Negotiation as a reduction technique in material procurement is to ensure that high cost incurred in material procurement is manage hence the negotiation is one of the tool in spend cost management to optimise profit in every organization. Lack of knowledge to some guide when negotiating by procurement manages lead to high cost of finished product and it makes the product not to compete well with its competitors in the market. The impact expected at the end of negotiation is to minimize cost and maximise profit of the organisation. In both private and public sectors between 50% to 80% of the total expenditure is spend on acquiring either materials or services. The high percentage of charges by company’s agent could lead to additional cost of production over invoicing and overpayment. What else can be done, and what other mean can be used to acquire raw materials without incurring high cost. To reduce high cost, negotiation is one of the technique of spend cost management to arrive at a mutually acceptable bargain by planning. Objectives and strategy in order to arrive at an agreed pace term and condition of service between a procures and supplier. To ensure prudence and judicious utilization of the limited resources available in an organization. To expose ideas to procurement manager on how to achieve the objectives and enhance the profitability of organization as materials procured when adequately negotiated reduce cost incurred in acquisition of material for production process. To expose purchasing manager to possible tools of spend and cost management. The major research question of what re the techniques for negotiation the strategies for effective negotiation, the rate of material availability, how coordination and management of suppliers to ensure cost reduction and constant flow of materials to avoid interruption at the point of production. The research Design would be descriptive and analytical in nature. Interview would be conducted on selected staffs of Production, Stock Control section, Human Resources and Procurement Department. The Instrument for data collection are Questionnaire, Record, Interview, Observation. This work also comprise of summary of findings, conclusions and recommendation.
Every human being needs water to survive, so also every organization needs materials to survive. In the private and public sector, their total expenditure is mainly spent on acquiring either materials or facilities or services. There is no way business operations can be effectively carried out without them. Negotiation is vital to organizations so as to reduce cost or minimize cost and to maximize profit.
1.1 Background of the study
Negotiation as a cost deduction technique in material procurement is for efficiency of any business, and also contingent upon obtaining the right materials and have it available in the right quantity from the right source, at the right price, delivered at the right place at the right time, whereby failure to any of these adds to costs and decreases the profit level of any organization.
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