THE ASSESSMENT OF INVENTORY KEEPING METHODS AND IMPACT ON STOCKS AVAILABILITY IN A MANUFACTURING COMPANY

Abstract

This study was on the assessment of inventory keeping methods and impact on stocks availability in a manufacturing company. Three objectives were raised which included: To determine to what extent the ineffective management of inventory in Kasapreko company limited has caused low productivity in the company, to ascertain whether the company has suffered from poor management and control of inventories and to find out the relationship between inventory keeping and stock availability in Kasapreko company limited. The sample size used for this study was 52 out of 500, using a systematic random sampling. However, having analyzed the data the following are the findings which were deduced from this study

Chapter one

Introduction

1.1Background of the study

Inventory constitutes a major portion of current assets especially in manufacturing companies and retail/trading firms. In order to maintain inventory levels of such magnitude, huge financial resources are committed to them (Mittal, 2014). As such, inventory also constitutes a major component of working capital. To a large extent, the success or failure of a business depends upon its inventory management performances. Inventory management, therefore, should strike a balance between too much inventory and too little inventory (Gupta & Gupta, 2012). The efficient management and effective control of inventories help in achieving better operational results and reducing investment in working capital. It has a significant influence on the profitability of a concern thus inventory management should be a part of the overall strategic business plan in every organization (Gupta & Gupta, 2012).

Inventory plays a significant role in the growth and survival of an organization in the sense that ineffective and inefficient management of inventory will mean that the organization loses customers and sales will decline. Prudent management of inventory reduces depreciation, pilferage and wastages while ensuring availability of the materials as at when required (Ogbadu, 2009). Efficient and effective management of inventories also ensures business survival and maximization of profit which is the cardinal aim of every firm. More so, an efficient management of working capital through proper and timely inventory management ensures a balance between profitability and liquidity trade-offs (Aminu, 2012). Specific performance indicators have been proved to depend on the level of inventory management practices (Lwiki et al., 2013

Inventory management is recognized as a vital tool in improving asset productivity and inventory turns, targeting customers and positioning products in diverse markets, enhancing intra and inter-organizational networks, enriching technological capabilities to produce quality products thereby imparting effectiveness in inter-firm relationships. Proper inventory management even results in enhancing competitive ability and market share of small manufacturing units (Chalotra, 2013). Well managed inventories can give companies a competitive advantage and result in superior financial performance (Isaksson& Seifert, 2013). Management of inventory is also fundamental to the success and growth of organization as the entire profitability of an organization is tied to the volume of products sold which has a direct relationship with the quality of the product (Anichebe&Agu, 2013)

Inventory plays a major role in the operation of many businesses and manufacturing companies. In manufacturing, inventories of raw materials allow companies to operate independently of their sources of supplies. Day to day operation is not dependent on deliveries from supplies since stock of the necessary materials is maintained and used s needed. Without inventory control, millions of naira could be lost year because of non accountability of stocks and inaccurate checks and balances.

The process of control and management of inventory is a very important factor in the success or failure of any business for example, little stock will result in stock out which will disrupt the production distribution cycle that is crucial to the survival of all manufacturing companies while too much stock will tie down the resources of a company. Poor or inadequate inventory management can present a serious challenge to the productive capacity of a manufacturing organization. In addition to raw materials and finished goods, many companies also maintain items of assets, property, inventories of work in progress, office supplies, business firms and general operation supplies.

Considering the large sum of money that is committed to the stocks of raw materials, work in progress and finished goods, it is therefore of paramount necessity that these stocks be managed efficiently and effectively in order to avoid the jeopardizing of the profit position of the firm

In inventory, there is an optimum level therefore inadequate inventory causes loss of sale and disrupts the production process while excessive stock level leads to unnecessary carrying cost and obsolescence or spoilage risks. According to Charles T. Horngren (2007), the optimum inventory. Level lies between the inadequate inventories and the excessive inventories. Inventory management aims at maintaining an optimum inventory level that will be carried at the least cost.

Statement of the problem

Stock management which  is the function of understanding the stock mix of a company and the different demands on that stock is a very crucial for the survival and growth of the organization in view of the fact that huge amount is invested in inventory. Stock demands are influenced by both external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level. Stock control, otherwise known as inventory control, is used to show how much stock you have at any one time, and how you keep track of it. It applies to every item you use to produce a product or service, from raw materials to finished goods. It covers stock at every stage of the production process, from purchase and delivery to using and re-ordering the stock. Efficient stock control allows you to have the right amount of stock in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.
The problems seen in the course of this study are as follows:-

1. Ineffective management of inventory in the manufacturing company specifically Kasapreko company limited
2. Loss of sales or business of the company as a result of insufficient inventories of finished goods.
3. Low productivity in the manufacturing company as a result of poor inventories model used by the company
4. Poor management and control of inventories in the manufacturing company.

Objective of the study

The objectives of the study are;

1. To determine to what extent the ineffective management of inventory in Kasapreko company limited has caused low productivity in the company
2. To ascertain whether the company has suffered from poor management and control of inventories.
3. To find out the relationship between inventory keeping and stock availability in Kasapreko company limited

Research Question

The following research question will be formulated;

1. Does effective inventory control ensure continuous production of goods in Kasapreko company limited?
2. Has effective inventory control made a significant impact on the manufacturing company?

• What is the relationship between inventory keeping and stock availability in Kasapreko Company limited?

Research Hypotheses

The following research hypotheses were formulated;

H0: there is no ineffective management of inventory in Kasapreko company limited has caused low productivity in the company

H1: there is ineffective management of inventory in Kasapreko company limited has caused low productivity in the company

H0: there is no state of inventory management in the Nigerian manufacturing company especially Kasapreko company limited

H2 there is state of inventory management in the Nigerian manufacturing company especially Kasapreko company limited

H0:  there is no relationship between inventory keeping and stock availability in Kasapreko company limited

H2:  there is relationship between inventory keeping and stock availability in Kasapreko company limited

 Significance of the study

The significance of this study lies on the fact that with improved inventory control and management in manufacturing companies, the following persons may benefit from it:

It will be significant to manufacturing companies, firms and businesses as it will enable them keep an adequate inventory control and ensure that they do not run out of stock or have excess stock which can endanger their liquidity position. It will also help to meet consumer’s demands or quest. It is also important to the government as it will help to reduce waste of investment inventory. It will also help lecturers to really know the importance of inventory control so that they will be able to impact it on their students. This study will also reveal the relevant methods to be used in preventing mismanagement; it will also improve stock control which has led to the mismanagement and unproductively of materials

Scope of the study

The scope of the study covers the assessment of inventory keeping methods and impact on stocks availability in a manufacturing company. The study will be limited to

Limitation of the study

Some limitations and factors in this research study are as follows:-

1. The time required for the research and the submission of this work is very short and the researcher was unable to go through all manufacturing companies.
2. Financial constraints:-Finance which is the most importantresource for this work was not readily available.
3. Limited exeat:-Due to the fact that exit is very difficult to get inschool, proper research was not carried out and this affected the integrity of the results achieved.

iv.        Kasapreko company limited -operative attitudes of some of my respondents:- Themanagement of Kasapreko company limited prohibited its employees from giving out information about the company to outsiders without adequate permission from the management and even when this permission was obtained at the long run, many vital information were not revealed because they were regarded as the privacy of the company.

Definition of terms

INVENTORY: This is a record of a business’current assets. It can also bedescribed as the merchandise or supplies held or in transit at a particular point in time

STOCK AVAILABILITY: Stock availability is a straightforward concept: It’s the degree to which a business has enough inventory of each item to meet customer demand

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