CONTROL OF STOCK AND ITS IMPLICATION FOR MANUFACTURING INDUSTRIES (A Case Study of UNITED NIGERIAN TEXTILE PLC Kaduna)
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CONTROL OF STOCK AND
ITS IMPLICATION FOR MANUFACTURING INDUSTRIES (A Case Study of UNITED NIGERIAN
TEXTILE PLC Kaduna)
CHAPTER ONE
INTRODUCTION
1.0 INTRODUCTION
The world of study is full of discoveries and innovations.
Through intensive question and enquires. The discoveries are used in solving
some compound problems either directly or indirectly.
This study is focused on stock control and its implication in
an organization, with special reference to the manufacturing industries.
Stock is an material supplied, received into store house and
being shop or issued on request (Lockyer K. 1984)
Stock control is the means by which material of correct
quantity and quality is made available as and when required with due regard to
economy in storage and ordering costs, purchase prices working capital.
Stock control is very important in the public sector, but it
is generally considered to be more important in the private sector, this is
because there is a notion that control is always applied by a profit making
organization. The present economic situation in the country has made it
imperative for manufacturing industries to control its stock scientifically
other wise it will affect the cost of production as well as its profit margin.
There is no standard system of stock control which can be
universally recommended or applied, each organization adopt the one most
suitable to its needs, although certain principle and practice are more or less
common to most them.
Stock control is very important unit in an organization,
which has to be critically analysed and coordinated however various firms has
not been making use of stock control to their own advantage.
They tend to have little or shallow view of the stores
activities, which in the long run brings set back to them and resulting to
tying down the circulating capital.
Therefore adequate method of measuring and checking inventory
level is crucial for the survival or any organization especially the
manufacturing concern. Stock control involves the making of rational decision
on the level of stocks that may be economically needed to meet all requirement
for planned production.
From the stores point of view, one of the major important
thing is to keep the incoming material as nearer as possible to the machine
shops and assembly shops that will be used daily. To avoid a disruption of
production process that may ultimately result in low productivity, low sales
and low profit, shortage of materials should be avoided.
In other words, every organization should as a matter of
importance, know its quantity and its economic order quantity.
More also, proper and adequate stock control regulates the
delivery of excessive materials, hence if left unchecked, it will pile up the
ware house the production area, apart from the fact that the excess of deliveries
tie up too much capital here the emphasis should be on the manufacturing
schedule and everything is regulated by that, in respect to some manufacturing
firms that deals with expensive or bulky material or components the flow has to
be regulated and managed hour by hour and their demand high degree of
understanding cooperation and efficiency.
Therefore, if as effective and efficiency system of the
control is implemented by any manufacturing company as well as any other
organization, a huge amount of money and time will adequately by saved.
1.1 HISTORICAL
BACKGROUND OF UNITED NIGERIAN TEXTILE PLC.
United Nigerian Textile Plc was incorporated in Nigerian on
7th May, 1964 for the purpose of producing printed textile materials. The
company, which operates one of the biggest and most efficient textile mills in
Nigeria, commenced operation at the beginning in 1965.
Initially, United Nigerian Textile Plc (UNT PLC) was a
finishing plant importing gray, cloth as its main raw material. But following
the federal government policy on background integration, in June 1967, the
company installed both spinning and wearing facilities in produce gray both
from locally grown cotton in its determination to expand its operation again in
1967, the company acquired a controlling interest in Zamfara Textiles Industry
Limited (ZTIL) by this decision UNT PLC was assured of steady supply of gray
buff for its highly efficient finishing plant, which at the time, was the only
plant producing highly sophisticated wax print in the country and indeed, in
west Africa.
In 1976 UNT Plc. UNT Plc conceived the idea of establishing a
textile factory to produce material quite different from the conventional
products of both Kaduna (UNT Plc) and Gusau (ZTIL) factories. This was
successfully in corporate and established in 1977 at Funtua Textile Limited
Under the company’s policy of even spreads. Funtua Textile Limited (FTL) is now
producing high quality bed sheet, pillow cases and cotton/ Polyester fabrics.
In 1980, UNT PLC brought of NORSPIN and own its premises a subsidiary company (UNITEX LIMITED) and an
association company (SUPERTEX LIMITED) was set up. Unitex Limited is spinning
plan, which produce yarn for the sole consumption of UNT PLC. Supertex Limited
is a finishing plant producing wax prints. Although Supertex has been closed
down in May 2004.
UNT Plc is now a group of four companies spread over three
neighboring state, Namely Kaduna, Katsina and Zamfara, with its product being
distributed through out the country. Its expansion and modernization programmes
have made the group the biggest employers of labour among all the textile industries
in the country and of course the target in terms of production capacity.
For the future, the industry will continue to seek to improve
the quality of its products increase efficiency and as well keep abreast of
modern advances in technology.
1.2 STATEMENT OF THE PROBLEM
Malpractices exist in the store section, especially in the
areas of theft and fraud, because of the small nature of some of the materials
but high in value, therefore, such things can easily be pilfered if proper
control is not adopted.
Consequently, stock administration and control has been
facing a lot of challenges of over and under stocking pilfering and other
happenings that are posing a threat to the operation of stock activities have
been persistent. Until an organization devices means through which stock
activities and stock control and its implication can effectively be handled,
the stock administration and its control will continue to suffer some defeat.
Stock control and its importance came into limelight during the industrial
revolution in Europe, the revolution resulted in scarcity of raw material and
component parts, this led to many manufacturer devising ways of controlling and
holding stock, until when needed.
This research work is therefore intended to show case the modern
proven methods of ordering holding and dispensing stock and its control
organization such that stock and stock control will be an hitch free task.
