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.
ABSTRACT
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
Declaration ii
Dedication iii
Acknowledgment iv
Abstract v
Table of Contents vi
CHAPTER
ONE
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
Organization 35
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
CHAPTER
FOUR
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
Bibliography 90
Appendix 94
Questionnaire 95
CHAPTER ONE
1.0 INTRODUCTION
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:
Corporate Performance
It
is defined as the end result of organization’s work processes and activities.
Inventory Control
It
consists of measures put in place by an organization or unit to safeguard its
operation and keep costs at its minimum.
Inventory Management
It
refers to the attainment of the right level of inventory at very minimal.
1.11 Summary
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.
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