their organizations goal. However to conduct research in
those all companies and organizations by the same research at the same time is not a
simple work, this is because of the fact that conducting such research requires huge
amount of resources and need a long time and financial resources. So, for the
manageability due to resource and time constraint as well as financial constraint the
study were limited to a single government organization of Ethiopian revenue and
customs authority Dire Dawa branch.

1.8 Limitation of the study

In conducting this study the researcher uses both primary and secondary data. In
collecting primary data the researcher face faulty or incorrect data from employees.
Some of the respondents can misunderstand the questionnaires and the researcher can’t
use the interview methods of data collection because both the managers and some
employees of the organization are unwilling to the interview.

Chapter Two

2. Literature review
1.8 Definition of purchasing

According to Nair (2006), purchasing is the function of buying machinery tools, general
supplies, materials and etc, required by organizations. He also states that the work of
purchasing is performed by purchase section.

Purchasing is the process of acquiring goods and services to be used in production

process at right time, with right quality, at the quantity by the right price from the right
suppliers, with the desired levels of services and at the right place (Dobler, 1996).

Every organization both in public and private sectors are in a varying degree depending
on the materials and services provided or supplied by other organization. Therefore,
purchasing is one of the basic and common functions of every organization to achieve
the desired level of success and objectives effectively and efficiently as established
framework of the organization (Burt, 1990).

1.9 Purchasing policy

Purchasing policy is largely determined by the finance available but, every organization
has its own policy, whether they are put it to writing or not. However, an established
policy eliminates the necessity of making of rash decision every time when a
comparable situation arises. A written policy ensures that decision and action will be
consistent and such an approved policy statement gives authority to the purchasing
peoples (Aswathappa, 2010).

Purchasing department is responsible to establish administer policies institute report

necessary to permit analysis of purchasing performance negotiate and approve terms of
control and analyze price paid for material and generally define how to obtain saving
and coordinating purchasing procedures (Alijian& George, 1990).
1.10 The essential purchasing policies and principles

The essentially efficient purchasing has the following basic principles.

 Right quality:- quality is the dimensional limited compensation,

performance, durability, etc of material quality is the compensation grade for
a machine component, it’s the grade of the material and various dimensions
and tolerance for an auto – mobility, the grade of material also used
economical running durability and soon quality can be measured by physical
test. Chemical analysis, dimensional measurement and etc depending up on
commodity (N. K Nair 2006).
 Right time:- purchaser must make available materials at the right time such
that when material are required, materials that would available before the
organization required them involves cost such as carrying cost, deterioration
cost, obsolescence costs (Donald 1990).
 Right price:- the right price is which brings ultimate value. It needs not be
the lowest price, the factors that affect the prices of items are quality and
quantity of the product required (N. K Nair, 2006).
 Right source:- in purchasing the starting point is the recognition of the need
for material or products, though the exact specification may or may not be
fixed, its general nature and purpose are known what is available is the
market? Who makes such product? Or who can make it or supply it in most
economically or satisfactorily all these questions must be answered before a
supply order is placed (A. K. DATTA 2004).
 Right place:- right place means right place of delivery. Every purchase
control in addition to time of delivery must clearly state the place of delivery
and such other terms like free delivery or ex- factory delivery.

2.3.1 Advantages of the purchasing policy

Having written and implied policies provides opportunities to define and clarify top
management objectives policy statement are a means for executive management to
communicate its leadership and views. Executive management should develop a series
of high level policy statements that provide guidance to employees at all level.
Another advantage of policy is that provides a frame work for consistent decision
making and action. In fact one of the primary objectives of policy is to ensure that
personnel act in manner consistent with executive or functional management’s
expectations. Finally an effective policy provides an addition advantage by defining the
rules and procedures that apply to all employees.

2.3.2 Disadvantages of purchasing policy .

-A policy is difficult to communicate throughout large organization.

-A danger exists that employees view policies as a substitute for effective

management policy statements are guidelines outlining management’s belief or
position a topic. They are not a set of how to instruction designed to provide
specific answer for every business decision.

-Policy development can also restrict innovation and flexibility. Too many policies
accompanied by cumbersome procedures can become an organizations worst enemy.