These problems are not limited to single organization rather it is a universal
problem still facing of affecting many organization. In all organizations,
money is spent in acquiring materials and for lack of proper control, these
materials are lift lying down uncared for. This is because the management pays
little or no attention to the control of stock. They do not see stock control
as a contributing factor to profitability or an aid in achieving the
organizational goal.
This research work attempt to evaluate the stores section of
the manufacturing concern with the aim of making useful suggestions and recommendation
on possible way or strategies that can be adopted in enhancing an unproved
effective and efficient stock control.
Stock control and its importance came into limelight during
the industrial revolutions in Europe, the revolution resulted in scantly of raw
materials and component in parts, this led to many manufacturers devising ways
of controlling and holding stocks unit when needed.
1.3 SIGNIFICANCE OF
THE STUDY
This research is written in anticipation to be of immense
value to many individual, group, private organization and government
entailment.
The work will also increase the knowledge of then personnel
staff of the organization under study especially the stores section with
regards to how to properly manage
materials in the store so that too much lasted expenses would not be incurred
by the organization as if will ultimately results in low profit margin of the
organization.
The suggestion that will arise from finding of this study
will made the policy makers, researchers and even the general public in a more
enlightened position to either serve as a reference or increase their knowledge
in formulating policies that would bring about rapid and meaningful development
of their various organization particularly manufacturing sector.
Further effective management of material and inventory is one
of the major factor contributing to the over all success of the organization,
hence this work will reveal some of the problems hindering the effectiveness of
store activities and if the suggestions taking into consideration will
definitely contributes to the economic well being and the overall success of
the organization.
1.4 OBJECTIVES OF THE
STUDY
The main rational of writing this research is to enable the
researcher, the stock managers and the business studies students to find
solution to the continuous problem encountered in controlling stock in their
various field of operation.
For instance, in the manufacturing industries by poor
management of stock has been prevalent there by reducing the profit margin of
organization.
Stock control involves the making of decision on the level of
stock that may be economically needed to meet all requirement for planned
production.
One of the most important thing is to keep the incoming
materials as nearer as possible to the amount the machine shops and assembly
shop will use, why regularly shortage must be avoided or else production lines
may have to stop and at the same time too much must not be delivered, other
wise, it will pile up the ware house, the production area, apart from the fact
that the excess of deliveries will tie up too much capital.
This study allows the researcher on opportunity to examine
the organization’s stock control system and implication more closely in order
to understand the nature of the problem with a view of suggesting possible
solution to them.
The research work is also to help us to see for ourselves,
stores activities that are being carried out in manufacturing industry.
Finally, it is also hoped that it will constitute a source
for assisting future students to obtain preliminary understanding of the
subject matter covered by this work, as it will be a reference for further
research work.
1.5 STATEMENT OF THE
HYPOTHESES
The following hypotheses are tested in the course of this
study.
HYPOTHESES
H 0: That the use of stock controls system will not improve
the company’s efficiency.
H 1: That the use of stock controls system will improve the
company’s efficiency.
1.6 LIMITATIONS AND
DELIMITATION OF THE STUDY
These are circumstances that limit ones effort in performing
a giving task in conducting a study of this nature, there must be some hindrance which stand as
limitation encountered below.
The initial experience of the researcher showed research like
this needs enough time for collecting of fact and other relevant information on
stock control and its implication.
Another limitation to this research was that most of the
staff under the stores section were semi literates. Also the uncooperative
attitude of some staff of the store house often due see the research work as
the means of bringing to light any fraud committed by them in the course of
their duties as stores officers therefore tended to give scarcity information
when approached.
The most difficult constraint, which the study suffered from,
was that of time constraints.
Yet the researcher was able to complete the job within
reasonable framework.
1.7 DEFINITION OF
TERM
v Maximum Stock
Level: Is the amount expressed in the unit of issues, above which the stock
should not be allowed to exceed.
v Minimum Stock
Level: This Is the amount expressed in the unit of issues, above which the
stock of any commodity should not be allowed to fall.
v Reorder Level: Is
also considered as the unit of issues at which ordering action is indicated in
time before material could fall below the minimum level.
v Stock Taking: The
process of verifying the quantity balance of items holds in stock by comparing
the physical and the record.
v Review Of Stock:
In order to keep abreast of changing condition after stock has been
established, review of stock would be conducted at a reasonable interval.
v Economic Ordering
Quantity (EOQ): Is the mathematical formula needed or employed by many
organization to established the most economic amount to order for any item held
in stock.
v Control by Value:
It uses price in controlling the value of stock, the whole stock held are
measured in monetary terms and stock control as on of the tools used.
v Control: Is an
element of managerial task that involves the management of stock held in stores
houses to make sure that the objective of the enterprises or firm are
accomplished efficiently and economically.
v Inspection: Is the
means of examining the incoming consignment for the right quality and quantity.
v Discrepancy: The
differences between record and physical quantity after stocktaking.
v Continuous Stock
Taking: This is the method whereby stock taking continuously through out the
year, in accordance with the predetermined programmes so that each item is
physically verified at least once in the year.
v Hastening Stock
Level: This is the amount expressed in the unit of issues at which it is
estimated that hastening action is necessary to request suppliers to make early
delivery.
v Two Bin System:
This system is a simple and direct method of stock control. The two bins
contain the same items and of equal quantities.
v Investigation of
Discrepancies: This process after the stock taker and the storekeeper have
agreed that a discrepancy exists, the procedure depends on the nature and value
of the discrepancy.
v Obsolete: This is
where an item is no longer usable by the organization concerned due to the
changes in operational technique or production.
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