THE EFFECT OF STOCK CONTROL PROFIT MAXIMISATION IN MANUFACTURING COMPANY (A STUDY OF NIGERIAN BOTTLING COMPANY LIMITED, KADUNA)
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THE
EFFECT OF STOCK CONTROL PROFIT MAXIMISATION IN MANUFACTURING COMPANY
(A
STUDY OF NIGERIAN BOTTLING COMPANY LIMITED, KADUNA
ABSTRACT
This project is centered on the importance of
stock control and management in business organization to enable the research
obtain relevant materials and information for the purpose of analysis and
conclusion personals interviews and the use of questionnaire were employed
together, information from various department in Nigerian Bottling Company
Kaduna. The use of text books to review related literate was also employed. The
study also evaluate the extent the company complies with accepted methods or
(models) like economic order quantity, re-order level, safety stock etc. the
essence of this study have been to study the problems. The researcher reveals
that for erective control of stock, the company has a department solely
responsible for inventory control thereby reducing the operational cost of the
business. It also facilitate easy and maintenance of all documents. It was also discovered that
the company does not apply scientific method of economic order quantities to determine
re-order level or quantities. Based on the findings, it was recommended that
the organization should introduce the use of computer to enable it keep proper
and up to date stock record at all times. It was recommended that the entire
system should be made to involves all functional managers directly affected by
the stock control system, will facilitate on understanding of the system and
its effective implementations.
TABLE OF CONTENT
Title
page i
Declaration
ii
Approval
iii
Dedication
iv
Acknowledgement
v
Abstract
vii
Table
of content viii
CHAPTER ONE
1.0 Introduction
1
1.1 Background of the study 1
1.2 Statement of the problems 5
1.3 Objectives of the study 6
1.4 Formulation of hypothesis 7
1.5 Significance of the study 7
1.6 Scope of the study 9
1.7 Limitation of the study 9
1.8 Historical background of the firm 9
1.9 Organizational structure of the study 10
1.10 Definition of terms 11
CHAPTER TWO
2.0 Review
of Related Literature 12
2.1 Introduction 12
2.2 Definition of Basic concept 15
i. Stock Control 15
ii. Profit Maximization 18
iii. Manufacturing industry 24
2.3 Necessity for holding stocks 26
2.4 Authorization of stock issues 27
2.5 Effects of over stocking and under stocking 30
2.6 Advantages of efficient stock control
systems 32
2.7 Setting up inventory control 32
2.8 Inspection and receipt of incoming stock 34
2.9 Responsibility for stock control 35
2.10 Economic order quantity (EOQ) 42
2.11 The formula approach 42
2.12 Requirement of material control method 48
2.13 Training of store keepers. 49
CHAPTER THREE
Research Methodology
3.1 Introduction 51
3.2 Method of Data collection 51
3.3 Problems of Data collection 52
3.4 Types of data 53
i. Primary data 53
ii. Secondary data 54
3.5 Population
of study 54
3.6 The
study sample 55
3.7 Description
of the questionnaire 55
3.8 Research
instruments 56
3.9 Method
of testing the hypothesis 57
CHAPTER FOUR
4.0 Data
presentation analysis and interpretation 58
4.1 Introduction 58
4.2 Presentation of data 58
4.3 Analysis of data 60
4.4 Testing of hypothesis 67
4.5 Summary of findings 67
CHAPTER FIVE
5.0 Summary,
Conclusion and Recommendation 71
5.1 Summary of the study 71
5.2 Conclusion and Recommendation 72
5.3 Recommendations concluding remark 73
Bibliography 75
Appendix I 76
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND
OF THE STUDY
Stock
is frozen cash and as such should be given the same if not more priority than
liquid cash. Firms need stock in one form or the other in order to carry out
its day-to-day activities and as such, the need to have the stock at the
required time, quantity, quality and under proper condition can never be over emphasized
more often than not, organization hold in order to have ready supply of
materials from the store house to guard against future increase in price, enjoy
quality discount, prevent shortage of supply from its various sources etc.
since the ultimate goals of any business set up is to make profit, then, such
profit can only be realized through incurring the least affordable cost while
expecting huge returns.
Inventory
is major area of asset deployment which should be required to produce, minimum
return on capital investment since it incurs cost so there is a great need to
minimize such cost and control stock with respect to its receipt, storage and
issue. When an organization is declining on what is to be held in stock, it is
of necessity to consider what item are to be used, and produced by the
organization in question and then decide which items is stocked. Stock have
been noted to be life blood of organization and all such efforts are always made
to see that efficient stock control system and equipments are invented to cater
for the various items held in stock.
In
order to minimize stock holding cost via efficient stock control measure,
experience and qualified staff should be employed to see to such matter. In public
sector of the economy today, stock control is nothing to write home about, you
find stock idle in the store house, and some are even deteriorated due to lack
of storage facilities and staff with the little or no knowledge with regard to
store management.
