EVALUATION OF COMMODITY PROCUREMENT SERVICES UTILIZED BY AGRIBUSINESS COMPANIES IN GUNTUR DISTRICT OF ANDHRA PRADESH
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Date
2019
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ACHARYA N G RANGA AGRICULTURAL UNIVERSITY, GUNTUR
Abstract
Procurement outsourcing is the transfer of specified key procurement activities related to sourcing and supplier management to a third party, to reduce overall costs and to increase the company focus on its core competencies. Now-a-day’s most of the agribusiness companies assign their procurement function to third party procurement service providers. Procurement outsourcing is normally followed in commercial crops like cotton, chillies, spices, potato etc. Guntur district is one of the major cotton growing districts in Andhra Pradesh. There are 383 ginning mills and 33 pressing factories spread over entire Guntur district. Most of the agribusiness companies are utilizing the commodity procurement services for purchasing cotton in the district. Hence the study was taken up to evaluate the commodity procurement services utilized by the agribusiness companies i.e., spinning mills in the district. A total of 12 spinning mills were selected randomly for the study.
In the study area, it was noticed that the respondent companies from Guntur district have procured their commodities from the TPP service provider called National Collateral Management Service Limited (NCML). From the findings, it was noticed that 58.33 per cent of the spinning mills procured cotton from three sources (open market, traders, TPP) while 33.33 per cent of respondents procured from two sources and remaining 8.33 percentage of the respondents procured cotton from any one of the sources. Most of the selected companies were associated with the TPP service providers from one to three years. Peak season for spinning mills procurement was November to March. Strategic goals adopted by firms in procurement
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were procuring good quality commodities, provision of reasonable prices for their commodities, to maintain long term cooperation with suppliers, on time delivery of commodities and to reduce the overall cost of procurement. Major criteria for selecting an outsourcing service provider was level of expertise of service provider, cost of service, funding facility or credit availability, prior experience with service provider and business ethics of service provider.
Procuring good quality commodities was ranked first among the strategic goals adopted by the agribusiness firms followed by reasonable price which was assigned second rank while long term cooperation with service providers was ranked third, on time delivery was ranked fourth. Condensing the overall cost of procurement was ranked least. Agribusiness companies major priority factors for choosing an outsourcing providers were level of expertise of service providers, cost of service provided, credit availability, prior experience with service providers and business ethics they followed.
From the findings, the major benefits derived from procurement outsourcing by spinning mills were availability of good quality commodities was ranked first followed by establishment of good network and gaining knowledge, benefit of focusing on core business and lowering the procurement cost. About 41.66 per cent of the respondents were satisfied with services offered by the third party procurement service providers. It was found that equal number of agribusiness companies were either dissatisfied or indifferent and very satisfied by the procurement performance delivered by third party procurement service provider while 8.33 per cent of the total respondents were very dissatisfied. Some of the strategies for improvement of commodity procurement services by the TPP service providers were promoting the concept of TPP and also the benefits derived from TPP, maintaining good relations with the clients and update information about their commodities regularly, taking regular feedback from the clients about the procurement service offered, update information about the competitors from time to time in the market
Description
D5813
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