EVALUATION OF USEFULNESS OF INVENTORY MANAGEMENT (A STUDY OF SOME SELECTED BEVERAGE COMPANIES)

ABSTRACT

It has been generally accepted that for any organization to produce and satisfy its stakeholders,  such  organization  must  have  good  management  team  that manages  the  resources of  the  organization using  some  laid  down  rules.  In manufacturing concerns, inventories constitute a greater proportion of assets. The management of inventories usually involves a lot of problems which range from the right tome to place order to maximization of profits for the stakeholders. Thus, the research undertaken this research work entitled. Evaluation of usefulness of inventory management. A study of some selected Beverage Companies including: Coca-Cola Nigeria Plc, Pepsicola Nigeria Plc and Nigeria Mineral Water Industries Limited. The objective of this work includes: To determine whether profit is maximized and cost minimized due to the application of the efficient inventory management. To  determine  also  whether  manufacturing concerns in  our  country  manage inventories effectively by using inventory management techniques e.g. Economic Lot Size, Just-in-Time etc. Data were collected using questionnaire method, and were analyzed using chi- square (X2) Pearson product moment, correlation co-efficient (r) and regression analysis. The result therefore shows that they place order at the right time and right quantity overcoming the setbacks of lead time. The companies also minimize costs of holding inventories and maximize their profits. The findings showed that manufacturing  concerns  in  Nigeria  meet  the  target  requirement  of  their customers, stakeholders, and the society where they operate. The research recommends that: all staff of the manufacturing concerns should be made to have the thorough knowledge of inventory management as this will enable them to work towards their stock protection and cost minimization. The manufacturing concerns should get the recent developed software on inventory management and use to update their knowledge of inventory management on regular bases.

CHAPTER ONE

1.1    INTRODUCTION

Every Organization has to its own purpose of operation. The level of actualizing the objectives or goals determines how efficient and   effective  that   organization  is.   But  for   the  goals   of   any organization to be achieved, such entity must observe some stipulated or laid down principles for its effective performance. When these rules are followed simultaneously, then the usefulness of such principles or concepts will be achieved.

In general term, management has  been recognized as  that which plans, direct and as well control the effective use of organizational resources to achieve its objective.

Akpala (1987) as in Onuoha (1991:4-5) defines management as the process of combining and utilizing or of allocation of organization’s input (men, materials and money) by planning, organizing, directing and controlling for the  purpose of  producing output (goods and services) desired by the customers so that the organizational objectives / goals are accomplished.

In evaluating a topic as this, one ma start by analyzing the key words in it, such as usefulness, inventory, and management as they relate to the manufacturing concerns.

Something is said to be useful when it is achieving the best objective, purpose aim or goal of its wage. And also when using the laid down rules and resources available, achieves the best desired goals without wasting the available resources.

According to Ama (2001:470), inventory is the stock o goods a firm is producing for sale and the component that make up the goods.

Again, Hilton (1994:13-14) defines inventory as: an itemized list of goods or valuables with their estimated worth, specifically, the annual accounting stock taken in any business.

Therefore, from the above definitions inventory is the totality of all  the  stock,  which  includes:  raw  materials,  work-i-progress and finished goods that enable an organizational to produce. It could also said to be the total amount of goods and or materials contained in a store or factory at any given time.

But  the  question  is:   are   there  ways  of   handling  these inventories for the purpose of achieving the best thereof? The answer is simply yes! The inventories must be managed and controlled in order to achieve their usefulness.

In doing this, the production manager, purchases manager and the sales manager of the organization always put heads together to design suitable ways of handling the level of stock purchases, production stock requirement and sales using some feedbacks to exercise controls in order to synchronize result with the standard set.

According to Lucey (1989:29), inventory management is the system used in a firm to control the firms’ investment in stock. The system involves recording and monitoring of stock levels, forecasting future demands and deciding when and how to order with overall objective of minimizing in total, the cost associated with stock.

However,   inventory   management   is   the   ability   of   an organization to use all  the techniques at its  disposal to hold the quantity  of  stock  (inventory)  that  will  be  enough  to  produce  its required goods needed by the customers at the appropriate time and at least cost to the organization with the view to maximize profit.

Thus, Ama (2001:475) states the following as the usefulness of inventory management to the organization.

–        Reduction in cost incurred due to inventory holding.

–        Maintenance  of  certain  level  of  customer  services  that  are excellent.

–        Sustenance of a large size of inventory for efficient and smooth production and sale operation.

–        Maximization of profit.

–        Sustenance of minimum investment level in inventories.

–        Avoidance  of  risk  of  losses  due  to  theft,  frauds,  waste  or carelessness due to large stock holding.

