The Impact Of An Efficient Inventory Control On The Productivity Of An Organisation (A Case Study Of Rokana Industry, Owerri)

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The Impact Of An Efficient Inventory Control On The Productivity Of An Organisation (A Case Study Of Rokana Industry, Owerri)


Abstract


Inventory control requires high cost and investment commitment most businessmen view inventory control or inventories and their attendant costs as “unnecessary evil” hence falling to assess carefully the benefits afforded their companies or business by existence of inventories in a manufacturing company where these inventories are handled the introduction of a well-planned and effective system or means of controlling these inventories is necessary for profitability and accountability to both the management and shareholders of the company whose interest, objectives and aims under which the company or business was established must be protected. However, the research work will be treated in five chapters.

Chapter one is the introduction of the work where the problems were identified five research questions and four hypotheses were stated to guide the work.

Chapter two involved the review of related literature quoting the various professionals ideals on the issue while my own perspective was also sated.

Chapter three involved the sources of data for the study the sample size and the statistic tool were used in analyzing the data.

Chapter four dealt with proper analysis of the research questions and hypothesis with percentage frequency and hypothesis statistical tools.

Chapter five is the summary of the work the conclusion of findings from the data analysis in chapter four.


Table Of Content


Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

Introduction

  • 1.1 Background of study
  • 1.2 Statement of problem
  • 1.3 Objective of the study
  • 1.4 Significance of the study
  • 1.5 Research question
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Research hypothesis
  • 1.9 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Inventory control
  • 2.2 Process of stock control
  • 2.3 Reasons for holding stock
  • 2.4 Objectives of stock control
  • 2.5 Stock taking
  • 2.6 Stock record
  • 2.7 Receipt and issues
  • 2.8 Treatment and discrepancies

Chapter Three

3.0 Research Methodology

  • 3.1 Research design
  • 3.2 Sources of data collection
  • 3.2.1 Questionnaire
  • 3.2.2 Personal interview
  • 3.3 Population and sample size determination
  • 3.4 Method of data analysis

Chapter Four

4.0 Data Presentation and Analysis

  • 4.1 Introduction
  • 4.2 Presentation of data
  • 4.3 Analysis of data

Chapter Five

5.0 Summary Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • 5.4 Bibliography
  • Appendix
  • Questionnaire

Chapter One


1.0 Introduction

1.1 Background Of The Study

A trend is the past has been for companies to hold some level of sock than previously did. Hence companies has found that they can sometimes reduce the lead time required to obtain materials and to produce product, so that they can operate with less inventory and still serve their customers effectively.

Stock is an idle resources hold for future use whenever the inputs and outputs of a company are not used as soon as they become available, inventory is present service operation and jobs tend to have small investments in stock for many companies however, stock account for a large percentage of assets thus the need for stock control. Uzor (2006: 128) defines stock control as the means by which materials of the correct quantity and quality is made available and as at when required with due regard to the economy in storage and ordering cost, purchasing and working capital carter and price (1996:139) defines stock control as the process of ensuring that the stock hold by the organisation is supplied to those parts of the operation that required the item (i.e. production distribution, sales, engineering etc.). Henrit .Z and Farrell (1990: 100) defines inventory stock control as the assurance of having the items at hand when needed and afford the added protection of reserve, stocks, theoretically untouchable but practically serving to till need when extra ordinary demand develops or when correct procurement fails.

Organisation that have stocks has the advantages of assenting items to be held in stock the extent of stock holding, operation needs, time required to deliver goods, availability of capitals, cost of storage regulation of the input of stock into and from the store house through these. It is possible for firms to adjust continuously the vanity and valve of stock held to confirm with circumstance of controls according to Mank (2000: 148) inventory need to be effectively managed, if efficient operation is to be achieved, due to its initial nature the made of control and management of inventories can be a factor in the success of failing of may manufacturing company concern.

He pointed out that insufficient inventory can seriously disrupt the production distribution cycle that is so critical to the survival of all the manufacturing organisation on the other hand excessive inventories can cripple a firm as famous and thus endanger its liquidity position. Either way, poor inventory management can present a serious challenge to the productive capacity of manufacturing organisation in view of the subject matter of the work the researcher aims at identifying the nature of stock control in Rokana industries Plc. Nekede Owerri.


Brief History Of Rokana Industries Plc.

Rokana industries Plc. was incorporated on 11th September 1998 as a private limited liability company with the objective of manufacturing toiletries household product and hey personal hygiene products for the health care market.

The company maintain its head office at No 4 AjayiStreet off 52 Allen Avenue Ikeja Lagos while it factory is located at plot 5 mission road, Umualum Nekede Owerri. It also maintains sales office and depots at Kano and Aba. The company started as a wholly indigenous private enterprise, upon its admission in 1991 to the second-tier securities market of the Nigeria stock exchange.

