The Impact Of Stock Management On The Success Of An Organisation (Case Study: UTC Nigeria Ltd)

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The Impact Of Stock Management On The Success Of An Organisation (Case Study: UTC Nigeria Ltd)


Abstract


The study on the Impact of Stock Management on organizational success was conducted in UTC Nigeria Ltd as a case study. A total of 30 respondents were selected as representative sample departments of purchasing, production and stores.

The objectives of the study were, to establish the inventory management systems and techniques in place, to find out the costs associated with holding stock in an organization, to establish the measure of success in an organization and to establish the relationship between stock management and organizational success

The findings indicate that UTC Nigeria Ltd hold stock. The findings reveal that there is formal stock management and several techniques are applied to manage stock which includes stock taking and inventory level tracking.

The research further reveals that many factors combine to bring the organizations success a reality. These according to the research findings are; total cost reduction, increase in daily sales and sales turnover, reduced waste, customer satisfaction and profit levels. Stock Management has got a big impact on the success of an organization. Therefore organizations need to put enough emphasis on the stores department

The research forwards some recommendations such as;

Costs: Management needs to be aware that there are a number of costs directly or indirectly attributed to stock. These costs range from acquisition, storage and disposal costs. These costs need to be eliminated to absolute minimum.

Monitoring and evaluation; Precautionary measures therefore need to be put in place to guard against certain occurrences such as fire and theft. The researcher also put forward areas for further research and these are;

  1. Procurement and materials acquisition and organizational efficiency
  2. The relationship between stores department and other departments
  3. Buyer supplier relationship and operational efficiency

Chapter One


1.0 Introduction

This chapter covers the background of the study, statement of the problem, objectives of the study, the scope of the study, significance of the study and the operational definition of terms.


1.1 Background to the Study

Many organizations in Nigeria that do not have proper stock management systems in their operations face a lot of challenges most of which include dependency on the efficiency of the supplier, missed sales in case of stock outs, high costs of obtaining materials and poor customer service. However, organizations have recently found it as having a great impact on the success of the organizations (Frazelle, 2002; Jessop, 1986). Good stock management by a firm will lower costs, improve efficiency and ensure production while at the same time meet fluctuations in customer demand. It will give the firm a competitive advantage as more efficient production can feed through to lower prices and also customers are always satisfied as products will be available on demand. Stock management has been defined by different scholars but all drive to the same meaning. The international dictionary of management (1995) defines stock management as the use of management techniques designed to determine and implement the holding of optimum levels of stock, whether raw materials stocks, bought out goods, work in progress, or finished goods. Stock availability is the most important aspect of customer service. The goal of stock management is therefore to increase financial returns on inventory while simultaneously increasing customer service levels (Frazelle, 2002). Stock management directly affects both the value of the assets used in a business and the quality of services given to customers. Firms should therefore focus on just a few core activities which of course include stock management in order to maintain a long term competitive advantage. Using this approach which has been refined, companies have tried to focus on their stock and have set a stage for wide spread acceptance of advantages of stock management (Baily 1997;)

Lewis 1970; Quinn 1992; Hamel and Prahalad 1994). Baily (1997) explains that it is widely feared that shortages of materials and certain products will be increasingly common in future. Whlie Kotler 1973 and Balachandrian (1975) argue that in times of shortages, the marketing problem shifts its location from selling to buying. Basing on this, Croell (1977) suggests that the purchasing department is expected to provide what is expected of in terms of stock taking, stores lay out and stock levels. The scenario of stock management involves determining the purchasing practice and techniques and strategy. A supply strategy is seen by Porter (1999) as an integral part of the general competitive strategy of a firm. Determining the relationship to have with suppliers is therefore crucial in stock management (Bain, 1959, Lenders, 1965). Nair (1999) explains that stock management involves stock control, purchasing, stock losses, stock cover, stock turnover and general stores operations and materials handling. An example of effective stock management system is given by W. H. Smith who sells 100,000 product lines every year and more than a million orders are placed around 2,000 different suppliers to keeping the shelves stocked at precisely the right level is an exciting task. By feeding sales information directly in the computer, it enables stock to be replenished automatically and quickly and frees staff to help customers and increase sales which in turn lead to success (Daily Monitor 10th October 2004 p 21). Firms that have not embraced the use of stock management in their operations have been reported to miss the chances of maximizing sales. So poor performing industries look to stock management to drive down costs improve performance and revolutionalise traditional systems of production. It is against this background that firms have realized the importance of stock management towards organizational success Lewis and Trevin (2000). Success is the ability of a person or machine or an organization to do something well, (Longman Dictionary, 1987). Success measures are necessary for organizations because they show whether organizations are achieving their target set at strategic and operational levels (Kermally, 1997). Success of an organization is measured basing on many variables regarding customer satisfaction, sales volume, total cost reduction and meeting industry standards. According to Host (1992), sales volume and growth rate of change in sales are used to evaluate organizational success. They are determined by evaluating marketing factors that influence sales, including marketing strategies, competition, promotional programs and distribution decisions. The success of an organization can also be implied on how the organization achieves its mission and satisfy its customers’ needs in the most competitive way. The organization is said to be successful when it can satisfy all its target customers in time, handle customer order in the right time and use the available resources effectively and efficiently. UTC Nigeria Ltd Ltd is one of the biggest mineral water Manufacturing Company in Nigeria as well as West Africa. It is the first company in Nigeria to manufacture Mineral water and have 80% market share in mineral water industry in Nigeria (www.rwenzori.net). The factory is located on plot 588,592 Lagos state. It is 16kms from Lagos city centre on the road to Jinja. UTC focuses its future on innovation and excellence in business. It has a well – equipped PET bottling plant, which can produce over 400,000 bottles per day. The water bottling lines can produce over 300,000 bottles per day. This reflects UTC desire to keep a pace with technological advances.