–        Production  of  adequate  and  accurate  information  regarding inventory to management of effective decision making about the firm.

–        Boost of customers holding.

Organizational resources ate always limited in supply ad the resources are best utilized when wasteful organizational practice(s) are avoided. It is therefore, the aim of this work to evaluate how beverage companies as part of manufacturing concerns have been avoiding wastages in inventory by using efficient inventory management and control techniques like Economic Order Quantity (EOQ),  Just-In-Time  (JIT),  Quick  Response  Manufacture  (QRM), among  others  to  render  efficient  services  to  their  customers, maximize their profits, a avoid production hold-ups in factories ad eliminate risk  of  liquidity crunch, etcetera. To  achieve the  above objectives, some beverage companies like Seven Up Bottling Company, Limca Bottling Company (Eastern Bottlers LTD) and Coca- Cola Nigeria Bottling Company were selected for this study.

1.2 STATEMENT OF PROBLEM

The main problem of this research work is that the inventory management techniques that operate efficiently in other countries of t eh world like Britain, Japan, United States of America; among others do not do so in Nigeria local environmental factors through the needs of the models to operated effectively. The specific problems are as follows:

–        Cost of obtaining and holding inventories is always high and this  affects the  price  of  the  finished  products the  concerns thereby making it difficult for the common people to get or buy them.

–        That manufacturing concerns due to poor transportation system and unreliable delivery services that hold well in Nigeria find it

difficult to determine or forecast workable lead time and inventory levels that can enable them place order at the right time and get replenishments.

–        Due  to  production  hitches  suffered  by  the  manufacturing concerns, their customers who are the suppliers to   the final customers find it difficult to obtain their required orders especially during festive periods like Christmas and New years, among others,   thereby causing scarcity of the products and increase in price.

–        It is difficult in Nigeria for the operators in the manufacturing concerns to determine the quantity of inventory to order which is economical due to variations in environmental factors such as price changes or products due to constant petroleum price fluctuations that affect other facets of economic production.

The above problems among others have made the researcher to embark on this work to evaluate how efficient the inventory management techniques are operating in the manufacturing concerns in Nigeria.

1.3    OBJECTIVES OF THE STUDY

The general objective of this work is to evaluate the application of inventory management in Nigeria manufacturing concerns, so as to know whether they operate efficiently like in other countries of the world such as Japan, United States of America and Britain among others.

While the specific objectives are to:

(a)    Determine if manufacturing concerns place orders at the right time and obtain quantities of inventories that are economical through the use of inventory management.

(b)    Determine  whether  the  companies  do  not  have  enough inventory size or quantity that help them have hitch-free/smooth production and sales to their customers.

(c)     Ascertain whether the use of inventory management enables the concerns to reduce the cost of inventories ad thereby improve on their liquidity.

(d)    Ascertain whether the companies maximize their profit for the full benefits of their stakeholders.

(e)    Assess if the organizations render efficient services to their customers through prompt delivery of their orders at attractive prices.

1.4    RESEARCH QUESTIONS

For a meaningful research work to be carried out on the usefulness of inventory management in manufacturing concerns, a number of questions must be asked and answered. The following are therefore, some of the research questions:

(i)   Do  manufacturing  concerns  use  efficient  inventory management techniques such as: economic order quantity (economic lot size) and just-in-time, among others?

(ii)  Does economic lot size technique in particular assist manufacturing concerns to hold sustainable size of inventory, for efficient and smooth production?

(iii)    Has the inventory management and control techniques help them to minimize their costs of inventories?

(iv)  How have the manufacturing concerns contributed to the economic growth of their host communities in particular and the country, Nigeria at large?

(v)     Does efficient inventory management help the manufacturing companies to maximize their profits?

(vi)    To what extent have the customers of manufacturing concerns received satisfactory services from the manufacturing companies?

These question will be structured in such a way that the respondents will state whether they strongly agree, agree or are neutral or disagree in their responses. The answers from these questions will form the basis of the analysis.

1.5 STATEMENT OF HYPOTHESES

A  research hypothesis is  a  generalized and  verifiable statement about a state of phenomena which may be true or false.

According to Onu (1996:13), the validity of a hypothetical statement is subject to verification which must be based on adequate information on which decisions could be objectively based for either to accept or reject such a hypothesis. Thus, a research hypothesis is defined further as a rule of accepting or rejecting the validity of a statement on the basis of random samples from the chosen population.

Therefore, these research null hypotheses will be empirically tested in this research work.

1.      Ho:   Manufacturing   concerns   do   not   minimize   costs   of inventories through the  use of  economic lot size (economic order quantities).

