Evaluation Of The Impact Of Inventory Management On Working Capital Management In Manufacturing Companies In Nigeria (A Case Study Of Nigeria Bottling Company, Ilorin Branch)
1.1 Background of the Study: The Nature and Scope of Stock Management.
The project brings to light the meaning and essentials of inventory management and how they may be used to improve the working capital of a business. Many business decisions can be taken only in respect of knowing the cost involved. Decision under the management of a company finance are basically those involving capital investment decisions on the one hand and short term decision on the other hand. While short-term decision incorporate within its framework, the concept of working capital long-term capital and cash flow generated from such capital investment are undoubtedly essential for maintaining the liquidity of the firm. Inventory management can assist in improving the working capital of a business by providing the data necessary to arrived at the best decisions. Obviously, there are many definitions as many authors will view it, these authors may view it from different perspective in attempt to justify their satisfactory among the various definitions are the following:
Inventory is the totality of those items of tangible property, which are held for sale in the ordinary course of business or held in the process of production, for such sales of currently been available for sale inventory is a general term describing goods which are normally held in house and store gang, the bulk of these goods are usually intend for use in connection” with production or operation activities. But the term inventories cover finished products awaiting dispatch to customers, scrap and package and purvey return to suppliers.
Inventories are caution to absorb planning errors and fluctuation in supply and demand to facilitate smooth production and marketing operation. It may be classified as raw materials, work-in-progress and finished goods.
Management: Among the various definitions are; Management is a social progress entailing a body of knowledge, about managing and managing is the process of planning, organizing, directing, coordinating men, machines, and achievement of objectives”
“Herold” describe it as “the process of getting things done through people and with people”
E.I.F Breach” in his own opinion defined “management as social process entailing responsibilities for the effective and economics planning and regulation of the operations of their enterprise in fulfillment of s given purpose or task. With this we know that management is the body of knowledge about managing.
Therefore inventory management can be defined as the functions which include the development and administration of policies, system and procedure which will minimize total cost relating to inventory decision and related functions, such as purchasing, production, marketing service requirement etc.
Inventory management is almost the same in many organizations although, techniques adopted may differ according to business conditions. The top must carry out the basic functions management such as planning, organizing, staffing, controlling and directing which helps in policy making and establishment limits for keeping inventory.
The basic principles brings the stores of the company is the goods requisitions signed by authority concerned.
1.2 Statement of the Problem
It is no gain saying that the Nigerian economy is in stage where it is extremely difficult for most firms to survive so much that a high level of uncertainty pervades the business sector regarding the continuity of the future operation of the affected firms. Continuation of this trend does nothing but spells dooms as the collapse of most business concern is but a matter of time. No matter how well established or large a corporation’s capital based may be without due regard being paid to working capital there is a bound to be a resultant adverse effect on the operations of firm in question. The management of inventories is as importance for the company’s short term financial situation as the management of cash and again a balance has to be found.
1.3 Justification of the Study
The study will enable the management of the Nigerian Bottling Company to know whether to produce raw materials locally or to import.
It will also help the firm’s resource order to increase the shareholder’s wealth as in the theory of finance it will as well enlighten the entire management team and especially financial managers on the importance of effective planning, management and control of inventories so as improve the working capital of the company.
The research work will also enable management to develop correction measures to reverse any unfavorably development in the management of company inventories
1.4 Aims and Objective of the Study
The aims of the study is to highlight the various inventories and to examine inventory models and show how it can be use to improve working capital.
It also intended to examine the method of stock valuation with regard to Nigerian Bottling Company Ilorin Branch.
The evaluation of the procurement procedure and method of inventory control adopted by NBC so as to give advice (Where necessary) to the management on some deficiency regarding its management of stock which may hinder the increment of its working capital.
To enlighten the public about the misconception it may hold against the company and to find out the benefit inventory control to the company.
