THE EFFECT OF MATERIAL AND STOCK CONTROL ON THE PROFITABILITY IN KADUNA REFINING AND PETROCHEMICAL COMPANY (KRPC), KADUNA
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THE EFFECT OF MATERIAL
AND STOCK CONTROL ON THE PROFITABILITY IN KADUNA REFINING AND PETROCHEMICAL
COMPANY (KRPC), KADUNA
ABSTRACT
This research is on the effect of material and stock control
on profitability (a case study of Kaduna Refining and Petrochemical Company).
The study used both primary and secondary source of data collection.
Questionnaires were used to elicit the view of the respondents on whether
material and stock control has effect on the profitability of Kaduna Refining
and Petrochemical Company. Frequency and percentage were used in analyzing the
data collection, and chi-square was used to test the hypothesis formulated.
Some of the problems facing KRPC are those of procurement of raw materials,
inventory management and control. These come about as a result of inability of
the company (KRPC) to calculate the economic order quantity and the various
control levels use in the management of stock. The major purpose of this
research on material and stock control are to analyzing the effect of material
and stock control in KRPC to know the importance of material stock control in
KRPC and to give future research room to improve on where the present research
stop. Seventy (70) samples were used and two (2) hypotheses tested. The
research among other things made the following findings: the KRPC is such a
large company that every major section of its operation is now fully
computerized and the stores staff are given periodic training.
TABLE OF CONTENTS
Title page - -
- - -
- - -
- - i
Declaration -
- - -
- - -
- - -
ii
Approval page
- - -
- - -
- - -
iii
Dedication - -
- - -
- - -
- - iv
Acknowledgements
- - -
- - -
- - v
Abstract - -
- - -
- - -
- - vii
Table of Contents -
- - -
- - -
- - viii
CHAPTER ONE
INTRODUCTION
1.1 Background of
the Study - -
- -
- - -
1
1.2 Statement of
the Problem - -
- - -
- - 2
1.3 Objective of
the Study - -
- - -
- - 3
1.4 Statement of
Hypothesis - -
- - -
- - 3
1.5 Significance of
the Study - -
- - -
- - 4
1.6 Scope of the
Study - -
- - -
- - -
4
1.7 Limitations of
the Study - -
- - -
- - 5
1.8 Historical
Background of the Case Study - -
- - 5
CHAPTER TWO
LITERATURE REVIEW
2.0
Introduction - -
- - -
- - -
- 9
2.1 Techniques of
Inventory Management - -
- - -
9
2.2 Inventory
Recording Technique- - -
- - -
13
2.3 Reasons for
Holding Stock - -
- - -
- 16
2.4 Cost Associated
with Inventory Control - -
- - 17
2.5 Types of
Inventory Control System - - -
- - 18
2.6 Types of
Warehouses - -
- - -
- - 22
2.7 Categorization
of Inventories in KRPC - -
- -
24
2.8 Inventory
Management Techniques and the Performance of Organizations 26
2.9 Concept of
Performance - -
- - -
- - 34
2.10 Performance
Indicators - -
- -
- - -
35
2.11 The Challenges
face by Company in Managing their Inventories 38
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Research
Design - -
- - -
- - -
48
3.2 Research
Population - -
- - -
- - 48
3.3 Sample Size and
Sampling Techniques - -
- - 48
3.4 Method of
Gathering Data - -
- -
- - 49
3.5 Justification
of the Method Used - -
- - -
49
3.6 Method of Data
Analysis - -
- - -
- - 49
3.7 Justification of
Instrument Used - -
- - -
50
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0
Introduction - -
- - -
- - -
- 51
4.1 Background
information of the respondents
- - -
- 52
4.3 The relationship
between inventory management and performance of KRPC 62
4.4 Challenges
faced by the KRPC in Managing inventories - -
66
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0
Introduction - -
- - -
- - -
- 69
5.1 Summary -
- - -
- - -
- -
69
5.2 Conclusion
- - -
- - -
- - -
74
5.3
Recommendations - -
- - -
- - -
76
5.4 Suggested Areas
for Further Researcher - -
- - 77
References - -
- - -
- - -
- - 78
Appendix - -
- - -
- - -
- - 79
CHAPTER ONE
INTRODUCTION
1.1 Background of
the Study
Material management, as practiced in business today, can be
defined as “a confederacy of traditional material activities bound by common
idea. The idea of an integrated management approach to planning, conversion
flow and distribution of products materials form the raw materials state to the
finished state (Iornum, 2007).
The above definition implies that materials management is
generally concerned with the flow of material from the source of supply through
the production line to the final consumers. This means that the material
management include such function as the primary responsibilities of purchasing
plus other major procurement responsibilities like inventory control, traffic,
receiving, warehousing as well as production planning and control.
Later Douglas also defined material as aggregate of those
ordinary causes of business which are in the process of production of goods or
service to be available for sale. Material are significant portion of most
firms of assets which accordingly requires substantial investment in order to
keep these inventories from becoming unnecessarily large, material must be
managed effectively. In modern business greater emphasis have being put in
material handling. It concern in material management is to provide material in
the right condition at the right time. It implies that the handling procedures
should be able to appropriate stock level, ensuring proper use of stock and
ensure that inventory is fully amounted for.
Jonny Ater – defines material handling as the movement and
protection of material goods and products through the process of maintaining,
distribution, consumption and disposal. Material handling should be controlled
and carried out properly if a huge standard of efficiency and cost
effectiveness is to be achieved.
1.2 Statement of
the Problem
Material and stock control in organization is an important
aspect of production process. Many companies engage diverse strategies to
achieve organizational goal through material and stock control. The control of
material as it affects Kaduna Refining and Petrochemical Company (KRPC) is the
unavailability of material in store an proper reconciliation of possible loss
to business through interruption of production or failure to meet order with
the handling cost of stock.