2.      Ho: Just-in-Time (JIT), Economic Lot Size and Quick Response Manufacture (tools  of  inventory management) do  not  assist manufacture concerns to hold sustainable size of inventories for efficient and smooth production.

3.      Ho:    Economic    Lot    Size    (ELS),    Just-in-Time    material Requirement Planning (MRP) and Quick Response Management (QRM) tools  of  inventory management do  not help manufacturing concerns to maximize profit.

1.6    SIGNIFICANCE OF THE STUDY

Having gone through the statement of the research problem, the significance of this research work are as follows:

(i)      It will enable manufacturing concern to discover and maintain optimum level of investment in inventory.

(ii)     It will enable the manufacturing concerns attend to their social responsibilities as their hoist countries constitute part of their stakeholders.

(iii)    It will enable inventory managers to know the ideal quantity of stocks to order that is economical to the organization and when to order for it.

(iv)    It  will  assist the organizations to maximize their  profits and reduce their risk of liquidity.

(v)     It will enable the manufacturing companies obtain the right size of inventories that will always support their smooth and hitch free production and sales operations

(vi)    It  will assist the organizational managers know that level of inventory that will be kept to cover errors in forecasting the lead time or the demand during the lead time.

(vii)   Customers goodwill towards the organization will be maintained as it enables delivery committed to be met all the time.

(viii)  It will provide a base for other research works that might be carried out on stock management in any other sector.

(ix)    Lastly, it  will help reduce business failure in our society as inventory constitutes one of the core pillars of business operation.

1.7    SCOPE OF STUDY

This research work is intended to evaluate the usefulness of inventory management in manufacturing concerns but the field of manufacturing is very vast and for this reason the researcher based this study on some selected beverage companies in Nigeria namely: Coca-cola Nigeria PLC, Pepsi cola Nigeria Plc and Nigerian Mineral Water Industries Limited.

The  research also  x-rayed how the  usefulness of  inventory management has assisted manufacturing companies to reduce cost of inventories obtained the size of inventory that is economical and that supports hitch free production, maximize the profit for t he stakeholders  and  render  efficient  services  to  their  customers, etcetera.

1.8    LIMITATION OF THE STUDY

In conducting this research work, the researcher encountered some difficulties such as the following:

(a)    Secrecy: Manufacturing concerns as a principle always held tightly   to   their   methods   and   data   generated  from   their operations. This  is  perhaps  not  to  allow  people  know  their technical know-how, and their performances. They hold this view because they argued that they operate in a competitive industry. As a result of this, obtaining information from them. However, were some of the data needed cannot be supplied for security reasons; they were extrapolated from the supplied ones in order to prove the concept of this research work.

(b)    Finance: The researcher found it difficult to finance this work because of the attitude of manufacturing companies which in a bid to protect their information always use many strategies to cause somebody seeking for information from the to repeat as many times as possible in their office looking for a single item of data. Again, putting the assembled materials n the accepted standard cost much.

(c)     Paucity of Relevant Literatures: The concept of inventory and its management have been of old. But the way in which manufacturing  concerns  treasure  information  on  their inventories has made it almost difficult for relevant literatures to be seen easily on this area of study as compared in other fields. Because  of  this,  the  researcher  found  it  hard  in  obtaining relevant literatures while conducting this research.

However, the researcher laid his hands on were enough to evaluate and make conclusion on this topic.

Nevertheless, the researcher was able to surmount the above hurdles and at the end put up a  research work whose output is reliable, testable and verifiable at any standard.

1.9    DEFINITION OF TERMS

MANAGEMENT: The term management is used in various ways. It could refer to a group of people in an organization, or could also refer to the process of accomplishing a given task. Various scholars define management in various ways. However, management is the coordination of  an  organization’s resources aimed at  achieving a predetermined goal or objective.

INVENTORY: Inventory is the total amount of good and/or materials contained in a store or factory at any given time. The word inventory can refer to both the total amount of goods and the act o counting them.  Many companies take  an  inventory of  their  supplies  on  a regular basis in order to avid running out of popular items.

ECONOMIC ORDER QUANTITY (EOQ): A standard formula used to arrive at a balance between holding too much so too little stock.

FIRST IN, FIRST OUT: A system to ensure that perishable stock is used efficiently so that it doesn’t deteriorate. Stock is identified by date received and moves on through each stage of production in strict order.

JUST IN TIME (JIT): This aims to reduce costs by cutting stock to a minimum.

STOCK REVIEW: This is a regular review of stock. At every review you place an order to return stock to a predetermined level.

₦5,000.00 – DOWNLOAD FULL PROJECT DOWNLOAD FULL PROJECT Added to cart

---

---

---

---

Related Project Topics :