2.4 Methods of procurement

The following procurement methods are approved as per article 33 of the proclamation

2.4.1 Open bidding

Except as otherwise provided in proclamation and directives, public bodies shall use
open bidding as the preferred procedures of procurement public body may use a method
other than open bidding only where conditions for use of such other methods stimulated
in the proclamation and this directives are satisfied a public body using a method of
procurement other than open bidding pursuant to article 33 /3 of the proclamation.
(Proclamation 649/ 2009)

2.4.2 Restricted bidding method

The restricted bidding methods of procurement limits those invited to bid to only a few
suppliers. The restricted bidding procedures consist of two distinct stage selecting of
suitable bidders and evaluation of bids. At first stage the only criteria which may be
used to select prospective bidders are economic and financial standing or technical
knowledge or capability of carrying out a specific assignment. The public body shall
not disclose the identity of candidates invited to participate in procurement by restricted
bidding proc. 649 /2009

Condition for use of restricted bidding

 When goods and related services and works and physical services, because of
their specialized nature, are available only from a limited number of suppliers
or contractors.
 Where a repeated advertisement of the invitation to bid fails to attract bidders
in respect of procurement subject.
 The cost of procurement does not exceed the threshold specified in respect of
restricted bidding in the directive
 At least five candidates shall be selected in a fairly manner from suppliers list.

2.4.3 Direct procurement

Direct procurement happens when a public body for some justified reasons, procures
goods, works or services from only one source. A public body may use direct
procurement method for procuring goods and related services, works and physical
services and intellectual and professional services directly from one single source
without going through all the requirements of a full bidding process. Ahead of a public
body shall strictly control the direct procurement method in order to ensure that there is
no abuse and that its use is only where conditions, specified in the proclamation and
directives is satisfied. (Proc, 649/ 2009)

Conditions for use of direct procurement

The condition for use of direct procurement

i. Small value contract

ii. Availability of only one single sources
iii. Extension of existing contract
iv. For captivity reasons and
v. Emergency situation s
2.4.4 Two stage bidding

Two stage bidding method is used when the procurement process is split in to two
phases. The first phase identified suitable candidates, who are then invited in the second
phase to submit their firm bids. Since the purpose of the first stage is to draw up
detailed schedule of requirements based on proposals from candidates the bidding
document prepared by public body for the first stage shall state the requirement of the
public body in general terms and incorporate the necessary description and
questionnaires. The technical proposal submitted by candidates during the first stage
shall be opened in the absence of the candidates in the manner stated in the invitation to
bid. (Proc. 649 /2009)

Conditions for use of two stage bidding

 When the public body may not be capable of preparing all the technical
specification because alternative technical approaches may be available but not
within the knowledge of the public body.
 In such circumstances, it is better for public body to learn from bidders about
the most appropriate, fit for purpose solution to meet its procurement
requirements.
 In the case of large or complex contracts of goods, services and or work such as
turnkey contracts for manufacturing process plant.
2.4.5 Request for quotations

Sometimes referred as shopping, request for quotation method is used to buy items of
low value. The head of a public body shall strictly control the use of RFQ as a method
of procurement in order to ensure that there is no abuse. A decision to use request for
quotation method shall be approved in writing by the head of a public body the reason
for selection of procurement by the request for quotations method shall be documented
in the records of procurement. In any procurement made by means of request for
quotation, not less than three candidates as far as possible, shall be selected from the
supplier list so ensure fairness in the selection same supplier or (s) shall not be selected
repeatedly
 2.5 Purchasing procedures

Procedures are the outlines in detail the specific action to be taken in short it establishes
the way of doing things. Purchasing and material executives should develop their
department’s procedures in accordance with four fundamental concepts. First procedure
are not end up themselves the objective to develop as a service procedures, second
procedure must be designed to facilitate communication and coordination of the efforts
of one work group with another. Third effective operations requires that responsibility
be assigned clearly for the accomplishments of each step of each procedure finally
procedure should established at the lowest possible organization level the best method
for conducting or outline activity (Aswuthappa, et al 2010).

the principal purchasing procedures are the following

 Organization of procurement
 Verification of purchase requisition
 Request for bidding
 Evaluation and selection of suppliers
 Evaluation of suppliers
 Evaluation of performance purchase
 Follow up and expediting
 Receiving and inspection
 Payment
2.6 Purchasing process

The purchasing process is cycle consisting of five major steps

Identify user need for product or services

The purchasing process begins with identifying or anticipating a material or services

needed by users. Material requirement may include equipment, components or raw
materials, subassemblies or even completely finished goods. Internal customer
requirement are expressed in a variety of ways, including:-

 Purchase requisition /statement of work

 Cross functional new product development teams
  Traveling purchase requisition /bar codes
 Customer order and fore cost
 Reorder point system
 Stock checks
2.6.1 Evaluation of potential suppliers

Once the user need has been recognized the system will check to see if an approved
supplier has as ready been entered in to data base. In many cases fore a repetitive
purchase, purchasing may have as ready negotiated a contract with established terms of
delivery pricing, quality etc … and the supplier already been entered in to the
accounting system.

