Cost Benefit Analysis Of Inventory Control In Nigeria Manufacturing Company (A Case Study Of Unilever Brother Nigeria Limited, Kwara State)

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Cost Benefit Analysis Of Inventory Control In Nigeria Manufacturing Company (A Case Study Of Unilever Brother Nigeria Limited, Kwara State)

Table of Content

  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content

Chapter One


  • 1.1 Background of the Study
  • 1.2 Statement of the Research Problem
  • 1.3 Justification for the Study
  • 1.4 Objectives of the Study
  • 1.5 Scope of the Study
  • 1.6 Limitations of the Study
  • 1.7 Definition of Term

Chapter Two

Literature Review

  • 2.1 Introduction
  • 2.2 Inventory Defined
  • 2.3 Inventory Management and Control
  • 2.4 Classification of Inventory
  • 2.5 Reason for Carrying Inventory
  • 2.6 Inventory Models
  • 2.7 Inventory Policies
  • 2.8 Economic Production Quantity
  • 2.9 Factor Affection EO AND EPQ, EDQ AND EPQ

Chapter Three

Research Methodology

  • 3.1 Profile of Uni-Lever Brother
  • 3.2 Research Design
  • 3.3 Scope of the Data
  • 3.4 Source of Data
  • 3.5 Data Collection Procedure
  • 3.6 Method of Data Analysis

Chapter Four

Data Presentation, Analysis and Interpretation

  • 4.1 Data Presentation And Analysis
  • 4.2 Purchasing Policies
  • 4.3 Receiving Procedure
  • 4.4 Stock Control Policies
  • 4.5 Distribution Policies
  • 4.6 Warehouse Policies
  • 4.7 Tabulation of Data
  • 4.8 Cost Saving Effect of EPQ Model on Finished Products
  • 4.9 Result of Finding

Chapter Five

Summary, Conclusion and Recommendations

  • 5.1 Summary of Major Findings
  • 5.2 Conclusion
  • 5.3 Recommendations
  • References

Chapter One


1.1 Background of the Study

A critical review of the financial statement of most companies would review the substantial amount normally held on inventory.

Inventory refers stock of items used within the production system or the operation of business coming among which are: raw materials, semi finished (working – in progress) and finished goods of a given company.

Inventories are stack of goods that are maintained by a business in anticipation of some future demands such demands could be for products manufactured by the company or supplies used in the transformation process.
In other words, investment are current asset and relate to a specific accounting period, their use should be as mush as possible, be regulated within the period to which they relate.

The type of inventories kept by a firm depends on the firm in question, the business operation, financial resources and other factors. Inventory control system must always maintain a sufficient amount of material and supply to meet the demand of the production unit being out of stock and item may course idle time and production re-scheduling management is the function in business of making decision and hence of what to determine and follow how resources are used and what is produced.

It is a management responsibility to define the nature of organization.

The availability and quality of those inventories, is therefore a parameter to determine their efficiency.

Their investment in inventories is usually so high that proper and continuous reliance on them. The stock in an investment which repress out some equivalent amount in cash from which profit or margin is expected. However where the stock does not attract a profit due to the stock lying follows in the stock therefore this recognition of the afore said, that the topic is chosen.

Cost Benefit Analysis and Inventory Control in Nigeria Manufacturing Company

Though the term inventory control may have different meaning to different meaning to different users, more often, the term is usually construed to mean materials controller stock control .

Generally, inventory control is the system that ensures the provision of the required quantity material at the required time with the minimum amount of material costs.

It is appropriate or relevant to know that high level of service and production cannot be provided unless there is an efficient inventory management and facilities, inventories must serve as butter between production, transportation and consumption.

In conclusion on inventories as cussion help to absorb planning error and unforeseen fluctuation in supply and demand and to facilitate smooth and marketing function.

1.2 Statement of the Research Problem

There are many if what is in handing of inventories some of the more significant cast are interest charge storage cost, handing cost, insurance cost, obsolescent cost and space utilization cost inventories load to loss of sales and customers good will.

Obviously, manufacturing companies as a whole, are passing through a temperature period as a result of the prevailing state of the economy the survival of any company depends on how effectiveness and efficient the company’s strategies nearly all manufacturing concerns are aiming at providing goods and services to customer at the least possible cost in order to generate maximum profit.

However, it was realized that without keeping the necessary level of inventory the manufacturing concern might spend too much in keeping excess inventory, of loss customer as a result of keeping excess low level of inventory necessaries the need to venture in to studying inventory (as an integrate arm of production) Uni-Lever Brothers Nigeria Plc produced by the company shows the strength of the organization this implies that the company must have been keeping a form it an inventory level, even when the economy was bad that is, when getting raw materials was a problem, Uni- Level Brothers has been moving on well, that makes the company a special one and studying this inventory management is a worth while experience. Since inventory cost do affect profitability companies are confronted with the problem of:

  1. Audit carrying obsolete goals in stock.
  2. Maintain adequate liaison between the production control purchasing and marketing department.
  3. Try to maintain effective inventory control to avoid over large orders replenishment orders out or phase with production.

1.3 Justification for the Study

The main purchase of the study is to have a close examination and assessment of the inventory control technique adopted by the inventory in determining the performance as a whole.

Every manufacturing industry maintains some form of inventory for survival and continuity purpose. The current economy situation makes inventory control a must for any business organization. It also necessitates the fact for making rationale decision in order to guide against having excess or insufficient level of inventory.

Uni-Level brothers Nigeria Plc is one of the leading firms in the household industry in Nigeria today. It therefore means that the company uses large amount of stock because the current economic situation manifested by the difficulties associated with getting foreign exchange needed to import some of its raw materials is not in the firms favour. It is as a result of this problem that this study becomes very important the management stands of gaining immensely the result of these findings.