Here in Nigeria, a cursory look at our economic problem will
appear to suggest the non-adoption of materials management which is a product
of our industrial philosophy that has made our manufacturing sector over
important dependent. Though the organization (KRPC) under the study has advance
store and way of obtaining their materials but lack proper personnel to handle
the material problem.
1.3 Objective of
Study
The following are aimed at realizing the objective:
i)
Analyzing the impact of material and stock control in KRPC
ii) To
know the importance of material and stock control in KRPC
iii) To
provide useful recommendation as related to the study
iv) To
give future research room to improve on where the present research stops.
1.4 Statement of
Hypothesis
H0: Material and
Stock Control has no effect on the profitability of a KRPC.
H1: Material and
Stock Control has effect on profitability of a KRPC
1.5 Significance of
the Study
The study findings may be significant in the following ways;
It is hoped that study findings may be used as basis for further research and
investigations inform of literature. The findings may provide information to
managers in different organizations especially on knowing how to compare actual
performance and inventory management. The findings may also be beneficial to
other upcoming researchers to investigate further about the impact of inventory
management on organizational performance of other organizations other than
KRPC. The study may further encourage government to set up educational
institutions to provide training on how to manage inventory in organizations.
1.6 Scope of the
Study
The study is interested in trying to understand the
techniques of material management and stock control used at Kaduna Refining and
Petrochemical Company (KRPC), relationship between inventory management and
profitability KRPC and the challenges faced by KRPC in managing inventories and
materials.
The study considered information relating to the period of
four years that is 2006-2009. This range of years was considered as output at
KRPC has been showing a decline despite of the many techniques used in the
process of material management and stock control. Furthermore, the time was
enough to provide more information for the study upon which conclusions and
recommendations are based.
1.7 Limitation of
the Study
The study was limited by funds as it was not be enough to
cater for transport and secretarial services. Being the first research, the
researcher lacked enough experience and skills during the process of this
research. However, the researcher tried hand in hand with the help of his
supervisor to make the required information for the whole research process in
time.
The study was also faced with a problem of not finding all
respondents in the time of the study due to them being too busy with the
organization work. The researcher however made appropriate timetable with the
top company managers that suited all the respondents during the process of data
collection for reliable and valid information
1.8 Historical
Background of the Case Study
The Kaduna Refinery and Petrochemical Company (KRPC) was
commissioned in 1980 as NNPC Refinery Kaduna. It was however incorporated as a
wholly owned limited liability company of NNPC on the 3rd November, 1988 under
the Companies Act 1968, it is the third refinery in the company, it was
established to cope with the growing demand for petroleum products especially
in the northern part of the country. The refinery was designed to process both
Nigerian and imported crude oil into fuels and lubes products, in December
1985, the fuel’s section of the refinery was successfully de-bottle needed from
50,000 BPSD to 60,000 BPSD, bring the total refinery installed capacity to
100,000 BPSD.
In March 1988, the 300,000 MT per annum petrochemical plants
was commissioned. The petrochemical plant, being a downstream plant of the
refinery derives its entire raw materials including utility supplies, from the
refinery. In an attempt at commercialization of NNPC in the same year, it
became necessary to merge the two plant (Refinery and Petrochemical Plants) to
form a single subsidiary company of Nigerian National Petroleum (NNPC) known as
the Kaduna Refinery and Petrochemical Company Limited (KRPC) as it is today,
KRPC occupies an area equipment to approximately 1.8km square KRPC is made up
of two main division namely, Operation and Services, each headed by an
Executive Director who reports to the Managing Director. However, there are
department that report directly to the Managing Director are regarded as the
Managing Director’s Division. Managers heading the department report to their
executive directors and these under the Managing Director report directly to
him.
Kaduna Refining and Petrochemical Company is a subsidiary of
Nigerian National Petroleum Corporation (established in 1971 known as Nigerian
National Oil Corporation [NNOC] by then).
The federal government’s decision to construct the third NNPC
Refinery in Kaduna was taken along with that of Warri location as far back as
1974. The whole idea were to supplement the plant at Port Harcourt and to
discourage the wastage of foreign exchange used in the importation of petroleum
products, KRPC thus was established for the purpose of refining crude oil into
high value petroleum products and exploitation of other related profitable
business in cooperate interest of the organization and the whole nation in
general, However, KRPC did not start operation until 1979.
The activities of KRPC are divided into refinery and
petrochemical units with each unit leaving its own activities and producing
different output from the other unit.
Refinery Products
The KRPC undertakes the refining of the following products
i.e. dual purpose kerosene (for domestic use) motor gasoline, base fuel, lube
oil, waxes, surplus, Naphtha, black wax, asphalt, Liquefied Petroleum Gas (LPG)
and petrol.
Petro – Chemical (Laboratory) Product
The following listed are petro-chemical products made at the
KRPC Liner Alkene/Benzene Petro – Chemical plant, Kaduna.
1.
Solvent (For End Users): Insecticides, plants, vanishes, degasses,
mental cleansing, polishes for shoes, filer and furniture.
2.
Benzene:Aromaticsolvent paints and leagues, pharmaceutical industrial
chemicals and Aviation Gasoline.
3. Tins
and Drums:Are also manufactured and other users of tins and drums are
containers of their products.
4.
Heave Alkylate:Transformer oil, lubrication oil, Greases and Tremolo
fluids.
The vision of the organization, is to be pride of the nation;
and the mission is to refine crude oil into high value petroleum and
petrochemical product and also manufacturing, packaging products efficiently.
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