2.6.2 Bidding, negotiation and supplier selection

- Supplier selection –final supplier selection occurs one purchasing completes

the activities required during the supplier evaluation process. Selecting
supplier is perhaps one of the most important activities performed by
companies errors made during this part of purchasing cycle can damaging
and long lasting
- Bidding or negotiation – bidding and negotiation are the two common
methods used when making supplier selection decision. This process is
typically initiated when the purchasing manager sends a request for
quotation form to suppliers. This objective is to award business to the most
qualified bidder. Competitive bidding is effective under certain condition:-
 Volume is high enough to justify this method of business.
 The specification or requirement are clear to seller
 The market place is competitive
 Buyers ask for bids only from technically qualified suppliers who
wants the contract
 Adequate time is available for suppliers to evaluate the request for
quotation.
 The buyer does not have preferred suppliers for that item.
 2.6.3 Purchase approval

After the supplier is selected or requisition for a standard item is received, purchasing
grants an approval to purchase the product or services. This is accomplished through
several different approaches, depending on the type of system in place.

- Purchase order
- Blanket purchase order
- Material purchase release

2.6.4 Release and receive purchase requirement

This phase of the purchasing cycle consist the physical transmittal of purchase
requirements. This should be a fairly routine, although not necessarily most efficient,
part of purchasing cycle. Some organization transmits orders electronically, while
others send material release through the mail or by fax. Purchasing or material
requirement minimize the time required to release and receive material

2.7 Objectives of purchasing function

Purchasing has final authority over certain spending area. This typically set forth in a
policy describing the general objectives or principles

The following describes one company’s purchasing objectives:-

 To select supplier that meet purchase and performance requirement

 To purchase material and services that comply with engineering and
quality standards
 To treat all supplier fairly and ethically
 To promote buyer seller relationship and to encourage supplier
contribution
 Treating suppliers fairly and with integrity
 To work closely with other department
 To conduct purchasing operations so they enhance community and
employee relation
 To support all corporate and objectives and policies
 To maintain qualified purchasing staff and develop the professional
capabilities of the staff.
 2.8 Major problems that hinders purchasing practice

In the real world organizational purchasing process deviate from this model observation
of numerous companies and institutions over many years has demonstrated that the
purchasing process can be observed by the following situations.

 Supplier specification or brand: specification are worked out in detail by the

user, i.e. a technical specialist, and written for one specific suppler. The use
of a particular brand or supplier specification seriously limits the buyer
commercial latitude (in terms of negotiations) with the supplier, who in most
cases is well aware of the selection of his product.
 In adequate supplier selection: selecting a supplier is one of the most
important decisions in the purchasing process, particular if it be products
delivered require many years of maintenance and services.
 Personal relationship:- purchase orders are placed with suppliers whom the
use has a friendly relationship; this is one reason why long relationship
between organization may exist.
 Lack of good contractual arrangement – contracts, when available are stated
in general terms, they are not compute and have not passed legal scrutiny
and clear description of the product or supplier may be missing.
 Too much emphasis on price:- especially when buying capital equipment
buying decisions need to be based up on total cost of ownership (TCO)
rather than price only. Much equipment manufacturers have adopted a sales
strategy where they charge a fairly low price for their equipment.
 Poor administrations processes: in some cases the supplier may have
actually made the delivery and now the purchasing department is requested
by the user to produce a purchase order with a purchase order number to be
issued to the supplier so that payment can be made.
 Delivery problems: that the state of delivery problems occur supplier deliver
to late deliveries are not complete, products are damaged or do not meet
quality requirements, packaging is unsound and information labels cannot be
read by bar code systems. The reason for these problems usually can be
traced back to unclear specification or a careless supplier selection.
 2.9 Purchasing manual

Essentially, a purchasing manual is a medium for communicating information regarding

purchasing policies, procedures, instructions and regulations. (kenneth , 2006)

 Policies may be general or consequential general policies state in broad

terms the objectives and responsibility of the purchasing function.
Consequential policies state in expanded from how general policies are
applied in specific activities and situations such as selection of suppler.
(Kenneth 2oo6
 Procedures prescribe the sequence of activities by which policies are applied
such as the receipt of bought out goods. (Kenneth, 2006)
 Instructions give detailed knowledge or guidance to those responsible for
carrying out policies or procedures such as suppliers with who call off center
acts have been negotiated. (Kenneth, 2006)
 Regulations detailed rules regarding the conduct of purchasing and ancillary
staff in the various situations arising in the course of their duties such as
concerning the receipt of gift from suppliers (Kenneth, 2006)

2.9.1Advantages of purchasing manuals

 Writing it down helps with precisions and clarity

 The preparation of the manuals provides an opportunity for consultation
between purchasing and other department to look critically at existing
policies and procedures and where necessary changes them.
 Procedures are prescribed in terms of activity under taken or controlled by
purchasing, thus promoting consistency and reduction of the needs for
detailed supervision of routine tasks
 A manual is a useful aid in training and guiding staff.
 A manual can help the annual audit
 A manual coordinates policies and procedures and help to ensure uniformity
and continuity of purchasing principles and practice as well as providing a
point of reference against which such principles and practice can be
evaluated.
 A manual may help to enhance the status of purchasing by showing the top
management attaches importance to the procurement function.
 2.9.2 Disadvantages of purchasing manual

 Are costly to prepare

 Tend to forester red tape and bureaucracy and stifle initiative
 Must be continually updated to show changes in procedures and policy

2.10 Principles and standards of purchasing practice

Accoding to(Brain harrington,2oo6) the following are pirinciples and standards of

purchasing.

