Impact Of Efficient Inventory Management In Hospitality Industries
As the topic states “The impact of effective inventory management in a hospitality industry” one will then assay that impromptu, manufacturing / hospitality industries, face a lot of inventory management problems. This is the around head of what the researcher tried to bring to force, to examine and analyze the possible causes to this problem.
The writer also defined the concept “Inventory management” and traced its origin and usage of methods applicable to its effective management. A step was also taken to suggest solutions by making constructive recommendations aimed at addressing the raised.
Some of the problems associated with inventory management are unavailability of raw materials; determination of optimum level of stock, as well as discrepancy between policy and practice in stock management.
In-depth research was conducted and the study retracted the need for management of inventory and its attendant benefits in chapter five.
1.1 Background of Study
The organization goal of most business enterprise includes survival and growth, fulfillments of social responsibility and realization or maximization of profits. This level returns enable the company to take advantage of business opportunities, undertake research programmes and innovations which will further increase investment portfolio in the long-run; prompt discharge of her social responsibilities and its economic obligation to the members of the company. In order to maintain this formidable position, it becomes imperative that positive attempts must be made to minimize operational capacity of the business, increase production capacity and efficient marketing of their products to the consumers. However, one of the problem ways of achieving the most desired efficiency in business management is through reducing operational cost to a bearable level.
One major component of this cost reduction concept in many manufacturing organization that deserves the attention of management is through reducing operational cost to a bearable level.
One major component of this cost – reduction concept in many manufacturing organization that deserve the attention of management is the investment in “INVENTORIES” otherwise known as stock in most business enterprise, inventory or stock budgeting is the largest single item in the current asset of an industry. Improper management of stock level often contributes to most business failures. Inventories are mostly inputs used in the manufacture of a product and the components of stock are raw materials, work in progress (WIP) and finished goods. Raw materials are those stored for further production. Work-in-progress (WIP) is send – manufactured products. They present products that need further processing before they become and work – in – progress facilitates production while stock of finished goods are required for smooth marketing operations. Considering the large sum of money work – in- progress and finished goods, it there the becomes imperative that these “stocks should be managed efficiently in order to avoid blutant waste of resources that would have been channeled to other capital budgeting and investment. Any non challant attitude towards the management of a company’s inventory will be tantamount to putting the progress of the firm in jeopardy.
The only way by which this risk can be effectively managed in a company is for the enterprise to install an efficient management information system (MIS) and sound inventory valuation system based on cost principle, No matter which method is adopted for prudent inventory management, my major concern is at a point where cost will be marched to maximum revenue and the ideal choice is the method at which marginal costs adds to the gross or periodic income. Given the level of inventories needed for the most successful merchandizing operation, the objectives of operational management is to advice on the lowest possible total cost of maintaining these inventories. This means employment of skilled labour and plant efficiency in the overall handling of inventories into and out of storage; planning and controlling of stocks by various departments.
There is an optimum level of investment for any capital whether it be cash, physical plant or inventories for example, the liquidity had by someone mighty be too large or small. The reasons for having excess liquidity or cash balance will be a function of financial sacrifice made by the members of the company. On the other hand, the reason for the meager resources of the company might be due to the poor credit rating of the firm. Therefore, a break – even point should be adopted for the efficient management of the firm’s assets. An optimum level of investment budgeting that will not create room for unnecessary wastes and as well guarantee satisfactory profits as long run investment profit. Consequently, inadequate inventory management usually disrupts production and remotely facilitates loss of revenue.
Moreover, excess stock level is contagious because it introduces risk of carriage and obsolesces.
However, the prime facise of this study is to establish the fact that poor inventory management is existent, device always of computation and valuation of stock; significance and recommend maintenance of this level which will eventually maximization of profits. Thus, the primary focus of this studious engagement is to discover and profound techniques that will effectively see to the adequate planning and controlling of inventories as it is practiced in NBL Enugu; the emphasis being placed on cost management. In taking this problem, a well organized method will be sold.
1.2 Statement of the Problems
The problem of this study includes:
- Difficulties in determination of the optimum level of stock in inventory management
- How the level of influence in inventory of raw materials pad to inventory management
- Controlling of stock as a problem of stock management in hospitality industry
- Impacts of various departments towards the planning and controlling of stock in inventory management
- Effect of inventory valuation in hospitality industry
1.3 Research Questions
- Is the inventory management system adopted by Nigerian Bottling Company NBC Plc Enugu adequate for assessing inventory management practices?
- How does Nigerian Bottling Company NBC Plc Enugu internally control its inventory management system?
- How inventory management system contributes to the Nigerian Bottling Company NBC Plc Enugu operational activities?
- What are the problems of inventory management system in Nigerian Bottling Company NBC Plc Enugu?
1.4 Objective of the Study
- To assess whether the information system adopted by Nigerian Bottling Company NBC Plc Enugu is adequate or not.