The company shares is now being held by the Nigerian public individuals, associations and corporate organisation. The general policy of Rokana is determined by the board of directors of which engineer Charles Ugwu is the chairman and managing director.

Assailing the managing director in the daily administration and management of the company are highly experience and professional mangers the company also maintains the technical advisory services of her foreign supplier and product brand owners. The hour existing manufacturing units at the factory are the plastic unit, the across unit, the log unit and comedic unit.


Rakana Products Include:

1). Jordan toothbrush: Which is one of Rokana quality products is a household name in dental care and probably the most widely recognized brand throughout the world. Other products of the company include: Rokana dry air fresher, Number 1 insecticide, sparkle furniture polish, natural baby oils lotion and ointments, Rokana dental, stock/plaque remover, Natusan dry skin lotion, sparkle toothpaste/ fluoride.

Rokana has adequate capacity for all its products and other complimentary productions on contract basis. In both existing and new products development, the overriding objectives is high quality and functional expense hence all of Rokana’s products are classify in the premium product segment.


1.2 Statement Of Problems

In recent times, most organisation has been characterized with drastic changes that comes along with problems arising from business complexities the Nigerian business environment is not left behind in these changes. Inventories are neither totally good nor bad but inventories control determines the position of the firms many firms have in effectives stock control system which has led to the following.

  1. Running out of materials, which in turn disrupt production leading to loss of salary and education in profit maximization.
  2. Holding of excessive inventory which leads excessive holding of cost, extra space requirement, product obsolesce and pilferage of raw materials.
  3. Typing up capital unnecessarily which attract interest inform of cost.
  4. Poor operation of the stores which in turn leads to problem of materials flow in the production system.
  5. Selection and application of wrong inventory method which does not consider critical factors.

1.3 Objective Of Study

The objective of this study are:

  1. To evaluate the various cost associated with inventory in the organisation.
  2. To access the extent of implementation stock control method in Rokana industries Ltd.
  3. To examine the effectiveness of stock control method adopted by Rokana industries Ltd Owerri.
  4. To find out the determinant factor in choosing stock control method.
  5. To identity the variable for effective stock control method in Rokana industries Ltd Owerri.

1.4 Significance Of The Study

The successful completion of the work will help to educate managers on how to ensure implementation of effective stock control. The study will be useful in ensuring efficiency in decision making which will enhance efficiency in the utilization of resources in the production activities.

The study will help organisation unrest the changing demand pattern by understanding the variables in the stock control and how to manipulate them in every situation, thus possessing the sufficient group of expertise in material management which can be supplied in production process.

Finally, this study shall make firms to know the essence of having the optimum level of stock at any particular period. The successful completion of this work will go a long way to help researchers to wider out his or her knowledge about stock control and its importance it will also enable students who will be carrying out such related topics in future.


1.5 Research Questions

  1. What is the relationship between inventory control and production?
  2. How can stock control influence the profit of an organisation?
  3. How does inventory control and cost operations relate?
  4. What processes are involve in inventory control of an organisation?
  5. Are there factors that militate against effective implementation of inventory control system?
  6. What is the relationship between inventory control and sales?

1.6 Scope Of Study

This study of the impact of effective inventory control on the productivity of an organisation will focus of Rokana industries Ltd Nekede, Owerri. The elements of the subject matter, the techniques reasons and importance of the topic under discuss will be elaborated in subsequent chapters of the study.


1.7 Limitations Of The Study

This study was faced with series of constraints in the course of writing it. Prominent among the constraints are time spent in visiting Rokana industries and time spent in compiling my findings.

Secondly, the finance in carrying out this activity was a big problem obtaining relevant data information was another limiting factor as almost all the required information obtained was sufficient. Even in situation where interviews were necessary, there was difficult in scheduling while some qualified personnel are either busy or ignorant over such interview.


1.8 Research Hypothesis

In order to achieve the set goals, this work is guided by the following hypothesis.

  • Ho: Inventory control does not have any impact on the cost of operations in the organization.
    Hi: Inventory control des not contribute to the success of an organization.
  • Ho: Inventory control has no significant differences in terms of operations of the organization.
    Hi: Inventory control has significance difference in terms of operations of the organization.

1.9 Definition Of Terms

1). Lead time:

This is the moment the stock controller placed order to the time the order is supplied.

2). Stock talking:

This represent the complete process of verifying the quantity balances of the entire range of items held in stock. It is usually carried out annually so as to discuss the value and quantity of stock for balance shut purposes.

3). Stock checking:

Represents any physical check on the quantity of items held in stock. This is actually applied either regularly or intermittently.

