Application Of Material Management Concept In Manufacturing Industry (A Case Study Of Okin Biscuits Nigeria Limited)

Project and Seminar Material for Business Administration and Management BAM

Application Of Material Management Concept In Manufacturing Industry (A Case Study Of Okin Biscuits Nigeria Limited)

Chapter One

1.0 Introduction

The issue of materials management and its operational effects in the manufacturing organization is among the last of the specialized business function to centralize and given responsibility and authority of making major contributions to profits. Since the basic goal of any manufacturing company’s activities is the development and manufacturing o products that can be marketed at a profit, this is accomplished by the appropriate blending of what management authorities called the five m’s: machines, men, materials, money and management which are interrelated factors that must be combined properly to achieve economic production, satisfactory and adequate services. Also the effective management of materials engenders the production and modification of materials into useful forms through the utilization of various manufacturing process.

In most business operation today, the cost of materials is the remaining cost that is truly variable, all other major cost are either fixed or semi fixed and to this effect, the cost of materials in a typical manufacturing organization constituted about sixty – five percent of the total operational cost. The opportunity for profit improvement in the materials area is virtually impossible to match in any other area of business operation. Also, in a manufacturing organization, materials is the life wire and no company can operate without them, only the most progressive manufacturing firm realize that material availability, engineering or purchasing specifications fabrication cost and distribution cost are all factors which impinge on total material cost and all these factors must be coordinated and controlled by a system oriented called material management.

Materials management can therefore be defined as a science based Art, which deals with the planning, organizing, controlling and directing of supply and processing activities of materials in an organization. It follows that the management of materials in an organization is all embracing than any other arms of management because of the diverse activities involved and the complexity of the problems it process in synchronizing the activities to make them a successful whole

From the above view, it can be seen clearly that material management is an organization leadership task and onus of the leader’s task is effective and efficient coordination and development of available human and materials resources so as to achieve the objectives of the organization. So, whosoever is conferred with the responsibilities of ensuring successful performance of the above activities is regarded as materials manager.

1.1 Statement of Problem

Until very recently, the materials management profession had hitherto been treated with wave of the hand. This is why most of the very useful models and techniques developed by the supply experts have not received popular recognition by most companies in the industrial set-up.

Investigations revealed that the company that forms the subject matter had found it difficult to see to materials management as an entity capable of making meaningful contribution to its profit planning and in material control programmes. For this reason, the procurement function has been swept under the carpet by the management of 0kin Biscuit.

The trade of this non-recognition can still be felt in the organization of the company concerns its application of material management. A lot still need to be done to put the company on a sound footing in the areas of materials management.

The problem is not peculiar to 0kin Biscuit Industry alone, it is a problem to be seriously addressed by the majority of manufacturing companies of today: otherwise, the vast colossal sum of money being lost to un-orthodox purchasing practices will continue unchecked.

1.2 Rationale (Aim) for the Study

This research work has been undertaken as a fulfillment of one of the conditions necessary for the award of National Diploma (ND) in Business Studies in the Department of Purchasing and Supply, Institute of Finance and Management Studies, Kwara State Polytechnic, Ilorin.

The researcher has gained a lot of practical knowledge from the research. This research has got the researcher exposed to the happenings in the industry sector of the Nigeria economy and this has installed some
Confidence and skills in the researcher. Through this research work, the researcher’s professionals mind had been positively influenced, also the researcher’s sense of awareness as far as store management and inventory control are concern has been highly fostered.

The subject matter, 0kin Biscuit Industry will definitely find this research work very valuable especially in the areas of their store and purchasing activities. For instance, the problem of improper record keeping, stock outs, over and or under stocking, obsolescence or damage to inventories in the store, etc. With this research, the company shall find a lot of useful elements that will aid smooth inventory management. The supply department has through this research seen the need to affect highly sophisticated stock control and stock taking. All the fact uncovered in the course of carrying out the research shall help the company to improve on its store management.

The society as a whole will also find this research absolutely useful, professional purchasing personnel materials management students and other members of the public having interest in materials management can refers to the research both as an id to professional practices, examination purpose and in case of future researches.

1.3 Scope of the Study

This research work is based on material management of Okin biscuit industries.

The scope of this research work centers its attention on the core areas of application of materials management concept in manufacturing organization such as purchasing, storage, issuing etc.