- To examine the internal controls in the inventory management system of Nigerian Bottling Company NBC Plc Enugu.
- To envisaged the contribution of inventory management system of Nigerian Bottling Company NBC Plc Enugu in its operational activities.
- To identify the problems of inventory management system of Nigerian Bottling Company NBC Plc Enugu.
1.5 The Scope of Delimitation of the Study
The study is to analyze the need for efficient stock management in hospitality industries in general but with particular reference to the Nigerian Bottling Company NBC Plc Enugu.
1.6 Significance of the Study
This study is significantly derived into the following reasons:
- The result of this study would help the management of NBC PLC Enugu in maintaining their stock at optimum level to enable them eliminate problems associated with inventory valuation and management
- The result will go a long way to alleviating problems of this nature by other hospitality industries especially breweries in planning and controlling of stocks to avoid wastages and risk of cash drain.
- The result would help the management of NBC PLC to avoid the danger point which is the excess stock level that introduces unnecessary cost and risk obsolesce.
- The research study would also create a foundation that will facilitate the under standing of need for stock valuation.
- It is hoped that result of the study will encourage other departments in NBC PLC to help in contributing data for planning and controlling of stock inventory
- This study will help inculcate new ideas to the management of various methods that can influence inventory acquisition to achieve effective and efficient inventory management.
- The result will definitely encourage hospitality industries to be sending their staff on courses and workshops to acquire new skills and update their knowledge on inventory management information technology and system.
- The result would help the management to NBC PLC Enugu to review their organizational goal and see the extent their objectives are being achieved.
- The result would help NBC Plc to asses their overall performance for possible modifications, policy strategies and economic growth.
- Finally, this study would copiously as work of reference to future researchers, while suggestions made in this study would serve as a rallying point on formative evaluation for the maximization and utilization of best brains for effective and efficient inventory management in NBC PLC Enugu.
1.7 Definition of Terms
Ordering cost usually cost of denial cost of preparing a purchase order or production order and special processing and receiving costs relating to the number of orders processed.
Carrying cost of a desired rate of returns on the investment in inventory and costs of storage, breakage, obsolesce, deterioration, insurance and personal property taxes.
Economic Order Quantity:
Economic order quantity is that size of inventory that will result in minimum annual costs of the item in question.
This is the point of level that automatically triggers on new order of inventory or stock to replenish an exhausted order it is dependent on expected usage dumping.
This is the stock set aside to meet the demand of the customers in the course of production in case there is sudden usage of inventory beyond normal rate. The essence is to ensure that the industry does not run not of stock in a given period of time.
A quantity of goods or anything that is kept or stored for use as need arises especially a quantity of raw materials, work – in – progress finished goods or supplies.
This is the internal between placing an order and receiving delivery.
Activities process or aimed at ensuring that quantities of stocks are such that satisfactory service level is maintained for all stock units while holding cost is minimized.
A firm or a person who has a specified type of stock (e.g. wholesaler that has stock of particular manufactured goods).
Stock Holding Cost:
The cost incurred because at a stock of something is kept for a time e.g. the rent of storage space, the wages of a store keeper, the costs of stock records.
The magnitudes of stocks of something.
A state of having no stock of stocking keeping unit
This is the card made for each items of inventory held.
Measuring the quantities of items of stock that an enterprise has in order to obtain accurate list of it.
The ratio of the sales revenue of a firm for a period of the average value of its stock – in trade or stock of finished goods during that period.
Considering of a function of all the parts at the design of one of a firms product to see whether the changes in material manufacturing methods or design will increase the products value to the firm.
The decline in the value of asset through external causes such as technological change, change in demand or change in fashion or taste.
Summary, Conclusions and Recommendations
5.1 Summary of the Findings
It proved that ABC inventory technique is focal methods to determine the materials demand of the state at Nigerian Bottling Company NBC Plc Enugu.
Above average the result indicated that lack of management support, unqualified staffs and shortage of trainings are the major cause which affects effective inventory management system at Nigerian Bottling Company NBC Plc Enugu.
The highest number of respondents assured that Nigerian Bottling Company NBC Plc Enugu use information technology to manage its inventory stocks.
The survey result revealed that information technology adopted by Nigerian Bottling Company NBC Plc Enugu has greater data accuracy. Even if a significant number of respondents (21.3%) were disagreed.
The majority of the respondents replied information technology of Nigerian Bottling Company NBC Plc Enugu is enabled to maintain good supplier relationship, improve interdepartmental coordination and increases state service.
Most of the respondents disclosed that information technology system of the Ministry save time to prepare inventory reports while sizable respondents (18.9%) were disagreed.
The utmost of respondents were agreed that Nigerian Bottling Company NBC Plc Enugu held inventories to mitigate current and future demand uncertainty.
