CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF STUDY

The adoption of human resource outsourcing as policy by most organization has increased overtime in Ghana; reason being that outsourcing tend to be cheap that the employment of the services of the human resource in an organization.

According to (Yang, et. al. 2007; McIvor, 2008) stated that with the increasing globalization, outsourcing has become an important business approach with belief that it will offer some kind of competitive advantages maybe gained as products or service.

In most of organization today, the human resource services tend to be the most outsourced because of its job description. Human resources outsourcing evolved from hiring payroll processing companies in the 1990s to delegating tasks previously performed by human resources assistants and specialists, such as recruiting, coordinating benefits and handling unemployment claims.

The effect of the human resource outsourcing is also seen in the areas of supply chain management practices in an organization. According to (Lin and Shaw, 1998) stated that the supply chain is a network of autonomous or semiautonomous business entities involved, through upstream and downstream links, in different business processes and activities that produce physical goods or services to customers.

It kind of consists of a series of activities that an organisation uses to deliver value, either in the form of a product, service, or a combination of both, to its customers. Furthermore, the supply chain could be considered as an integration of materials and information flow between customer, manufacturer and supplier. In the same vein according to (Archibald, et al., 1999) stated that recent economic trends have de-emphasised the benefits of vertical integration (e.g. economies of scale, access to capital, and large physical infrastructure investment) and instead have focused on the benefits of being specialised (e.g. speed, agility, and rapid growth). These trends have forced even large organisations to rely on hundreds or even thousands of external firms or suppliers to deliver value to the marketplace. As this shift has taken place, the importance of managing and coordinating the activities between these disparate entities has become paramount. Such effort is often referred to as “supply chain management”. It is to this regard that the study wishes to examine the effect of human resource outsourcing on supply chain management practices in an organization using Nestle Ghana as the case study.

1.2 HISTORICAL BACKGROUND OF NESTLE GHANA

In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes. People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe. In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the company was operating factories in the United States, Britain, Germany and Spain. World War I created new demand for dairy products in the form of government contracts. By the end of the war, Nestlé's production had more than doubled.

The 1920s saw Nestlé's first expansion into new products, with chocolate the Company's second most important activity. The end of World War II was the beginning of a dynamic phase for Nestlé. Growth accelerated and companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1960, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a shareholding in L'Oréal in 1974.

Nestlé divested a number of businesses1980/1984. In 1984, Nestlé's improved bottom line allowed the Company to launch a new round of acquisitions, the most important being American food giant Carnation. Since 1996 there has been other acquisitions including San Pellegrino (1997), Spillers Petfoods (1998) and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in July, Nestlé merged its U.S. ice cream business into Dreyer's and in August, a US$ 2.6bn acquisition was announced of Chef America, Inc. In 2003 Mövenpick Ice Cream was acquired, enhancing Nestlé's position as one of the world market leaders in this product category. In 2006, Jenny Craig and Uncle Toby's were added to the Nestlé portfolio and 2007 saw Novartis Medical Nutrition, Gerber and Henniez join the Company.

Nestlé Ghana Limited started business in Ghana in 1957 under the trading name of Nestlé Products (Gh) Limited with the importation of Nestlé products such as milk and chocolates. In 1968, it was incorporated as Food Specialties (Gh) Limited to manufacture and market locally well known Nestlé brands. The company became Nestlé Ghana Limited in 1987.

In 1971 the production of the IDEAL Milk and MILO started at the Tema Factory. The factory has since been further developed and now also produces CARNATION milks, CHOCOLIM, CHOCOMILO CEREVITA, CERELAC and NESCAFÉ 3 in 1. These products are not only produced for Ghana but also exported across West Africa.

In 2003, Nestlé Ghana Ltd invested in a new warehouse, the Central Distribution centre, located next to the factory in Tema. The company also runs sales offices with warehouses in Kumasi, Takoradi, Koforidua and Tamale.

The Company has invested some 130 billion cedis in 2004 and 2005 to increase its production capacity, particularly in the area of cocoa-based beverages, and to construct modern and efficient distribution facilities next to the factory in Tema.

1.3 STATEMENT OF PROBLEM

What really instigated the study was due to the inability of most organizations today to meet the needs of their customers; the reason might be as a result of inexperienced staff; it could be that the human resource management practices that were previously adopted by most of the organization are ineffective. In recent times it is seen that most organization have outsourced most important activities like the human resource function so as to services and product quality, reduce production cycle times, lower cost, increase competence of the organization and improve on the supply chain management practices.

In today’s competitive world, many organisation have turned to the use of their own brands to capture customers’ attention and gain their loyalty while reducing marketing cost and give the firm a competitive advantage. However according (Dankwa, 2012) noted that most businesses are lagging behind in supply chain management practices due to limited capitals, infrastructure and management. To alleviate this, there is need to create strong brands to gain competitive advantage possible through a continuously effective adoption and institutionalization of supply chain management (Arawati, 2011). In Ghana today, biggest challenge for organisations is how to deliver the promises made to customers (Ulas & Calpiner, 2008) of the right product, at the right time, right place and at a reasonable cost. Failure to meet this in turn leads to customer disloyalty and the outcome will become a clog on the wheel of performance of most organisation.

1.4 AIMS AND OBJECTIVES OF STUDY

The main aim of the research work is to examine the effect of human resource outsourcing on supply chain management practices in an organization. Other specific objectives include:

1. to examine the effect of supply chain management practices on the organizational efficiency in Nestle Ghana
2. to determine the effect of human resource outsourcing on supply chain management and organizational profitability
3. to investigate on the factors affecting human resource outsourcing in Nestle Ghana
4. to determine the relationship between human resource outsourcing and supply chain management efficiency in Nestle Ghana
5. to proffer solution to the above stated problems

1.5 RESEARCH QUESTIONS

The study came up with research questions so as to be able to ascertain the above stated objectives of the study. The research questions for the study are stated below as follows:

1. What is the effect of supply chain management practices on the organizational efficiency in Nestle Ghana?
2. What is the effect of human resource outsourcing on supply chain management and organizational profitability?
3. What are the factors affecting human resource outsourcing in Nestle Ghana?
4. What is the relationship between human resource outsourcing and supply chain management efficiency in Nestle Ghana?

1.6 STATEMENT OF RESEARCH HYPOTHESIS

H0: human resource outsourcing has no significant effect on supply chain management practices in Nestle Ghana

H1: human resource outsourcing has significant effect on supply chain management practices in Nestle Ghana

1.7 SIGNIFICANCE OF STUDY

The study on the effect of human resource outsourcing on supply chain management practices in an organization will be of immense benefit to the entire nestle Ghana limited and other manufacturing companies because the study will examine the various roles of the human resource in the achievement of an effective supply chain management practices. The study will also investigate on the factors affecting the efficiency of human resource outsourcing on supply chain management practices in an organization. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.8 SCOPE OF STUDY

 The study on the effect of human resource outsourcing on supply chain management practices in an organization will be limited to Nestle Ghana limited.

1.9 LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.10 DEFINTION OF TERMS

HUMAN RESOURCE: are the people who make up the workforce of an organization, business sector, or economy

OUTSOURCING: obtain (goods or a service) by contract from an outside supplier

SUPPLY CHAIN: the sequence of processes involved in the production and distribution of a commodity