1. Ethical perceptions – the results of perceived impropriety may become, over

time, more disruptive or damaging than an actual transgression. It is essential
that May activity or involvement between purchasing professional and activity
or potential suppliers which in any way diminishes or even appears to diminish,
open and fair treatment of suppliers be strictly avoided.
2. Responsibilities to the employees –the purchasing professional for most
responsibilities is to achieve the legitimate goals established by the employer. It
is his or her duty to ensure that actions taken as an agent for the employer will
benefit the best interests of the employer to the exclusion of personal gain
3. Conflict of interest – purchasing professionals have the right to engage in
activities which are of a private nature outside of their employment. However,
they must not are their positions, in any way to induce another person to
provided any benefit to themselves.
4. Gratitude’s – gratuities include any material goods or services offered with the
interest of providing the potential for, influencing a buying decision. As such
gratitude’s may be offered to a buyer or to other persons involved in purchasing
decision. Having any influence on the purchasing process constitution
involvement. Those in a position to influence the purchasing process must be
dedicated to the best interest of employer.
5. Confidential information – purchasing professionals and of this in positions that
influence buying decisions deal with confidential or proprietary information of
both the employer and the suppler. It is the responsibility of purchasing
professional to ensure that such information, which includes information that
 may not be confidential in the strictest sense but is not generally known is
treated in a confidential manner
6. Treatment of supplier – it is the responsibility of purchasing professional to
promote mutually acceptable business relationships with all suppliers. The
reputation and good standing of the employer. The purchasing profession and
the individual will be enhanced by affording all suppler representatives the same
courtesy and impartially in all phases of business transaction.
7. Personal purchasing for employee – the function of purchasing is to supply
material requirement of the employer. Personal purchase programs divert
organizational resources and dilute the effectiveness of purchasing function. In
certain state trade diversion way prohibit personal purchase for employees when
such materials are not manufactured by the employees or required for the with
or safety of the employee situations in which personal purchase programs are
justifiable involve items such as work related safety gear, hard tools and
computer hardware and software for business related work performed at home.
8. Responsibilities to the profession – purchasing professional has an obligation to
master the basic skills of the profession as well as keep abreast of the current
development in the field. It is equally in practice the purchasing professional
reflect those same standards through their combined actions of professional
groups or associations. Then the activities of group are highly visible, attention
needs to center on actions taken as a group, each member of a group should
consider it an obligation to support only those activities which up hold the high
ethical standard of our profession.
CHAPTER THREE

3 Research Methodology
3.3 Research design

The researcher used descriptive type of research design method for this study, Because
this method is very useful to clearly describe the present state of an area of investigation
to cover wide magnitude in order to obtain precise information as it occurs and it helps
that explain the study in terms of the conditions.

2.3 Type and source of data

The researcher would be used both primary and secondary data source .the primary data
source was questionnaires prepared by the researcher to respondents and observation.
Secondary data source was purchasing manuals, annual report and different related
document.

3.4 Sampling techniques and sampling size

The method of sampling that the researcher was used to obtain the necessary data is
judgmental sampling techniques from non probability sampling .This techniques is most
appropriate technique for this study because the researcher selects any respondents that
he or she thinks best fits to the researchers questionnaires. In addition this method
would be simple and easily predictable procedures of selecting sample, save time and
money. The target population of this study was the employees from purchasing
department and user departments. To conduct this study the sample of 30 respondents
would be selected judgmentally from the total population of the organization which is
301.

3.4 Method of data collection

In conducting this study, the researcher used both primary and secondary data collection
techniques. The primary data were collected by the researcher himself through
preparing questionnaires to get firsthand information from respondents. Secondary data
was collected by revising and analyzing the purchasing manuals, annual report and
different related documents.

3.4Method of data analysis

In this study both qualitative and quantitative data analysis would be utilized because
the data gathered through questionnaires and observation were mostly qualitative and
quantitative in nature. Qualitative data analysis was used in order to discover inherent
facts to explore new facts and is simple and easy to understand by the users of the
study. While qualitative data analysis provides answer to research questions through
direct quotation and careful description to explore new facts or interpret existing data
.finally all the data were presented through tables and simple percentage.
 CHAPTER FOUR

4. Data Analysis and Presentation

This part of research is the most prominent part of the study because analysis,
presentation and interpretation of the study is conducted in this chapter. So under this
chapter significant and basic topics of the study investigated well. The necessary data
and information gathered from respondents through questionnaires have been analyzed,
presented and interpreted. A total of 30 questionnaires were distributed to30 selected
respondents from total population of 301 employees by using judgmental sampling
technique. Out of 30 questionnaires 25 questionnaires were properly completed and
returned. This gives the response rate of 83.3%, which implies that the majority of the
respondents replied to the distributed questionnaires attractively.

