EFFECTIVE INVENTORY CONTROL AS A MEANS OF IMPROVING THE PROFITABILITY OF MANUFACTURING FIRM IN NIGERIA (A CASE STUDY OF EMENITE NIGERIA LIMITED, EMENE)
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EFFECTIVE INVENTORY
CONTROL AS A MEANS OF IMPROVING THE PROFITABILITY OF MANUFACTURING FIRM IN
NIGERIA
(A CASE STUDY OF
EMENITE NIGERIA LIMITED, EMENE)
TABLE OF CONTENT
CHAPTER ONE:
1.0
Introduction
1.1 Background
of the Study
1.2 Statement
of Problem
1.3 Formulation
of Hypothesis
1.4 Objective
of the Study
1.5
Significance of the Study
1.7 Definitions
of Terms
CHAPTER TWO
2.0
Review of Related Literature
2.1
Introduction
2.2 Functions of
Inventories
2.3 Costs
Associated with Inventory
2.4 Inventory
Valuation Methods
2.5 Nature of
Inventory Control
2.6 Inventory
control mechanisms/ Control
2.7 Inventory
Flow Circle
2.8 The Impact
of Effective Inventory Control
on Profitability of Firms
CHAPTER THREE
3.0 Research
Methodology
3.1
Introduction
3.2 Research
Design
3.3
Instrumentation
3.4 Procedures
for Data Collection
3.5 Population
of the Study
3.6
Determinations of Samples
3.7 Method of
Statistical Analysis
CHAPTER FOUR
4.0 Data
Analysis and Design
4.1
Introduction
4.2 Analysis of
Questionnaire Responses
4.3 Testing of
Hypothesis
CHAPTER FIVE
5.0 Summary,
Conclusion and Recommendation
5.1 Summary of
Study
5.2 Conclusion
of Study
5.3
Recommendations
Bibliography
CHAPTER ONE
1.0
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
Inventory control
refers to the management function concerned with the acquisition, storage,
handling and usage of inventory, so as to ensure availability of inventory when
needed, provide adequate cushion for contingencies and denying maximum economic
benefits and at the same time minimizing wastage and losses.
Independently, inventory purse can be defined as a quality of goods or maternal
in the control of the enterprises and hold for a time in its relatively idle or
unproductive state, awaiting its intended use or sale. It is equally identified
as stock on hand at a given time.
Control is necessary so as to minimize cost and at the same time keep our
services good enough so that an organization do not lose business. The control
and maintenance of inventory is a problem that is common to organization in
different sectors of the company. Inventory problems have proliferated as
technological ability to produce good in greater quantities and at a factor
rate. Cash invented in inventories could be used some where else for profit
making, debt servicing on dividend distribution. Management is therefore
becoming increasingly aware that the overall efficiency of company’s operation
is directly related to inventory situation existing within the company. The
real problem therefore has been in the determination of inventory level at
which many invested in the inventory will produce a rate of return higher than
it would if it had been invested in some other areas of business.
1.2
STATEMENT OF PROBLEM
The
issues of failure, poor quality products, “out of stock,” unnecessary delays in
and in extreme cases of shut down in some organizations can be attributed to
non-existence of effective inventory control system.
Most managers are ignorant of inventory control hence they fall victim of the
above listed circumstances. A few of them who are aware of usefulness of stock
control excel in their various business.
Inspite of these, effective inventory control has not been without a lot of
problems as observed by the researcher as follows:
1.
Most firms have no clearly identified inventory countries system.
2.
Most firms do not have enough money for keeping reasonable inventory.
3.
Most organization have little or no space for inventory. This affects the
number of products to produce and stock.
1.3 FORMULATION
OF HYPOTHESIS
For the purpose of this study, the
following hypothesis have been formulated.
1. Ho:
A well-planned and effective inventory control technique does not
contribute to the profitability of a manufacturing firm.
Hi:
A well-planned and effective inventory control technique partly contribute to
the profitability of a manufacturing firm.
2.
Ho: The amount of inventory stock does not have significance
impact of the level of productivity.
Hi:
The amount of stock has a significant impact on the level of
productivity.
3.
Ho; A well-planned and effective inventory control technique does
not provide a check on the accuracy for misappropriation in stores of most
firms.
Hi,
A well-planned and effective inventory control technique provide a check on the
accuracy for misappropriation in stores of most firms.
