INVENTORY MANAGEMENT PRACTICE AND CORPORATE PERFORMANCE (A CASE STUDY OF NIGERIA AGIP OIL COMPANY (NAOC), PORT HARCOURT.
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INVENTORY MANAGEMENT PRACTICE AND CORPORATE PERFORMANCE
(A CASE STUDY OF NIGERIA AGIP OIL COMPANY (NAOC), PORT HARCOURT.
Inventory management practice and corporate performance: a case study of Nigeria Agip Oil Company Ltd, Port Harcourt has been adequately investigated. Data was obtained through the use of questionnaire and personal interviews of the sample population. The hypotheses were tested using eh regression analysis statistical technique. The findings of the research shows that lack of adequate budgeting, falsification of records, poor administration/control of resource, high set up costs etc are some of the factors affecting the smooth implementation of inventory management practice in organization. The study has also identified the poor state of facilities/infrastructure, poor education/ training of personnel, poor findings, and inefficient management of material’/inventory processes as some of the factors that affects the implementation of inventory management practice in the organization studied. The research has established clearly that there is a significant relationship between the effective implementation of inventory profit and improved product/service quality. The study has recommended amongst others that modern production techniques should be used in the management of inventory practice. Finally, the study has recommended that further research should be on investigating the impact of capacity planning on corporate growth: a survey of telecommunications firms in Port Harcourt.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
1.0 Introduction 1
1.1 Background of the study 1
1.2 Statement of the problem 1
1.3 Purpose of the study 4
1.4 Research question 5
1.5 Research hypotheses
1.6 Significance of the study 6
1.7 Scope of the study 7
1.8 Limitation of the study 8
1.9 Organization of the study 9
1.10 Definition of terms 9
1.11 Summary 10
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction 14
2.1 The meaning of inventory 14
2.2 The reasons for maintaining inventory 14
2.3 An overview of the functions of inventory 19
2.4 Inventory costs 23
2.5 requirement for effective inventory management 25
2.6 objective of inventory control management 30
2.7 an overview of the models of inventory management 32
2.8 the benefits of effective inventory management practice in
CHAPTER THREE: METHODOLOGY
3.0 Introduction 41
3.1 Research design 41
3.2 Sample procedures 42
3.3 Questionnaire design 44
3.4 Data collection method/techniques 44
3.5 Data analysis techniques 45
3.6 Operational measures of variables 46
3.7 Test of validity and reliability 48
4.0 Presentation and analysis of data 49
4.1 Analysis of research questions 50
4.2 Test of research hypotheses 51
4.3 Hypothesis 1-3 56
CHAPTER FIVE: DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Discussion of findings 84
5.2 Conclusion 84
5.3 Recommendations 87
5.4 Further research 89
1.1 BACKGROUND OF THE STUDY
Effective inventory management is an indispensable organizational function for any organization that is desirous of boosting its corporate performance. However, the practice or method with which inventories are managed differs from one organization to another. Therefore, for any organization to achieve success in inventory management, sound inventory management practice must be involved and effectively implemented. Basically, inventories are an organization’s stock of goods and organizations are known to maintain different types of inventories to suit their production purpose Thompson and Thompson (2002).
Perhaps this explains why Stevenson (1999) argues that “many of the items of firm carries in its inventory profile actually related to the kind of business that it is engaged in” particularly, according to Chase et al (2004), “manufacturing firms carry supplies of raw materials, purchased parts, and partially finishes goods as well as spare parts for machines, tools and other supplies”.
Similarly, Melynic and Denzler (1996) maintain that inventory refers to a company’s ‘stock of any item or resource necessary for production or provision of service”. The implication is that organizations must necessarily maintain inventories of all sorts in order to carry out their production.
A critical review of previous studies in the area of inventory control and management, reveals quite clearly that as far back as early 1970’s, inventory control and management had long been recognized as a major plank for organizational success. Inventories became recognized as “physical resources that firms hold in stock with the intent of either selling it or transforming it into a more valuable state” Scott (1986).
Similarly, in the 1980’s, inventories were further classified into more specific types such as “raw materials, inventories, working in process inventories and finished goods inventories” Penedo (2004).
However, in the 1990’s, significant knowledge and awareness became evident leading to the classification of inventory into ‘transit, buffer, seasonal, Decoupling and Sepculative inventories” Stunta and Douglas (20070.
Presently, emphasis on inventory control and management in the 21st century has gone beyond mere classification of inventories into different types of include accounting and financial functions such as the verification of reports, analysis of reports for decision making etc Imaga (2006).
Consequently, emphasis on inventory management practice implies emphasis on all “the control measures initiated by organizations to ensure that the firms overall objectives are effectively achieved”. Infact, as Macodo (2001) puts it, “inventory management practice ultimately shops the direction that a firm intends to take especially in the availability of accurate and reliable data necessary for effective management decision.