Table 4.1 Background information about respondents

No Items Option Number of Percentage

respondents
1 Sex Male 17 68%
Female 8 32%
Total 25 100%
2 Age 18-27 5 20%
28-35 10 40%
36-47 5 20%
48-57 3 12%
58 and above 2 8%
Total 25 100%
3 Marital status Single 10 40%
Married 15 60%
Divorced 0 0%
 Total 25 100%
4 Education level Certificate - -
Diploma 6 24%
First degree 14 56%
Master & above 5 20%
Total 25 100%
5 Work Less than two years 2 8%
experience 3-6 years 7 28%
Above 6 year 16 64%
Total 25 100%
Source: own survey, 2015

According to the above table 4.1, 17(68%) of respondents are male and the remaining
8(32%) of respondents are female from this it can be concluded that the majority of the
organization dominated by male employees.

According to the above table 4.1 items number2, 5(20%) often were between 18-30 age
and 10(40%) of the respondents were between’ 28-35 ages, 5(20%) often were between
36-47 age, 3(12%) of the responds were between 48-57 and 2(8%) of the respondents
were 58 and above. This implies that most of the respondent’s age is between 28-35
ages in the organization thus, the employees of the organization are matured.

As above teble4.1, indicate that out of 25 respondents 10(40%) single, 15(60%) of them
are married and none of the respondents are divorced. TSo that the most of employees
of the organization are married.

As shown on the above teble 4.1 ;of item number 4; 6(24%) of respondents are diploma
graduates, 14(86%) of respondents were first Degree holders and the remaining 5(20%)
of the respondents were masters and above holders. This indicates that the majority of
the respondent’s more with the organization were first Degree holders.

As indicated on the above table 4.1, 8% of respondents have work experience of below
two years 28% of the respondents have work experience of between 3 and 6 years and
64% of respondents have work experience of above 6 years. For this reason the
employees of the organizations are familiar with the work environment.
Table 4.2, response related to purchasing procedures.

NO. Items Option Number of In percentage

respondents
1. Does your organization Yes 20 80%
follow purchasing procedures No 5 20%
?
Total 25 100%
Source: own survey, 2015

As it can be understand from table, 4.2, the majority of the respondents agree with
availability of purchasing procedures in the organization for the procuring goods and
services, but minimum number of respondents on 20% of respondents were not agree
on a organization follow necessary procedures to procure materials. From this the
researcher can understand that the organization follow the necessary procedures of
purchasing to fulfill shortage of materials of each section of department.

Table 4.3 Respondent’s attitude towards purchasing policy

NO. Items Option No of In

respondent percentage
2 What type of purchasing Centralize 17 68%
policy is followed by your purchasing
organization Decentralized 8 32%
purchasing
Both - -
Neither nor - -
Total 25 100%
Source: own survey 1015

As shown on the above table 4.3, 68% of the respondents reported the organization
follow centralized purchasing policy only 32 y. of the respondents replied that the
organization follow decentralized purchasing non of the respondents replied both and
neither nor . from this the researcher understand that the organization follow centrals
zed purchasing policy that the materials required by any department of the organization
or different units of the organization would procured by a single purchasing department
Table 4.4 response towards satisfaction of employee with purchasing procedures

NO. Items Option No of In

respondent percentage
3 Are you satisfied by the Yes 4 16%
organizations purchasing No 21 84%
procedures

Total 25 100%

4 If you say “yes” for item number Highly satisfied - -

4 how is your satisfaction level Satisfied - -
Dissatisfied 11 44%
Either satisfied 14 56%
nor dissatisfied
Total 25 100%
Source: own survey, 2015

As it can be seen in the above table 4.5, 16 of respondents were reported that they are
disagree with the organization purchasing procedures, 84% of the respondents
responded that they are agree with the organization purchasing procedures. This implies
that the organization cannot procure the materials in accordance with the settled
procedures or there is poor performance of purchasing procedures to buy the required
materials to fulfill the user department.

