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EFFECTIVE INVENTORY
CONTROL AS A MEANS OF IMPROVING AN ORGANIZATION IS PERFORMANCE
ABSTRACT
This research project is on effective inventory control as a
means of improving and organizations performance. A case study of NBC Plc.
The research was prompted by the researchers believe of the
indispensable role an inventory that is properly controlled can play in gearing
up the profit of an organization in any given accounting period with the
increasing highcost of production attributable to scarcity of raw-material.
It has therefore become necessary that an examination be made
on the classification of inventory and the proper way to control and stock
raw-materials.
A detailed analysis of how inventories are classified,
controlled and the cost of keeping inventory were studies by the researcher.
CHAPTER ONE
INTRODUCTION
Inventory control refers to the management function concerned
with the acquisition, storage, handling and usage of inventory so as to ensure
the availability of inventory when needed, provide adequate cushion for
contingencies and deriving maximum economic benefits and at the same time
minimizing wastage and loses.
Independently, inventory control can be defined as a quantity
of goods or materials in the control of an enterprise and held for a time his
relatively idle or unproductive state, awaiting its intended use or sale. It is
equal identified as stock on hand at a given time.
The type of inventory items consumed in the normal
functioning of an organization that are not a part of the final product. They
include toiletries and pencils:
(b) Raw
materials – Inputs into the production
–process that will be modified or transformed into finished goods.
(c) In
process goods – Partially completed final product that are still in the
production process
(d)
Finished goods - Final products
available for sale, distribution or
storage, more over, in the administration of the inventory of an organization
the following question should always be remembered:
(i) What
is the optimum amount of inventory to carry?
(ii) What
is the economic tool size for an order?
(iii) What is
the record system for showing the status or inventory at hand?
Control is necessary so as to minimize cost and at the same
time keep our services good enough so that we do not lose business. But the
control and maintenance of inventory is a problem that is common to organizations in different
sectors of the company. Inventory problem have proliferated as technological
progress ahs increased the organization ability to produce goods in a greater
quantities and at a taster rate. Cash
invested in inventories could be used some where else for profit making, debt
servicing or dividend distribution. Management is therefore becoming
increasingly aware that the overall efficiency of company’s operation is
directly related to inventory situation existing within the company. The real problem
therefore has been in the determination of the inventory level at which money
invested in inventory will produce a rate of return higher than it would it. It
has been invested in some other areas of the business.
It must not be overlooked that some problems associated with
inventory management are created by lack of effective and efficient inventory
management arising mainly from the management inability to identify the proper
inventory control strategy to be adopted, or
even where identified, the application is often inadequate.
1.1 BACKGROUND OF
THE STUDY
Inventory control is a function that is very vital and of
great significant to any king of organization. It is not peculiar to only the
manufacturing organizations, but also necessary to service- oriented
organization such as banks schools hospitals, each at these institutions still
requires some amount of inventory to stock and control so as to minimize
overhead costs and improve performance nevertheless, the primary focus in this
protect will be on production cum marketing oriented organization.
Raw materials inventory is the heart of any manufacturing
company since no production could take place without them, so their effective
control should be a significant factors in the management of materials.
1.2 PURPOSE OF THE
STUDY
Different inventory control problems are being encountered by
different organization effective inventory control can be achieved by the
selection and adoption of an inventory control system that will result to the
much needed improvement in the organizational performance. This research
therefore aims at:
(a)
Finding out the extent to which an efficient inventory control system
can contribute in improving the general performance of an organization.
(b) Identifying some of the factors militating
against a thorough adoption of an effective control system of inventories in an
organization.
(c)
Presenting ways through offering of suggestion and recommendation as to
how best to go about ensuring that an effective inventory control system is a
adopted and practiced in an organization like Nigeria Bottling company Plc. The
research will however not lose sight of acquisition problems of raw materials
and how best to solve it.
1.3 SIGNIFICANCE OF
THE STUDY
Inventory control is a
function that is very important and of great significant to any kind of
organization. It is not peculiar to only the manufacturing organizations, but
also necessary to service oriented
organizations such as IMT Enugu, Union Bank Plc etc.
