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INVENTORY AND CONTROL ON PRODUCTS
AVAILABILITY
CHAPTER ONE
INTRODUCTION
1.1
Background
of the Study
It
is a fact in materials management that continuity in production or provision of
services on constant flow of required inventory. However, the question
confronting the materials management remain, how much shall be ordered when the
quality available is less than required to meet production demand or the
quantity is less than order point and how best to plan and control the quantity
of inventory needed at a given time.
The
focus of the materials manager is to reduce the two extreme ends of the
spectrum, that is excessive (surplus) stock and adequate stock (stockout). The
level of stock or inventory to be purchased or carried by an organization will
depend on a number of issue, such as level of consumption, bulk purchase, discount,
reliable, delivery dates, difficulty in matching supply with demand,
speculation (availability or scarcity) and the company’s policy it is this
prevailing dynamic circumstance that gives rise to the need for inventory
planning for product availability. Inventory planning however, an enormous task
that requires an astute combination of intelligence of what is actually
happening to demand and that of what we expect to happen (forecasting).
A
closer look at organization annual balance sheet, it shows that assets account
for between 60-70% of materials held in stock; yet proper attention, is hardly
given to this aspect of management stacks and left at the mercy of the
unqualified individuals.
Inventory
planning is itself has been explained as the determination of the quantity and
quality required of a material, components, points and services ordering,
control receiving, inspection and storage of the right material and the
efficiency utilization of these materials to achieve organization’s objective.
In this study a general understanding of inventory planning shall be considered
as well as issue such as inventory control its importance to the organization,
stock maintenance, material handling quality control and product availability
among others.
1.2 Statement
of the Problems
Organizations
in their effort to satisfy consumers demand for their product needs always to
keep stocks of inventory at all times, since no organization can survive
without keeping stock and ensuring constant flow. The problem that emerges from
this is that of how best to ensure optimum supply without overstocking and
understocking. Inventory planning and control is argued to be an effective way
of overcoming these two extremes.
Kaduna
Refinery and Petrochemical Company however has been using these approaches in
its effort of maintain stock and constant flow of their products, yet it has
continuously experienced acute shortage of supplies. The question that arises
here is that, what techniques are employed by the organization’s expediting
network in ensuring that products needed arrives on time, and how effective is
the inspection techniques of the organizations it is an obvious hat most of the
problems that associated with inventory planning is lack of professionalism and
misapplication store responsibility that is shortcoming has a big challenges to
the entire organization. Above all the study is an to find solution to those
problem as it arise.
1.3 Objective
of Study
i)
To determine the needs for inventory
planning and control.
ii)
To determine the techniques used in
inventory planning.
iii)
To determine how to establish constant
flow of material in an organization.
iv)
To determine who is responsibility for
inventory planning in the organization.
v)
To determine the significance of
inventory planning in material availability.
1.4 Significance
of the Study
The
research is significant in many aspects, first the researcher will benefit
immensely as it is a basic requirement in partial fulfillment for the award of
Higher National Diploma (HND) in the department of Purchasing and Supply,
Kaduna Polytechnic. It will contribute to existing knowledge as student can use
it as a reference and understanding of inventory planning of serve as a
consultation by other researchers who may likely carry out the same research or
part of it work. It is also of the significance to the to the industry under
study whom may likely want to carried out similar research.
1.5 Scope
of the Study
The
work will be limited to inventory planning and it effect on products
availability, the researcher did not intend to go beyond the department under
study, the research will be conducted at KRPC within the following departments,
Material Management Department (MMD) operation departments and maintenance
department. These are traditional department that usually in needs of material
at KRPC located at Kachia Road, Kaduna. The researcher will use 10% of 200
populations across three department to justify her work.
1.6 Research
Questions
i) What
are the importance of inventory planning and control?
ii) What
are the techniques use in inventory planning?
iii) What
procedures are followed to ensure constant flow of inventory?
iv) Who
is responsible for inventory planning?
vi)
What are the significances of material
handling in inventory planning?
1.7 Limitation
of the Study
The
research is likely to be limited by a number of factors which may combine to
negatively affect the outcome. These limitations may be due to weakness of the
instruments use for data collection, here the respondents are limited by the
structure questionnaires.
Again
the attitude of the respondents may constitute a limitation as they may feel
reluctant to give information they consider sensitive.
The
research design as well as the statistical tools used also have limitation that
may affect the outcome of the study.
1.8 Definition
of Terms
This
aspect were design to explain all the languages and terminology that were use
during the exercise.
Inventory
– is defined as a list of all physical materials, stock items and equipment
that kept in the store.
Planning:
It can be explain as a futurist activity that bridges that gap between
initiating of an idea and the occurrence of the even itself. It means deciding
in advance what to do when, how and by whom, it is therefore form relation of
future course of action.
Control:
In its simplest form, control is about making sure the objectives of the firm
are achieved.
Management:
It is the judicious use of personal or organizational resources of the
achievement of predetermined goals.
Product:
Bundle of an items that provide satisfaction manufacturing output or performed
services.
Economic Order Quantity (EOQ):
This is a calculated ordering quantity than organization should order at any
point in time.
Buffer Stock:
Is a situation where stock (safety) is held to meet unexpected demand.
Store:
It can be defined as an isolated place where all kind of working and non
working types of material such as equipment, spare parts are kept for safety
and onward usage.
Stock Control:
Is defined as the means by which material of the correct quantity is made
available as at when required with the regards to the economy in storage and
ordering cost, purchases price and working capital.
ABC Analysis: Is
a system of stock control which basically analyze the stock by their important
and value where a smaller volume of material cost and can result into production
stoppages.
Receipt of Stock:
This is a document or stock receipt which involve all the material and item
supplied to the store whether from internal or external supplies.
Replacement Issues: These
are issues from replacement items/equipment and suppliers which has been broken
or how warned out or gone obsolete.
Stock Discrepancies:
This is defined as the disagreement between the physical and stock records.
Pre-Production Stock: This
comprise or part and material purchased from outside the organization to be
manufactured into products.
Post Production Stock:
They can also be described as finished products held either at the factory or
at warehouses and distribution centre elsewhere.
Inventory Control:
This is the presentation of an adequate and balance inventory of material
supplied within a minimum invest, so as tor educe storage and handling cost.
Provisioning:
It can be seen as the process of determining in advance requirement of material
taking into consideration, the amount of stock in hand at any time will be in
accordance with the stock control policy.
Cyclical Provisioning:
These involve examining either physical stock or stock records for a particular
class by commodity at a regular interval and taking simultaneous action or call
the items required replacement.
Discrepancies:
Discrepancies refers to the difference between physical stock/items and the
document records either as a result of surplus or shortage usually after
stocktaking.
Redundancy:
This is when quantity of an item in stock is more than reasonably necessary to
provide an adequate services to production or operations activities in which
the excuse is said to be redundant.
Obsolete:
This refers to when an item is going out of use but not yet completely
unusable.
Obsolescence:
When an item is no longer usable by the business concerned because of the
change in operational practice or method of production.
Material:
These are component spare, raw material are kept in store.
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