Statistical technique to be used in testing
the above hypothesis is the “T” value.
t = X1 – X2
S2P S2P
N1 n2
Where X1
= Mean of Management Sample
X2
= Mean of Supervisory Sample
S2p = Variance of both the
population sample
N1
= Size of the Management Sample
N2
= Size of the Supervisory Sample
1.4 OBJECTIVES
OF THE STUDY
The values of inventories in an industry are carefully detached by inventories
regarded as “ring leader” of industry. James H. Greene said, “inventory is of
such great consequence to the manufacturer that it shows up in the most
importance financial statement balance sheet and profit and loss statement.
Difference inventory control problems are being encountered by different
organizations. A selection and adoption of an inventory control system that
will result to the much needed improvement in the organizational profitability
can achieve effective inventory control.
The research therefore aims at:
1.
Funding the extent to which an effective and efficient inventory control system
can contribute in improving the profitability of a firm.
2.
Identify some of the factors militating against a true adoption of an effective
control system of inventories in a firm.
3.
Recommending ways through which a firm can enhance/adopt effective inventory
control system in a firm like Emenite Nigeria Limited Enugu.
The research will however not lose
sight on requisition problems of raw materials and how best to solve it.
1.5 SIGNIFICANCE
OF STUDY
This involves practical and academic basis.
Practical
Inventory control is a function that is very important and of great significant
to organizations and manufacturing firms. Therefore, the study will place the
stock manager on a better footing to actually know the cost of keeping
inventories and how to avoid it.
Inventory control is also necessary to service oriented organizations such as
First Bank PLC which enable such service oriented organization to attain their
target in a more efficient and effective way.
Academics
The study of inventory control is also very important to students because it
educates the readers on how to control inventory for effective and efficient
operation organization activity and when this happens, defective/obsolete
products will not be passed into the society for consumption.
Amongst the
constraints are:
1.
The inability of the researcher to interview some principal staff of the firms
whose contribution should have been of great help.
2.
Limitation of time and maternal resources: Time was seriously
research.
3.
Finance: The research as well as the student has to attend to
other problems other than this particular one in partial fulfillment of some
courses, it was therefore not easy to allocate money for this study especially
during this economic crunch. Much money was required to travel to the company
several times before collecting the necessary data.
1.7
DEFINITION OF TERMS
Some technical terms have been utilized
in this research report. For avoidance of doubt and operational definitions are
stated below.
Researcher:
A person who conducts a systematic enquiry in order to find solution to a
particular problem.
Organization:
This is a group of individual or a body who have come together to achieve their
goal.
Inventory:
A
detailed lists of goods or materials in an enterprise.
In-process Goods:
Partially
completed final products that are still in production process.
Ordering Goods:
The
act of requesting that goods should be supplied.
Stock:
The kept goods that are available for sale or distribution.
Shrinkage:
The decrease in inventory qualities over time from loss or theft.
First-in-First-Out
(FIFO)
Materials that are issued from the oldest supply in stock and units issued are
costed at the oldest cost liked on the stock ledge sheet.
Last-in-First-Out
(LIFO)
The cost of unit remaining in inventory
represent the oldest cost available issues are costed at the latest cost
available.
Cyclical orders:
Periodic review of inventory level.
Inventory Policy:
The rules that determines has and when
certain decisions concerning the holding of inventory should be made.
Standardization:
The process of establishing agreement
upon uniform identification for quality design and performance.
Flow Cycle:
The rate materials flow into and out of
a system.
Population:
The finite or infinite collection of
objects under study.
Firm:
Two or more persons carrying on a
business.
Raw Material:
Inputs into the production process that
will modify or transform into finished goods.
Specification:
The detailed description of materials.
Manager:
A person who controls business.
Finished Goods:
Final products available for sale or
distribution or storage.
Supplies:
Inventory items consumed in the normal
functioning of an organization that are not a product of final product.
Material Costs:
Cost of purchasing the goods plug
transportation and handling.
Order Costs:
The variable costs of placing in order
for raw materials. Each separate shipment involves certain expenses connected
with requesting and receiving materials.
Carrying Cost:
Expenses incurred from storing raw
materials.
Usage Rate:
The rate per day at which the item is
consumed in production, expressed in units. It is computed by *** annual
consumption of the raw material by 365 days.
Lead Time:
The amount of time between placing an
order and resolving the raw materials.
Safety Stock Level:
An insurance against problems in
ordering and delivery goods.
Economic Order
Quantity (EOQ)
Refers to the order size that will
result in the lowest total of order and carrying cost for an item of inventory.
Bin Cards
The cards used for detailing receipts
and issues of materials and also to assist the storekeeper control the
stock.
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