The Effects Of Inventory Management And Control On The Performance Of The Manufacturing Enterprises
The Effects Of Inventory Management And Control On The Performance Of The Manufacturing Enterprises
Abstract
This study was carried out to examine the effects of inventory management and control on the performance of the manufacturing enterprises with special reference to arsan water company Ikot Ekpene, Akwa Ibom state. Specifically, the study determine the effect of inventory management and control on the performance of manufacturing enterprises determine the various inventory systems in manufacturing enterprises. The study also examine the challenges of inventory management in manufacturing enterprises. The study further reveal the strategies that can be used to overcome the challenges of inventory management in manufacturing enterprises. The study employed the survey descriptive research design. A total of 30 responses were validated from the survey. From the responses obtained and analyzed, the findings revealed that the effect of inventory management and control on the performance of manufacturing enterprises is enhanced competitive advantage ,improved organizational performance and positive impact on organizational performance. Also, the types of inventory system used by manufacturing enterprises is manual inventory, Periodic inventory and Perpetual inventory. The study further revealed that the challenges of inventory management in manufacturing enterprises is manual documentation, inconsistent tracking and supply chain complexity. Lastly, the strategies that can be used to overcome the challenges of inventory management is demand forecasting, transparent performance and go paperless. The study thereby recommend that manufacturing firms should diversify their inventory system to suit specific needs of production and at the same time ensure that maximum attention is paid to inventory management so as to avoid or reduce the amount of loss that would be gotten from damaged goods in inventory. Also, inventory management should maximize space and timely delivery to avoid staying off production and closely monitor and manipulate their inventory system to maintain production consistency for enhanced organizational performance, profitability and effectiveness. Lastly, Nigeria manufacturing enterprise should not take the issues of inventory management lightly because it has the power to make or mar the future of the organization liquidity position.
Table of Content
Chapter One:
Introduction
- 1.1 Background of the Study
- 1.2 Statement of the Problem
- 1.3 Objective of the Study
- 1.4 Research Questions
- 1.5 Research Hypotheses
- 1.6 Significance of the Study
- 1.7 Scope of the Study
- 1.8 Limitation of the Study
- 1.9 Definition of Terms
Chapter Two:
Review of Literature
- 2.1 Conceptual Framework
- 2.2 Theoretical Framework
Chapter Three:
Research Methodology
- 3.1 Introduction
- 3.2 Research Design
- 3.3 Population of the Study
- 3.4 Sample Size Determination
- 3.5 Sample Size Selection Technique and Procedure
- 3.6 Research Instrument and Administration
- 3.7 Method of Data Collection
- 3.8 Method of Data Analysis
- 3.9 Validity of the Study
- 3.10 Reliability of the Study
- 3.11 Ethical Consideration
Chapter Four:
Data Presentation and Analysis
- 4.1 Data Presentation
- 4.2 Answering Research Questions
- 4.3 Test of Hypotheses
Chapter Five:
Summary, Conclusion and Recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
- REFERENCES
- APPENDIX
Chapter One
Introduction
1.1 Background of the Study
Inventories are vital to the successful functioning of manufacturing and retailing organizations. They may consist of raw materials, work-in-progress, spare parts/consumables, and finished goods. It is not necessary that an organization has all these inventory classes. But, whatever may be the inventory items, they need efficient management as, generally, a substantial share of organizations funds is invested in them. Different departments within the same organization adopt different attitude towards inventory. This is mainly because the particular functions performed by a department influence the department’s motivation. For example, the sales department might desire large stock in reserve to meet virtually every demand that comes. The production department similarly would ask for stocks of materials so that the production system runs uninterrupted (Anichebe and Agu, 2013).
Inventory represents an important decision variable at all stages of product manufacturing, distribution and sales, in addition to being a major portion of total current assets of many organizations. Since inventory constitutes a major segment of total investment, it is crucial that good inventory management be practiced to ensure organizational growth and profitability. According to Temeng et al (2010), historically, however organizations have ignored the potential savings from proper inventory management, treating inventory as a necessary evil and not as an asset requiring management. As a result, many inventory systems are based on arbitrary rules. Unfortunately, it is not unusual for some organizations to have more funds invested in inventory than necessary and still not be able to meet customer demands because of poor distribution of investment among inventory items (Temeng, Eshun and Essey, 2010). Based on the above analogy, therefore this research work evaluates The effect of inventory management and control on the performance of manufacturing enterprises in Ikot Ekpene Local Government Area.
1.2 Statement of the Problem
Problems of inventory management and control have been around for a very long time. The need to collect goods when it is readily available and then store it for times of shortage is perhaps the fundamental stock holding problem, which was tackled long ago by man. Nowadays, we usually think of stocks being held by organizations to allow efficient and continuous operations. Managers are aware of the vital roles inventory plays in the activities of organizations. In most organizations, direct materials represent up to 50% of the total product cost, as a result of the money entrusted on inventory, thereby affecting the profitability of the organization. Organizations at times do not control their inventory holding, resulting in under stocking and causing the organizations to stay off production, thereby resulting to manufacturing enterprises organizational ineffectiveness. This therefore creates relationship problems between inventory management and organizational productivity, profitability and effectiveness.