It covers the review of literatures and textbooks and the research will give various definition of terminology used in the course of the project work. It also include the activities been carried out by the materials management and their importance to the organization. The project work will also review the survival fact of the research work on the organization and offers appropriate advice its contributions to every business as a whole.

1.4 Limitations and Constraints

The successful conduct of this research work has not by any means been an easy task. The researcher was faced with a lot of problems, which almost threatened the success of the research.

Firstly, in view of limited time for the submission of the research work, the researcher has limited the report to application of material management.

Also, lack of enough and adequate financial resources has made it quite impossible for the researcher to visit other similar companies scattered all over the country. Another problem faced by the researcher was the uncompromising attitude of the management of the firm to release for use some of the essential facts that would have been of good materials for this research study.

Finally, there was the problem of inadequate and up to date statistical in almost all department of the company that forms the subject.

1.5 Objectives of Study

The research work has been carried out to achieve very many noble objectives. One of the objectives is to pin-point areas where the majority of Nigerian manufacturing concerns are making a very big mistake by allowing their store operations to be handled by quack store personnel.

Another objective of the study is to find out from where the company at forms the subject matter get their supply of inventories.

Finally, the research study has the aim of making all profit-oriented organizations to realize how much is being lost daily as a result of non-recognition of the materials management function. In effect, the research work as an eye opener for all profit – conscious organizations to see materials

1.6 Brief History of the Organisation

0kin Biscuit Industry Off a, was established in May 1978 by a patriotic businessmen, Chief Emmanuel 0. Adesoye, who is an indigene of Offa, in Offa Local Government Area then in response to the call to the Kwara State government calling on well meaning Kwarans to establish industries in the state

The company was incorporated in December 1979, under the Control of the Nigerian Customs and Excise Edict of 1969. “The manufacturer of biscuit”. The producing and sales started on 2nd June 1980. The company started with production of three varieties of biscuits namely Cabin Gem and Coaster in 1980, and other varieties like Short Cake, “Olomokulubu: were introduced.

The demand for 0km Biscuit industry out stripped supply machinery for the 2nd line of production plant was installed in 1982 to double the capacity of production. Production capacity was reduced in the following year, is as a result of import license, since major portion of raw materials were imported.

The adverse situation of foreign exchange during the following year forced many factors to close down for long period, but 0kin Biscuit Limited still survived through the capacity utilization had to reduce to a level of 25% to 30%. 0km Biscuit still has other branches of items like Okin Foams Limited, Okin Express and 0km Malt, which is presently under market testing and had staff strength of about 670 in which 70% are skilled workers.

However, the factory has four main section production engineering, administrative and accounts. The head of each section is directly responsible to the General Manager. Implant training course were conducted in cooperation with industrial training fund (ITF) to develop skill and talents of employees.

Employees are normally sent for training courses conducted by other management training organizations as well. Today, there are only two expatriate in the factory as compared to six expatriates in seven years ago. The company also offers training opportunity for the students from the higher institution of learning with the facilities provided at the various departments.

Today, 0km Biscuit produced the Coaster and Short Cakes and has became mostly consumed biscuit in Nigeria and were also exported out to the neighboring African countries.

1.7 Definitions of Terms

Peculiar to all field of specialization, be it management studies or science based course, every field of specialization has got its own terms, often been used for communication. The following are the definition of terms in materials management as used in this project.

i. Materials Management:

Can be defined as a science art which deals with the planning, organizing, controlling and directing of supply and processing activities of materials in an organization. In a nutshell, material management can equally be regarded as the integration of purchasing and stores activities under the control of the Manager.

ii. Specification:

A specification of an item is the description of the item, its dimension analysis, performance or other relevant characteristics in sufficient detail to ensure that it will be suitable in all respect for the purpose for which it is intended.

iii. Standardization:

Is the process of reducing the number of varieties of stocks to a controlled minimum.

iv. Procurement:

This is defined as a whole process whereby all classes of resources (people, materials, facilities and services required are obtained).

v. Negotiation:

It simply means conferring discussing or bargaining to reach agreement in business transaction.

vi. Value Analysis:

It is an organized procedure for the efficient identification of unnecessary cost in the materials used for the production of a product through analysis of the function expected of that product, with due cognizance of availability and storability.

vii. Obsolescent:

An item is said to be obsolescent when it is going out of use but is not yet completely unusable.

viii. Obsolete:

An item is regarded as obsolete when it is no longer in use or usable by the business concerned, because of changes in operational practice of production methods.