According to the above table, 4.5 the respondents were asked the satisfaction level on
the procedures of purchasing practice, 44% of the respondent replied that they were
replied they were dissatisfied with purchasing procedures of the organization. 56%
respondents replied neither satisfied nor dissatisfied from this researcher can understand
that the organization cannot meet the specifications of the user department in
accordance.
Table 4.5 Respondent’s response towards supply of items to user department

NO. Items Option No of In

respondents percentage
5 Does the purchasing department Yes 9 36%
purchase the items and immediately No 16 64%
supply for user department
Total 25 100%
Source: own survey, 2015

As it can be shown in the above table, 64% of the respondents reported that the
purchasing department can’t purchase the materials and immediately supply for user
department but few respondents replied that the purchasing department procures and
immediately supply. According to the above result shows the purchasing department of
the organization waits for a long period of time in order to supply the needed materials.

Table 4.6 Respondent’s response towards supplier selection

NO. Items Option No of In

respondents percentage
6 Is purchasing department select Strongly agree 2 8%
suppliers who are responding in Agree 3 12%
the short lead time? Disagree 11 44%
Strongly disagree 9 36%
Total 25 100%
Source: own survey, 2015
As it can clearly explained in the above table 4.7 Is purchasing department select
supplier who are respond in short lead time ? 36% of the respondents response strongly
disagree, 44% the respondents answered that they were disagree with the statement.
Moreover smaller number of respondents respond strongly agrees and agree thus the
researcher conclude that the purchasing department cannot consider time while
selecting potential suppliers.

Table 4.7 Respondent’s attitude towards source of materials

NO. Items Option Number of In

respondents percentage
7 From where do you purchase Local source 20 80%
most of the needed item or International source 5 20%
materials? Both - -
Total 25 100%
Source: own survey, 2015

According to the above table, 80% the respondents replied that they purchase materials
from local supplier while 20% of the respondents reported that the organization
procures from international source from this the researcher understands that the
organization procures most of their materials from local source.

Table 4.8 response towards procurement practice

NO. Items Option Number of In

respondents. percentage
8 What is the practice of Team based 11 44%
procurement that your procurement
organization Building supplier 1 4%
implements? relation ship
E-procurement 2 8%
Minimize risk 9 36%
Just in time - -
All - -
 None of them - -
Total 25 100%
Source: own survey, 2015

As it can be understand from the above table 4.9, 44% of the respondents replied that
the organization implement team based procurement practice 36% of the respondents
replied that the organization buying goods services by minimizing risk of materials ,
only 4%, 8% of the respondents, building supplier relationship and E- procurement and
non of the respondents replied that just in time procurement practice . from this the
researcher understand that the organization can’t build relation with supplier and the
organization cannot adopted the E-procurement, purchasing practice and the
organization can’t purchase goods and services through online

Table 4.9 Response to wards procurement methods

NO. Items Option No of In

respondent percentage

9 Which methods of Open bidding 10 40%

procurement are Restricted bidding 4 16%
applied in your
Direct procurement 7 28%
organization
Request for quotation 2 8%

Two stage bidding 2 8%

Request for proposal 1 -

Total 25 100%

Source: own survey, 2015

As shown in the above table 4.10, 40% of the respondents answered that the methods of
procurement that the organization apply to purchase the needed materials is open
bidding 28%, the respondents replied that Direct procurement, 16% of the respondents
replier that restricted bidding. While, 8%, 8%, and 0% of the respondents said that
request for quotation, two stage bidding and request for quotation.Therfore the
organization apples open bidding,direct procurement to purchase goods that have fixed
price in the country like fuel and uses restricted bidding as alternative when the criteria
for open bidding is not fulfilled. So in general the organization focuses on three
methods of procurent as specified on article 33 of the proclamation .

Table 4.10 response challenges faced during purchasing of material.

NO. Items Option No of In

respondents percentage

10 Are there any challenges you faced Yes 19 76%

during purchasing of material?
No 6 24%
Total 25 100%

Source own survey, 2015

As depicted in the above table 4.11, 76% of the respondents reported that there are
challenges they paced during purchasing of materials and 24% of the respondents
reported to they are not faced any challenges during purchasing materials for the
organization. From this the researcher concludes that employees of the organization
faced the problem during procuring of goods and services. The respondents cited the
following challenges

- Unavailability of necessary material

- Lack of transportation
- Lack of experience
- Loss of purchased material

Table 4.11 response related to problems of poor purchasing process.

NO. Items Option No of In

respondent percentage
11 Do you encounter any problems of Yes 18 72%
poor performance of purchasing No 7 28%
process?
Total 25 100%
Source: own survey 2015

The above table shows that 72% of the respondent answered “yes” or agree that their
poor performance of purchasing process where as 28% of the respond its are not agree
with problems of poor performance of purchasing process in the organization. This
indicates that the majority of respondents encountered the problem of poor material are
purchased and the purchasing process waiting for a long Period of time and luck of
knowledge of purchasing personnel.