1.3 Objectives of the Study
The broad objective of this study is to evaluate the effects of inventory management on the performance of manufacturing enterprises, while the specific objectives are:-
- To determine the effect of inventory management and control on the performance of manufacturing enterprises
- To determine the various inventory systems in manufacturing enterprises.
- To examine the challenges of inventory management in manufacturing enterprises.
- To reveal the strategies that can be used to overcome the challenges of inventory management in manufacturing enterprises.
1.4 Research Questions
The following research questions were formulated based on the objectives of the study:
- What are the effect of inventory management and control on the performance of manufacturing enterprises?
- What are the types of inventory system used by manufacturing enterprises?
- What are the challenges of inventory management in manufacturing enterprises?
- What are the strategies that can be used to overcome the challenges of inventory management in manufacturing enterprises?
1.5 Significance of the Study
This study is significant in the following ways:
- It will help in revealing the impact of inventory management on the performance of manufacturing enterprises.
- It will reveal how inventory management affects organizational effectiveness.
- The study will also show how seriously inventory management is practiced by enterprises in Ikot Ekpene.
- The study will also serve as a useful reference material to other researchers seeking similar information.
1.6 Scope of the study
This study covers the effect of inventory management and control on the performance of manufacturing enterprise. A case study of Arsan water company.
1.7 Limitations of the Study
The study was limited by the following factors:
Financial Factor:
Inadequate funds affected the way data were collected since the researcher had to travel long distances for the distribution of the research questionnaire forms.
Time Factor:
This affected the reduction in the size of the sample used for the study because the researcher had less than two months to complete the study.
Material Factor:
Shortage of relevant materials for literature review posed a great difficulty.
The study was also limited to the information gathered from primary and secondary records.
1.8 Organization of the Study
In this research study, the researcher took a critical look on the effect of inventory management and control on the performance of manufacturing enterprise.
The research work was divided into five chapters.
Chapter one was on the background of the study, as well as statement of the problem, objectives of the study, research questions, statement of hypothesis, significance of the study scope and limitation of the study, organization of the study and definition of terms.
Chapter two reviewed the related literature on the subject matter and contributions of different authors.
Chapter four takes care of the data presentation, analysis and interpretation as well as discussion of findings.
Chapter five (5) encapsulates the summary, findings, conclusion and recommendations made by the researcher.
1.9 Definition of Terms
Management:
The organizing and controlling of the affairs of a business or a sector of a business.
Inventory:
A record of a business’s current assets, including property owned, merchandise on hand and the value of work in progress and work completed but not sold. It also means aggregate of those items of tangible personal property which are held for sale in ordinary course of business, are in process of production for such sales, are to be currently consumed in the production of goods or services to be available for sale.
Finished Goods:
Goods being manufactured for sale by an enterprise.
Materials:
Articles such as raw materials, semi-finished goods or finished parts, which the business plans to incorporate physically into the finished production.
Supplies:
Article, which will be consumed by the business in its operation but will not physically as they are a part of the production.
Control:
A means of monitoring for, triggering intervention in activities that are not going according to plan.
Performance:
The amount of useful work accomplished compared to the time and resources used.
Chapter Five
Summary, Conclusion and Recommendation
5.1 Summary
In this study, our focus was on the effects of inventory management and control on the performance of the manufacturing enterprises using Arsan water company Ikot Ekpene a case study. The study specifically was aimed at determining the effect of inventory management and control on the performance of manufacturing enterprises, determine the various inventory systems in manufacturing enterprises, examine the challenges of inventory management in manufacturing enterprises and reveal the strategies that can be used to overcome the challenges of inventory management in manufacturing enterprises. A total of 30 responses were validated from the enrolled participants where all respondent are drawn from staff of Arsan water company Ikot Ekpene.
5.2 Conclusion
Based on the finding of this study, the following conclusions were made:
- The effect of inventory management and control on the performance of manufacturing enterprises is enhanced competitive advantage, improved organizational performance and positive impact on organizational performance.
- The types of inventory system used by manufacturing enterprises is manual inventory, Periodic inventory and Perpetual inventory.
- The challenges of inventory management in manufacturing enterprises is manual Documentation, inconsistent Tracking and Supply Chain Complexity.
- The strategies that can be used to overcome the challenges of inventory management is demand forecasting, transparent Performance and going paperless.
5.3 Recommendation
Based on the responses obtained, the researcher proffers the following recommendations:
- The manufacturing firms should diversify their inventory system to suit specific needs of production and at the same time ensure that maximum attention is paid to inventory management so as to avoid or reduce the amount of loss that would be gotten from damaged goods in inventory.
- Inventory management should maximize space and timely delivery to avoid staying off production and closely monitor and manipulate their inventory system to maintain production consistency for enhanced organizational performance, profitability and effectiveness.
- Nigeria manufacturing enterprise should not take the issues of inventory management lightly because it has the power to make or mar the future of the organization liquidity position.
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