The study will place the stock mange on a better rooting to
actually know the cost of keeping inventory and how to avoid it.
The study will also teach readers on how to control inventory
for effective and efficient operation of organizations activity, and when this
happens detective / obsolete products will not be passed into the society for
consumption.
1.4 STATEMENT OF
THE PROBLEM
The issue of failures, poor quality product out of stock,
unnecessary delays and in extreme cases
shut – downs in some organizations can be attributed to non-existence of
effective inventory control system.
Most managers are ignorant of inventory listed circumstances.
A few of them who are aware of the usefulness of stock control excel in their
various business. Inspite of these, effective inventory control has not been
without a lot of problems as observed by the researcher as follows:
(1) Most
firms have no clearly defined inventory control system.
(2) Most
firms does not have enough money for keeping reasonable inventory.
(3) Most
organizations have little or space for inventory. This affects the number of
products to be produced and stocked.
(4) There
is poor record of inventories in most organizations
All these are concern to the author which when tackled would
provide an operational efficiency for most firms.
1.5 SCOPE AND
LIMITATION OF THE STUDY
This research project is limited to the inventory procedures and
techniques as applied in Nigeria Bottling Company Plc, with a view to improving
the organizations performance. The work covers the activity of NBC Plc between
2000 to 2004.
A research of this nature cannot be out without hitches in
the process. It was therefore not uncommon that the researcher found conducting
this research on uphill test so many problems were encountered, and this might
have to a certain extent an influence on the out come of the research. Amongst
the constraints area:
(1) The inability
of the researcher to interview some principal staff in the firms whose
contribution should have been of great help.
(2) Limitation of
time materials resource: Time was seriously a delimiting factor in conducting
this empirical research. The topic was approved to the researcher just in April
2005 and the time log between them and submission needed much pressure. The
researcher has to conduct this research as well as attend his lectures.
(3) Finance: The researcher as a student has to attend
to other problems other than this particular one in partial fulfillment of some
courses. It was therefore not easy to allocate money for this study especially
during hard situation much money was required to cover the company several time
before collecting the necessary data.
1.6 HYPOTHESIS
For the purpose of this study. The following hypothesis have
been postulated.
Ho: A well planned
and effective inventory control technique alone cannot substantially contribute
to the performance the organization.
HI: A well planned
and effective inventory control technique alone can substantially contribute to
the performance of the organization.
Ho: The amount of
inventory to stock is not completely dependent on the organization
HI: The amount of inventory
to stock is completely dependent on the organization.
Ho: Higher
production and operational costs in organizations are not directly reflective
from poor inventory management
HI: Higher
production and operational costs in organizations are directly reflective from
poor inventory management
1.7 DEFINITION OF
TERMS
The following terms used in this study should be taken to
mean the following
MARKETING:
Marketing is a human activity directed at satisfying needs
and wants through exchange process.
MARKETING CONCEPT
The marketing concept holds that the key to achieving
organizational goals consists in determining the needs and wants of target
markets and delivering the desired satisfactions more effectively and
efficiently than competitors.
PRODUCT
A product is something that is viewed are being capable of
satisfying needs or want.
SERVICES
These are separately identifiable intangible activities which
provide want satisfaction when marketed to customers and or industry users and
which are not necessarily tied to the sale of a product or another services.
STRATEGY
This refers to the firms overall plan for surviving in its
environment.
ORGANISATION
An organization is a structural process in which persons
interact for objectives
PRODUCTION
This is the transformation of resources into finish goods or
service
DISTRIBUTION STRATEGIES
These are concerned with making products available when and
where customers want them.
TECHNOLOGY
This is the application to marketing of knowledge base on
discoveries in science, inventions and innovations.
WORKING CAPITAL
This is the net amount of current resources not needed to
meet current obligations of the firm.
EFFECTIVENESS
This is the degree to which pre-determined goods are
achieved.
EFFICIENCY
This is the economic manner in which goals oriented operation
are carried out
MANAGEMENT
This is the process of using both human and material
resources to achieve the set goals and objectives.
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