The highest number of the respondents agreed that Nigerian Bottling Company NBC Plc Enugu applied strategically supplier partnership in each inventory process.
The majority of the respondents replied that Nigerian Bottling Company NBC Plc Enugu properly managed its overstocking and under stocking of inventories. Whereas noticeable respondents (15%) were disagreed.
The greatest number of employees agreed that in Nigerian Bottling Company NBC Plc Enugu the inventory management system plays a role in reducing damages and wastages as well as minimized unwanted operational and inventory costs.
Significant numbers of respondents were opined that inventory management system of Nigerian Bottling Company NBC Plc Enugu improves both management of information reports and inventory planning and scheduling.
This study tried to examine the inventory management system at Nigerian Bottling Company NBC Plc Enugu. In particular, the first objective was to assess the information technology system adopted at Nigerian Bottling Company NBC Plc Enugu. Therefore, the study result revealed the Nigerian Bottling Company NBC Plc Enugu has used information technology. It is highly effective in data accuracy, real time inventory reports, service provision, state service and interdepartmental coordination. However, further upgrading is required to improve the data accuracy and real time report of inventory management system of the ministry.
The second objective was to examine the internal controls in the inventory management practices of Nigerian Bottling Company NBC Plc Enugu. The finding disclosed that the Ministry is largely effective in inventory internal controls related to mitigating unexpected demand uncertainty, taking strategic inventory supplier partnership, managing overstocking and under stocking of inventories, protecting inventories from damages and obsolete, retrieving inventory items easily, inspecting physical count and recording up to date inventory items. Nevertheless, a noteworthy number of respondents were claimed that the internal inventory control of the Ministry is weak to record inventory items properly up to date, inspect the physical inventory items timely and handle overstocking and under stocking of inventories.
The third objective was show the contribution of inventory management system of Nigerian Bottling Company NBC Plc Enugu towards its performance. Based on the findings, it can concluded that the inventory management system at Nigerian Bottling Company NBC Plc Enugu has a contribution in improving the ministry’s overall operational activities in terms of service delivery, state service, suppler relationship, management of information reports and inventory planning and scheduling. Besides, it has a role in reducing damages and wastages as well as minimizing unwanted operational and inventory costs.
Furthermore, the rest of the objectives were on the methods and problems of inventory management system of Nigerian Bottling Company NBC Plc Enugu. Through the findings the study revealed that ABC inventory techniques the main methods to determine the materials demand of the state. More importantly, from the interview feedbacks and respondents; lack of management support, insufficient qualified staffs and shortage of training are considered as the main problems for effective inventory management system of Nigerian Bottling Company NBC Plc Enugu.
To conclude, inventory management system at Nigerian Bottling Company NBC Plc Enugu is effective and has a great contribution on the ministry’s overal accomplishments
The finding indicated that though information technology system of Nigerian Bottling Company NBC Plc Enugu is highly effective still some of the employees of the ministry did not support specifically in data recording accuracy and preparing real time of the IT system. Therefore, the managements of the ministry should give better attention just by arranging meeting with the employees to review the problems, find out why the IT system inefficient to record inventory items accurately, generate real time reports appropriately and take a remedial action.
Most of employees confirmed that the existence of sudden inventory physical inspection and proper inventory items record but still there is inconvenience in works of the internal inspection and repetition of inventory items record. Therefore, the management of Nigerian Bottling Company NBC Plc Enugu has to follow up the operations of the inventory management process by strengthening the internal auditor teams and create accountability for those staffs who are negligent to record inventory items properly.
Based on the analyses, Nigerian Bottling Company NBC Plc Enugu should try to align its internal inventory management operations, especially in managing overstocking and under stocking that can lead to achieve competitive advantage. In this regard, the managements of the Ministry has to ensure that inventory items are at the right place, at the right time and in the right quantity just by consolidating strategic orientation and creating accurate inventory data to forecast demand.
The finding also indicated that lack of management support is the major cause for ineffective inventory management system at Nigerian Bottling Company NBC Plc Enugu. Hence, the management has to fully participate in inventory management process in creating safe workplace and follow upping the appropriateness and implementation inventory procedures.
Nigerian Bottling Company NBC Plc Enugu need to invest towards creating learning capabilities in general and inventory management learning capability in particular for supplies personnel and other staffs via availing various trainings so that such capabilities can contribute for the effective of inventory management.
Policy objectives of the GTP II entail maintaining encouraging main sectors of the economy, manufacturing sector. Looking this, the need to assess periodically the inventory management system is not only the issues of Nigerian Bottling Company NBC Plc Enugu but also the main concern in GTP II agenda. Therefore, policy analysts must look at a wider range of issues than those highlighted here. Nevertheless, the importance of this benchmark analyses should not be minimized. It provides useful way to focus on policy work by indicating some area of inventory management practices improvements.
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