Chapter Five

5.0 Summary of Findings. Conclusions and Recommendations

5.1 Summary of Findings

The focus of materials management has been presented in this project result – oriented approach. In the area of inventory control and cost the benefits are measurable and immense. However, there is a need for an objective evaluation of the performance of materials management field, and each problem has been offered a number of suggestions for necessary solution. This chapter will be more concern to the fundamental problem that is affecting the company’s materials activities and necessary recommendation will be made in each case.

The two major observations that I could made from this project and which I believe need some correction centres around:

  1. The over centralization of the company’s materials, function; and
  2. The general operation of materials functions in the company concern.

In regard to the first observation over centralization of the suppliers department, which manage the activities of the material function in the company brings about a lot of operational problems within the company plants and this need some sort of surgical operation at least to ease the problem.

The second observation shows that the company has not depart from this current low status given to materials management by many companies especially within the under developed economy of which Nigeria is one. Because he company management seems to be myopic in their outlook towards materials management process. Although the function, which is being referred to as the supplies department in company looks to be well placed on rarely performed the function expected of it. They believe that the department line of responsibilities begins with selection of suppliers and ends purchased materials is delivered to its point of use. Thus, the department is responsible for adding value by distribution to purchase direct materials (i.e. materials use in the product) up to the point where manufacturing converts it a product and thereby adds value by manufacturing. With indirect materials (i.e. those use in making the product but not incorporate in it) it performs essentially the same functions as a captive industrial distributor. They believe that the department buys supplies and stores them until they are, in repurchased by their ultimate users.

Furthermore, the company’s to management fails to realize that‘s management is a money making activity. The department is properly its right footing it can conveniently satisfies three out of the four basic criteria. For a profit centre because materials management employ capital, it incur cost, and it adds value by distribution. Just one basic criterion can be missing in the company and this is prizing. However, this lack is not terribly serious. It can be remedied just as it has been in the case of conventional profit centres that produce differentiated products for internal corporate customers.

5.2 Conclusion

Conclusively, the business organization system from above was evolve complement the effort of the application of materials management in a manufacturing organization. This materials management arm of a business organization deserves greater attention so as to improve the performance in of storage of goods, provision for replenishment of low stock, issue and dispatch, production planning and control, purchasing activities. Also, training motivation of workers should be a continuous exercise for it leads to improve the service render by materials management to the organization as a whole.

Materials management in business organization is facing a lot of problem that is observed and studies critically and the recommendations implemented materials management functions in an organization will be greatly improved efficiency in man power would lead to increase in productivity.

For effective service to be made available to the business organization should be improved and well trained staff should be employed.

5.3 Recommendations

With regard to the over centralization of the materials function (supplies department) of the organization. The researcher recommend to the company management that the company should involve itself in a centralized integrated in managing its material activities.

On the other hand, in reviewing the total operation of material management within the organization. Materials management activities comprises of store in purchasing unit. All the staff of the store must be trained to a minimum of certificate course in storage; the existing staff should be given: s to attend courses on storage. A forum should be set aside for the members of staff of materials management to have seminars; materials introduction or refresher courses as this improve the ability of the workers.

More so, the researcher will like to suggest and recommend that stores management have to be maintain to the optimum standard level of storage system. Also the health and safety of the workers should be put into consideration. The security of the store must be tightened so that unauthorized people may not have access to the stores.

Lastly, the management of 0kin Biscuit should employ the following two major and related forces that can accelerate the adoption of a unified materials management. These are electronic data processing (EDP) and the so – called systems approach to management.

Computer programme always treat materials management as a unified function. They are designed to keep track of all materials transactions and to make all routine purchasing inventory control, and traffic decision.

Management that adopts a systems approach will also be led to prefer a form of material management. The materials organization, in my opinion, forms a neutral subsystem with fairly well defined objectives and channels of communication.

Once the motion of materials management is accepted, the profit centre approach becomes a serious possibility. This is the exciting step, for it offers the prospects not only of substantial economics and efficiencies but also of giving materials management incentives to become entrepreneur to seek opportunities for profit, take reasonable risks, and work towards the same kind of goals that other profit centre managers do. This should be good from the stand point of executive, development, providing a new source of well – trained men for step management; the addition of another “centre of initiative” should also be a welcome tonic for the company as a whole.

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