To proffer suggestions to the company would be brought under control or at least minimized, reference to my visit and experience at NBC Ilorin.
To proper on the impact of effective inventory management in NBC
1.5 Scope and Limitation of the Study
The field on inventory used in NBC can be classified as raw material, work in progress and finished goods.
However, in the course of the research, some limitations or constraints were encountered, staff did not rendered their maximum cooperation’s while some entertains the fear that, they might reveal confidential (top secrete) information about the company. This forced me to obtain permission from the assistant plant manager (APM) in written before the research could be fully executed.
Also, there were some problems of delay and a lot of the money was wasted in the process of going to the company to conduct the research.
Due to the time given for the research work. The research could not dedicated all of her time to carry out the research properly because of her academic obligation
Money is also a major problem as the researcher has limited amount to conduct the research.
1.6 Organization and Plan of the Study.
The study will be divided into five chapters,
- Chapter one deal with the general introduction of the topic, background of the study, statement of problem, justification of the problem, aims and objective of the study, scope and limitation of the study of organization and plan to study, definition of accounting terms.
- Chapter two focuses of the literature review introduction of concept, characteristics of inventory management, meaning and use of working capital, channel of source of inventory and reference.
- Chapter three dealt with research methodology and data collection, historical background of the Nigerian Bottling Company, types of data collected, sampling method and methods of data collection and analysis.
- While chapter four focuses on data presentation and analysis, analysis and interpretation of data inventory analysis and method of pricing, nature of stock planning and types of stock control.
- Lastly, chapter five also focuses on the summary of the study and makes conclusion and recommendation for further study
Summary, Conclusion and Recommendation
The Nigerian Bottling Company Limited has an authorized share capital of over N1.8 million. It is a limited liability company and also subsidiary companies of Levites group of companies, which equally house about over 16 plants in the country.
The company realized nothing less than N1billion in a year. Inventory used in cocoa- cola be divided into raw – materials, work in progress and finished goods.
The sources of inventories are two: local and foreign. The local sources of raw materials includes the materials which are obtained locally for production process they include sugar, water bottle, soften Carbon (IV) Oxide e.t.c while coca – cola concentrate is the only material that is imported.
At the Nigeria Bottling Company the management of inventory is the responsibility of the storekeeper that are provided with copies of vocabularies, spare parts and catalogue so that they can have a means of identifying the requirements. The stores are coded in alphanumerical and the storekeeper relies mostly on his memory.
The storekeeper is thoroughly familiar with his materials the sections and has the general knowledge of the production and operational activities of the company, which help him greatly in identifying the goods in the store.
The management of inventory is an important for the company’s short term financial situation as the management of cash, and again a balance has to be found this time between tying up money which is not earning anything and losing profit.
At Ilorin branch of Nigerian Bottling Company Limited there is no available measurement or calculation for the economy order quantity (EOQ). As a result of this there is a lot of wastage, in the production department, some of the stock of materials are being ordered according to production, which increases during festivals like Easter, Id- el – Kabir, Id – el – Fitri, Christmas and New Year celebrations. They re-order less during the raining season. This is what their recorder level is base on sometimes there is delay in the course of transportation due to lack of communication or immediate response from their headquarter in Lagos.
In term of profit maximization, when the production cost is high, this will definitely reduce the profit. It should be emphasis that this is henceforth expected to find a way of producing the raw materials locally rather than improving or incurring large amount on transportation. As planning is essential to everyday operation of any company, it is very important for every organization to have a plan. Planning therefore is the formal process whereby specific objectives are set and detailed resources together with ways or methods of accomplishing these objectives established. It is very important to plan so as to make adequate budget.
Proper organization control permits adjustments into minimum disruption since this is an essential factor from every business concern like Nigerian Bottling Company Limited. The fact is that absence or failure to plan makes a business organization handicap, it will loss opportunities in the market place to its competitors.
Hence it is large that organizations who fail to plan also plan to fail.
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