Thus, for organizations that are desirous of boosting their corporate performance and ultimately improve organizational productivity, it is necessary that effective inventory management practices are implemented. It is therefore the cardinal objective of this research work to critically investigate inventory management practice and corporate performance.
1.2 STATEMENT OF THE PROBLEM
Organizations that do not have clearly spelt out inventory management practice are doomed for failure. These organizations are likely to experience stagnation in growth, poor quality of products/services, poor organization, wastages and inability to promptly respond to customers’ demands and expectation amongst other.
Thus, there is no doubt that organizations that are able to effectively implement inventory management practice would ultimately boost its corporate performance. Nonetheless, the absence of functional inventory management practice in most organizations have largely resulted in the following; wastage of productive resources, mismanagement, falsification and manipulation of records, abuse of public trust, misapplication of funds, embezzlements, distortion of financial records/statement, poor implementation of inventory policies, poor stocking, administration and control of organizational resources etc.
Therefore, the challenge facing productive organizations lies in their ability to effectively formulate and implement practicable and result oriented inventory management practice such as stocking and maintaining the right quantity of productive resources, good record keeping and adequate budgeting and control amongst others. The expectation is that if these measures are effectively implemented, then corporate performance can be enhanced.
1.3 PURPOSE OF THE STUDY
The purpose of this study is to investigate inventory management practice and corporate performance.
1.4 RESEARCH QUESTIONS
The following research questions are considered necessary for their research work.
1. What factors affect the effective implementation of inventory management practice in your organization?
2. to what extent does the effective implementation of inventory management practice improve corporate performance?
3. to what extent does the effective implementation of inventory management practice improve corporate profit?
4. to what extent does the effective implementation of inventory management practice improve product/service quality?
1.5 RESEARCH HYPOTHESES
The following hypotheses are formulated based on the stated research questions above:
H01: There is no significant relationship between effective implementation of inventory management practice and improved corporate performance.
H02: There is no significant relationship between effective implementation of inventory management practice and improve corporate profit.
H03: There is no significant relationship between the effective implementation of inventory management practice and improved product/service quality.
1.6 SIGNIFICANCE OF THE STUDY
There is no doubt that a lot of research work has been done in the area of inventory control and management. Infact, research evidence are documented in the works of Mac’odo (2001), Telsang (2002), Chase et al (2004), Umoh (2005), Penedo (2004), Imaga (2006), as well as Benjoko (2007) amongst others. Nonetheless, there is very little research evidence on inventory management practice and corporate performance. It is therefore based on this gap in literature that this research work is being undertaken.
The expectation is that the research evidence that will be generated form this research work will assist greatly in bridging the existing gap in literature. It is expected that this research work will be highly beneficial to the following stakeholders; inventors, employers, entrepreneurs, government industrialists, employees amongst others.
Indeed, it is expected that in the end that organizations through the findings of this research work will be able to improve significantly their inventory management practice with a view to achieving improve corporate performance.
1.7 SCOPE OF THE STUDY
This study is a case study of Nigeria Agip Oil Company Limited (ANOC), Port Harcourt. This study will involve randomly selected personnel to be drawn across the three levels of management top, middle and lower. The respondents will be drawn from the different departments and units of the organization. The objective is to obtain a broad view of the sampled population so as to effectively carryout the research work.
1.8 LIMITATION OF THE STUDY
A research work of this native is bound to be affected by a lot of factors. These factors include; inadequate time, inadequate finance/funding, non-co-operation of some of the respondents, poor accessibility of some of the respondents etc.
Inspite of these however, the belief is that the findings of this research work will be beneficial to all the stakeholders government, entrepreneurs, industrialists, inventors, employees and the organization itself. The expectation is that the findings of this research work will further seek to establish a relationship between inventory management practice implementation and corporate governance.
1.9 ORGANIZATION OF THE STUDY
This research work will be organized into five (5) chapters.
Chapter one will deal with the introduction of the research. It includes the context of the problem, statement of the problem, purpose of the study, research question, research hypotheses, and significance of the study, scope of the study, limitations of the study as well as definition of terms. Chapter two will deal with the review of related literature. Chapter three will deal with the methodology of the research. It includes; research design sampling procedure, questionnaire design, data collection method, technique, test of validity and reliability, operational measures of variables as well as data analysis technique. Chapter four will deal with the presentation and analysis of data. Chapter five will deal with the discussion of findings, conclusion, recommendations and further research.
1.10 DEFINITION OF TERMS
The following key terms as used in the opening chapter of this research work are defined operationally as follows:
It is defined as the end result of organization’s work processes and activities.
It consists of measures put in place by an organization or unit to safeguard its operation and keep costs at its minimum.
It refers to the attainment of the right level of inventory at very minimal.
The opening chapter has been very in depth. An introduction into the subject matters has been done. Indeed, it has been established that organizations that are desirous of significantly improving their performance must as a matter of urgency improve upon their inventory management practices.
It is expected that organizations that pursue improved measures and strategies of inventory management will ultimately be able to boost their overall performance in their chosen areas of investment.