1.4 Objectives of the Study

It is aimed at knowing the structure of inventory management and the administration of stock as it obtain in Uni-Level brothers Nigeria Plc that is, the aim of this study is to examine the material management and inventory control of named company.

The motive behind this study is to evolve a decision that will bring or prune the series of cost that may be incurred. This will maintain stock levels so that the combined cost, ordering cost, holding cost, stock out cost are put to the bearest minimum, without having negative effect on the organization. This study has the following as the principal objectives.

To study the inventory management strategy of inventory and stock control system that will help in keeping stock records (stock information).

  1. Stores layout i.e. space utilization and location of individual product.
  2. Analyze the benefits to be received from effective and efficient control of inventory and effect of poor control system.
  3. Cost of material handling in terms of delivery to customer and the cost of receipts from the National Warehouse (Central Depot).
  4. To identify the procedures and process of inventory management of finding the strengths and weakness of the company and making relevant recommendation as to how the weakness can be reduce and improve on the strengths.

1.5 Scope of the Study

The study shall examine the cause of the problem of abandoned capital assets in relation to inventory and stocking. The necessary information needed are supplied by the inventory records and financial data kept by the company. It is important to state that this study will implore the use of deterministic quantity.

The study provides information about inventory control in legal depot, which headless mostly finished goods of the study also cover the input and output level ignoring all work-in-progress will in turn be controlled.

1.6 Limitations of the Study

There are many constraints envisaged from the research, these include the followings:

  1. The research work is limited to a manufacturing concern
  2. Time limitation, within which to carryout research works
  3. The data provided by the manufacturing outfit concerned might be adequate and incredible.
  4. Other limitation attitudes in the course for souring primary data through personal interview and observation.

1.7 Definition of Term

The terminologies used in this study are defines below for a better understanding of this work in order for the researcher not to be misinterpreted.

1. Cost:

It could be defined as the benefit given up for the purpose of acquiring a desired goods & services.

2. Benefits:

It refers to an advantage or profit that gives us a helpful and useful effect that has made a good education. It is also known as payment made by the state to someone in needs.

3. Analysis:

Is the process of breaking a complex topic or substance into smaller parts to gain a better understanding of it or the separating of any material or abstract entity into its constituent element.

4. Inventory:

Refers to stock of item used within the production system or the operation of business coming among which are: raw materials, semi finished goods of a given company.

5. Control:

Is the power to make decision about how a country in an area or an organization runs.

6. Manufacturing:

It is an industry producing goods in a large quantity.

7. Company:

Is a business organization that makes money by producing or selling goods service. It is also known as a commercial business been with others in an enviable way e.g. a group of actors, singers or dancers in a companies.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary of Major Findings

The essence of carrying out this research out is to minimize cost and maximize profit through effective and efficient inventory management. Obviously, the current economic situation decision hence, management need to formulate policy and strategies on how to make considerable returns.

The study also shows that the quantity of a given item as ordered by lever brother Nigeria plc at any period in time is that quantity ordered in each period varies and are low on the average . if adjustment could be made in the average quantity ordered to bring it to a optima level , the reduce and so in the total cost of ordered that it thus enhancing Uni-lever Brothers profit and ensuring that it says in business and even complete favorably in its environment with competitions .

Finally, the model used in this study was found to be more adequate than parched by Uni-lever Brother Nigeria Plc. Using the EPQ and EOQ model, total cost incurred in keeping inventory was found to be significantly how about twice less than what is incurred ordered the firms current method of inventory.

5.2 Conclusion

This study has shown that the survival of any manufacturing organization depend, (to some extent on the inventory level being kept by the company).

Obviously, we have attempted in this stuck to show that inventory constitute a critical and in most cases, a sizable investment of firms resources on which considerable cost saving be made with sound inventory management policy.
Furthermore, one of the major objective of any business organization is to maximized profit and minimize cost ; therefore the desire level of inventory control such that an insufficient, excessive inventory situation is never allowed.

Also, the attempt in the un-lever brothers Nigeria plc however to integrate the expert of various functional specialist irrespective of their areas of calling that inventory are not just held to meet production demand but also guide against risk of stock out.

5.3 Recommendations

The following recommendation are hereby made:

  1. The company should adopt the EOQ and EPO model so as to adequately tackle the problem of sub optimization, which result when the factors of production are under utilizes, it can be vividly recalled from our findings that the calculated economic batch quantity was far above what is being produce, these difference represent sub-optimization of production scales. Furthermore, the EOQ and EPQ Model must be adequately applied to guide against ordering material below or above the normal quantity that will effectively minimized the cost in an optimal way.
  2. The company should seek for ways of sourcing for raw materials in the country in order to reduce the burden of high ordering cost and high exchange rate.
  3. The company should make provision for storage facilities, in adequate storage facilities has hindered with the minimum cost in a simplest way.
  4. There is the need to have a material control division in between the purchasing and storage division.
  5. Storage personnel should be encouraged so that maximum output could be attained by motivating them through worthy commendations, improving the working condition through enough and accommodative storage space, dynamic training and enhance remuneration.
  6. The company should introduce efficient inventory management system.
  7. Government should come to aid of companies by monitoring and import duties tariff.
  8. There should be a thorough overhauling of strategies as it affect materials sources which should re-oriented the entries business environment and most especially Uni-Lever Brothers Nigeria Plc the company under study.

Lastly, optimal level for every important item should be worked out and maintained in order to achieve the result for the organization.

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