Table 4.12 respondent’s attitude towards problems of purchasing

NO Items Option No of respondent In

percentage

12 What are the major Price problem 11 44%

problems you faced Transportation problem 10 40%
in your organization Budget problem 4 16%
No problem
25 100%

Source: own survey 2015

As it can be understood from the above table 4.13, 44% of the respondents responded
that there is price problem in the organization 40% of the respondent reported that there
is transportation problem in the organization. 16% of the respondent reported that there
is no problem in the organization. From this the researcher concludes that there is price
and transportation problem to purchase the materials this means the materials purchased
by purchasing departments are procured with high price (with in unfair price) and lack
of transportation services to receive the materials from supplier side.

Table 4.13 response towards principles and standards of purchasing

NO. Items Option No of In

respondents percentage

13 Are there any principles and standards of Yes 21 84%

purchasing that your organization applies?
No 4 16%
Total 25 100%

Source own survey, 2015

As it depicted in the above table,4.15, large number of the respondent were report that
to availability of principles and standard of purchasing in the organization 16% of the
respondent rises that there is no principles and standards of procurement in the
organization. As the majority of the respondents responded that were the availability of
principal and purchasing practices. The respondents responded that the following
principles and standard of purchasing practices that the organization applies. They are:-

- Gratuities
- Ethical perception
- Conflict of interest
- Confidential information
- Treatment of supplier

Table 4.14 response related to guide lines of purchasing

NO. Items Option No of In

respondent percentage
14 What are guide lines on Selecting qualified 8 32%
purchasing practice that supplier
the organization applies? Negotiation techniques 8 32%
Preparing and 9 56%
Evolution of bids
All
Total 25 100%
Source: own survey, 2015

As it can be seen in the above table 4.16, the respondents were asked on the quid line of
purchasing practice, 32% of the respondent answered that them is quid lines of selecting
qualified supplier, 32% of the respondent reported that the organization used
negotiation techniques 36% of the respondents said the organization implements the
purchasing practice by preparing and Evaluation of bids in order to get the right quality
materials with right quantity at right price (with faire price)
Table 4.15 response related to purchasing principles

NO. Items Principles of No of In

procurement respondent percentage

15 Which of the purchasing Right quantity 9 36%

principles are being achieved in Right time 1 4%
your organization?
Right quality 9 36%

Right source 2 8%

Right price 4 16

All - -

Total 25 100%

Source: own survey, 2015

According to the above table 4.17, the respondent were asked on strong side of existing
purchasing practice, 36% of the respondent agreed to right quantity and 36% right
quality of the purchasing. The other respondent are 16%, 8% and 4% replied right price,
right source and right time respectively. As the result shows thier is no difference
between right quantity and quality of purchasing in the organization this means that the
purchasing department is working better with respect to both of the right quality and
quantity.

Table 4.16 perception of employee towards principles and standards of purchasing

practice

NO Items Option No of respondent In percentage

16 How do you perceive the Very good 11 44%

principle and standard
of Good 14 56%
purchasing practice of the
Poor - -
organization?
Very poor - -

Total 25 100%

Source: own survey, 2015

According to the above table, 4.18, 44% of the respondent replied that organization has
very good principles and standard of procurement/ purchasing 56% of respondent
reported that the organization has good principles and standards of purchasing. None of
the respondent answered that the organization has poor and very poor principles and
standard of purchasing. So, this implies that the organization has following good
principles and standards of purchasing practice.
 CHAPTER FIVE

5.Summary, Conclusion and Recommendation

5.1Summary

This study was conducted to assess the purchasing policy and procedures of Ethiopian
revenue and customs authority in dire dawa branch.the of the study was to describe the
activity as well as the policy and procedures followed by mandatory department in
order to address the objectives of the study. Out of 30 questionnaires distributed to the
respondents of the case organization 25(85%) of them were properly filled and returned
.based on the response of respondents the following summary were drawn

As aresult shows there is a domination of male workers in the organization

 As respondents responded majority of the employees are first degree holder and
they are familiar with work environment.
 As majority of respondents replied the organization follow the purchasing
procedures and they are dissatisfied by the procedures of the organization
 Majority of employees said that the organization follow centralized purchasing
policy.
 Majority of the respondents said the organization cannot supply materials for
user department and they are not agree with organizations supplier selection.
 As majority of the respondents answered the organization purchase most of the
materials from local source.
 The organization implement team based and minimizing risk of procurement.
 According to the respondents response the organization performs open bidding,
direct procurement and restricted bidding methods of procurement in order to
purchase the necessary materials
 The organization face challenges and problems of poor performance of
purchasing process while purchasing materials
 As majority of respondents responded the organization used principles and
guidelines of purchasing practice.
 5.2 conclusions
By using respondents answer as a base the researcher outline the following
conclusion
The respondents responded the Ethiopian revenue and customs authority
dire dawa branch follow purchasing policy and procedures and used
guidelines on practice of purchasing to procure materials for the
organization. Purchasing process very long and some unnecessary step to
perform and there is activity post pond to other day. Regarding the
principles of purchasing the organization gives little attention to right time
,right source and right price and the purchasing department of the
organization is not work properly and does not meet to the needs and
wants of the user department and also supplier are exercising despite full
practices and this causing challenges for purchasing and bring poor quality
of materials.
As employee and managers of purchasing department of the organization
responded that organization implements the team based and minimizing risk
practice of procurement in order to minimize the poor performance of
purchasing process and the organization used centralized purchasing
policy. Finally the organization applies principles and standards of
purchasing and the employees of the organization faced challenges such as
unavailability of necessary materials, lack of experienced purchasing
personal and problems like price and transportation