4). Maximum stock level:

This is the amount of stock expresses in units of issue above which the stock should not be allowed to rise the purpose of this level is to curb excess investment or over stocking.

5). Minimum stock level:

This is the level below which the stock should not be allowed to fall. The purpose as to eliminate under stocking.

6). Re-order level:

This represents the amount of stock at which new order is to be placed or ordering actions is indicated in time for the materials to be delivered before stock falls below the minimum level.

7). Surplus:

A disable materials, equipment of ports including capital equipment which are in excess of normal manufacturing operating or repair requirement.

8) Fifo:

First in first out

9) Lifo:

Last in first out

10). Obsolete:

This is where an item is completely usable by the organisation.

11). Stock: These are inventories or stores used within the production system.
12). Productivity:

this is the rate or amount of goods produced compared with how much input (time, money) used or needed to produced them.

13). Obsolescent:

When stock is going out of use but is not yet completely unusable.

14). Redundant:

When an item in stock is more than what is reasonably necessary to provide an adequate service to the production or operational activity the excess over the normal holding.

15). Discrepancies:

This is when the amount of stock found by physical check fails to correspond with the balance on the stock records.

16). Manor discrepancies:

This is when differences between the physical check and stock record are less or small.

17). Major discrepancies:

This is a situation where the difference between calculation and physical stock is small, but item involved in very important to the operations of the organization.

18). Pre-production inventory:

Comprises parts and materials purchased from outside the organisation for manufacturing a product.

19). Stock control and inventory control:

Are used synonymously stock control originated from Britain while control is of American origin but mean the same thing.


Chapter Five


5.0 Summary, Recommendation And Conclusion

5.1 Introduction

In this chapter, the researcher has come to the conclusion of her research work and has the following for the conclusion of this research work.


5.2 Summary

This research work has been study of impacts of efficient inventory control on pharmaceutical of industries. Nichben Pharmaceutical Industries was the case study. The industries performance for the period of 2000-2011 was examined to know the impact of efficient inventory control i.e. how they affect the performance.

Issue relating to inventory control were examined, these includes purpose for holding inventory system and also inventory valuation methods. Data relating to this study were obtained by conducting interview with key officers of the company. While the secondary data were obtained from the various textbooks magazines and other literatures.

The data were analyzed by using chi-square which attempts to establish any existing relationship between

  1. Increasing level of inventory and operating cost.
  2. Inventory turnover and net profit margin.

5.3 Recommendation

Having gone through the system of inventory control in Nichben pharmaceutical industries the lapses and short comings existing having been outlined it is hoped that the following recommendations will help the management to improve on the present situation.

5.3.1 Inventory Control Policies

The industries should set up policies concerning its inventory management, policies concerning re-order points, safely stocks; material usage forecast etc should be set by the company. The setting up of such policies as recommended here can be affected by the combined effort of this group of people the production manager, the purchasing officer, the stores supervisor, the marketing and also the chief accountant.

5.3.2 Periodic Review Of Raw Materials (Inventory)

All policies concerning raw materials should be subjected to period evaluation to determine how fair it has helped in minimizing cost without any detriment to the product quality and also to the image of the industries. Te policies should be reviewed constantly and be brought up to date to match the current trend in the industry.

5.3.3 Maximum And Minimum Levels

For an industry to effectively control its inventory. It must establish the maximum and minimum inventory level. This will ensure that too much capital is not tied down in inventory at a period in time by excessive orderings; it will also serve as a signal for an impending stock out. The knowledge of the maximum and minimum proper production schedule.

5.3.4 Material Sourcing

The industry try as much as possible to source raw materials locally and reduce importation of raw materials. This will help the company to reduce its exchange losses which arises as a result of the drop in the value of the naira over the years.

5.3.5 Economic Order Quantity

The industry should adopt the scientific method of inventory management i.e. the EOQ model because of the enormous cost serving that would accrue to the firm as EOQ minimizes the balance of between ordering and carrying cost.


5.4 Conclusion

This study was undertaken with the primary aim of analyzing the impacts of an efficient inventory control on the industries. To achieve this, hypothesis were formulated.

  1. Increase in the level of inventory maintained by a firm will increase the operating cost.
  2. Increase in the inventory maintained by a firm will reduce the profitability.
  3. Increase in the level of inventory maintained by a firm will impair its liquidity position.

The analysis carried out by the use of chi-squares method revealed that an increase in the level of inventory of a firm will increase operating cost incurred by the firm. This increase does not impair the firm’s liquidity but does not reduce its profitability.

Poor inventory control affects the overall performance of the company as excessive costs are accumulated as a result of inefficiency in the management of the firm’s inventory.


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