However,
in the private sectors where individual are the owner of the business, the
reverse is the case because stock, no matter its form is given attention by
well trained stoppers, under the appropriate conditions after all, huge sum of
money have been sunk in the acquisition of such stock items and to what much is
given much is or will be expected.
Organization
in recent times have been facing one problem or the other which in most cases
lead to early liquidation. An
investigation have revealed that most often than not, the whole problem
normally arises from inefficient management of stocks at one stage or the other
both within and out side the organization, you will find improper or lack of
inspection facilities, poor and inadequate storing equipments, bad movement of
stock, just to mention a few with most of these thing present in organization,
there is a great possibilities of such an organization having problem thereby
leading to closure.
Shortage
arises due to lack of effective control stock among others, such as
deterioration, reducing obsolescence obsolete, pilferage receipt of the wrong
specification of stock stoppage in production arising from interior materials into
the production term cost thousand or millions of naira. But if stock are been
monitored with high accuracy such problem will be satisfactorily reduce or
totally controlled.
According
to the stores recently have been make to reduce this cost while still
maintaining a high degree of control large firm have introduced a system of
analyzing stock by various categories so as to ensure that adequate attention
can be paid to important item.
The
main theme of this project is to bring to lime light the performance
of beverage industry in Nigeria
In
view of the above, we will have a glance on some specific areas further
understanding. Firstly the writer intends to discuss analysis of stock control
procedures in beverage industry.
Stock
comprises a major part of a companies current asset, and can be classified as
raw material, work in progress (or work in process) and finished goods. Its
function are centered on stock management. At time firms could not reach the
peak of its operation because of major lapse in the area of stock management,
it was examined that the management tend to ignore the aspect of stock control
in relation to inventory level mostly, some firm liquidate due to ineffective
stock management, which was made known in the introduction part, this problems
brings about frequent production interruptions and failure to meet delivery
commitment. When a firm experience these, it obviously result to tie-up of the
firms funds and loss of profit which could gradually lead to shut down of
plant, and it affect the society as a whole (massive retrenchment). In essence
stock for smooth production and to ensure the maintenance of holding stock that
forms part of the smooth running of the business.
1.2
STATEMENT
OF THE PROBLEM
In
the past, many companies witnessed considerable lapse and increasing changes in
management disciplines of stock control an important element in the management
of stock.
1.
Stock management or management of stock is
one of the problem business faces.
2.
The development of analytical techniques and
computer capability now permits more sophisticated analysis of stock problems.
These two phenomena have combined to transform stock control into a critical
function requiring professional skills.
Most
companies still adopt the oil and crude methods of stock control, the use of
guess work and intuition, while others do not even make any attempt to minimize
investment in inventory in the name of the pilling?
Also,
companies that stock a strategic number of item do not segregate the high value
of stock selective and efficient control these, no doubt have contributed to
high operating cost and hence less profit recorded by most manufacturing
companies.
1.3
OBJECTIVE
OF THE STUDY
In
studying or explaining the various factors affecting efficient stock control
system in the firm under study, the following objective have been recognized
and taken into consideration.
i.
Determination of whether any relationship
exist between total inventory cost and sales?
ii.
Ascertain the effectiveness and efficiency of
the firms stock control system and reduction in operating costs.
iii.
Avoid excessive holding cost e.g. cost of
storage, handling, insurance recording and inspection etc.
iv.
Avoidance of unnecessary tie up? of the firms
and loss of profit.
v.
Providing recommendations for improvement
where necessary.
1.4
FORMULATION
OF HYPOTHESIS
Ho: Effective stock
management does not minimize the operational costs of the firm
Hi: Effective stock
management minimizes the operational costs of the firm.
1.5
SIGNIFICANCE
OF THE STUDY
The
aim of any (management) or manager as regards stock management should be to
avoid excessive and inadequate level of stocks and to maintain sufficient stock
to avoid the dangers of over and under investment in stock. The study
therefore, will be of immense contribution towards helping management or
manager to determine this by considering the relationship between stock levels
and both sales volume and gross margin realized.
The
study will also help the manager in effective stock management by
1. Ensuring
an uninterrupted supply of materials to facilitate smooth production.
2. Maintains
sufficient stock for periods of short supply and anticipate price changes.
3. Maintain
adequate stocks for smooth sales operations and efficient customer services.
4. Minimized
holding and ordering costs
5. Control
investment in stocks and keep it at a satisfactory level.
1.6
SCOPE
OT THE STUDY
The
scope include a general review of the practices of stock control in beverage
industry a study of Nigeria Bottling Company (NBC) Plc.
1.7
LIMITATION
OF THE STUDY
The
being an analytical study of practice of stock control, there was some of the
constraint of obtaining some of the information required from the staff, added
to these were lacks of industrial average for comparative analysis and shortage
of time.
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