5.3 Recommendation
 Because of doing honestly and staying a long period of time on the job than
male workers, the organization should increase the number of female
workers.
 In order to enhance its relation with local supplier and social responsibility
to the local community the organization should be delegate authority to sub
group /department to purchase materials.
 The organization should develop and implement just in time on the practice
of purchasing to minimize delaying of purchased materials.
 The organization should be build supplier relationship and use e-
procurement or online system to purchase the materials needed in order to
minimize cost, lead time and to reduce shortage of materials.
 To overcame the challenges such as unavailability of necessary material,
lack of transportation and lack of experienced purchasing personnel. The
organization should buy materials from both local and international sources
and should have their own transportation service and hiring purchasing
personnel.
 To overcome poor performance of purchasing process the organization
should implement best practice of purchasing process.
 To gate the right material the organization should strongly focus on right
time, right source and right price in addition to right quality and right
quantity.
 Dire Dawa University

School of Business and Economics

Department of Logistic and Supply Chain Management

Questionnaire form

Dear respondents:

This questionnaire is considered for academic research purpose and prepared by a

student of Dire Dawa University in logistics and supply chain management on the
assessment of purchasing policy and procedures. The information gathered from you
will never disclose to other parties and plays a greatest role to complete my research
paper so, please give your answer as honest and openly.

Instruction

- Writing your name is not allowed

- Use this mark (√) for your answers

Part –I personal information

1. Sex: Male Female

2. Age: 18-27 36-47 58 and above
28-35 48-57
3. Marital status: Single Married Divorced
4. Educational level: Certificate Diploma First degree
Master & above
5. Work experience: Less than two years 3-6 years
Above 6 years

Part –II Questionnaires related to purchasing policy and procedure

1. Does your organization follow purchasing procedure

Yes No
 2. What type of purchasing policy is followed by your organization?
Centralized purchasing decentralized purchasing
Both neither Nor
3. Are you satisfied by the organizations purchasing procedures?
Yes No
4. If you say ‘yes’ for question No. ‘4’ how is your satisfaction level?
Highly satisfied satisfied dissatisfied
Neither satisfied nor dissatisfied

Part –III Questionnaires related to purchasing practice

5. Does the purchasing department purchase the items and immediately supply for
user department? Yes No
6. Is purchasing department select suppliers who are responding in the short lead
time?
Strongly agree Agree disagree
Strongly disagree
7. From where do you purchase most of the needed item or material
Local source international source both
8. What is the practice of procurement that your organization implements?
Team based procurement minimize risk
Building supplier relationship just in time
E – Procurement all none of them
9. Which methods of procurement are applied in your organization?
Open bidding restricted direct procurement
Request for quotation two stage request for propos

Part –IV Questionnaires related to challenges and problems of purchasing

10. Are there any challenges you faced during purchasing of material?
Yes No
11. Do you encounter any problems of poor performance of purchasing process?
Yes No
12. What is the major problems you faced in you organizations?
Price problem transportation problem
No problem budget problem
Part –V Questionnaires related to guidelines and principles of purchasing

13. Are there any principles and standards of purchasing that your company applies?
Yes No
14. What are guidelines on purchasing practice that your organization applies?
Selecting qualified supplier Negotiation techniques
Preparing and evaluation of bids All
15. Which of the purchasing principles are being achieved in your organization?
Right quantity right time right quality
Right source right price all
16. How do you perceive the principles and standards of purchasing practice of the
organization?
Very good Good poor very poor

Reference
 Alijian and George (1990) purchasing hand book 2nd edition, new York;Mc
Grimu W hill Inc.
 Aswathappa(2010), production and operation management; Himalaya
publishing House, Bangalore.
 Donald w.Dobler etal (2010),supply chain management; Mc.Hill
Education,India.
 Kenneth cysons and Brian Harrington (2006) purchasing and supply chain
management 7 edition pearson education limited
 Nair (2006), purchasing and supply chain Management; vikas publishing
house PLC.
 Robert moncka, Robert Trent and Robert H.(2005) purchasing and supply
chain management 3rd edition , monack Trent Hand field.
 Public procurement and property administration proclamation number 649/2009