The company keeps different categories of stock including raw materials, finished products and maintenance repair and operations supplies (MROs), some of which include 500 ml, 1000 ml and 1500 ml water bottles, PET bottles for soft drinks, Plastic containers for cosmetics, chemicals and plastic bottles for medicines. UTC looks forward to strengthening its market leadership through constant enhancement of excellence of its products through innovative manufacturing and marketing, reinvestments and an efficient countrywide distribution network and focuses on extending its market leadership up to at least 95% courtesy of company profile. The company has however not achieved the extra desired 15% of the market share probably because of poor stock management system in place. It is therefore feared that stock management could impact on the success of this organization (www.rwenzori.net).


1.2 Statement of the Problem

Stock management is a very important aspect in an organization, and it allows efficient balance of patterns of traffic flow, use of space, rapid and easy access to stock of input and output general efficient stores operation and customer satisfaction. It is however clear that UTC Nigeria Ltd has failed to achieve the extra desired 15% of the market in the past two years, (www.rwenzori.net). This can probably be attributed to poor stock management systems in place. The researcher was therefore undertaken to establish the relationship between stock management and organizational success.


1.3 Purpose of the Study

The purpose of the study was to establish the impact of stock management on the success of an organization using UTC Nigeria Ltd as case study.


1.4 Research Objectives

  1. To establish the inventory management systems and techniques in place
  2. To find out the costs associated with holding inventory in an organization
  3. To establish the measure of success in an organization
  4. To establish the relationship between stock management and organizational success

1.5 Research Questions

  1. What are the inventory management systems and techniques in place?
  2. What are the costs associated with holding inventory in an organization?
  3. What are the measures of success in an organization?
  4. What is the relationship between stock management and organizational success?

1.6 Scope of the Study

1.6.1 Content Scope

The study encompassed stock management as an independent variable while organizational success is the dependent variable. The study specifically focused on stock taking, and also investigated stock levels in organization.

1.6.2 Geographical Scope

The research was conducted in Apapa district using UTC Nigeria Ltd as a case study. It is located on plot 588,592 block 111 UTC Nigeria Ltd. It is 16 kilometers from lagos Apapa express way on the road to Tincan Iland. It is known to be a large company enough in terms of stock management to cater for all the objectives of the study.

1.6.3 Period Scope

The study considered information from respondents for a period of two years. (2006-2008)


1.7 Significance of the Study

The finds of the study will assist;

  1. The organization UTC Nigeria Ltd to be aware of the relationship between stock management and organizational success and the recommendations will be used accordingly to reform stock problems that might be existing in their organization.
  2. Future researchers will be provided with literatures and recommendations for future research.
  3. The findings will also help other organizations to get an insight on how stock management impacts on organizational success.

1.8 Operational Definition of Terms

Stock cover, length of the time present stocks will last if sales continue at the same rate as in the immediate past.

Raw materials, Basic materials which under go changes through manufacturing process in the course of being incorporated into the final goods.

Work in progress, comprises incomplete items in the course of manufacturing.

Finished goods, items out of the production ready for use.

Success, this refers to achievement or attainment of desired goals or results.

Purchasing, the function responsible for obtaining by buying, lease, tenancy, franchise, or any other legal means of supplies, services or works required by an organization for use in operation or resale.

Stock, components and part finished goods kept in an organization’s stores to be used in manufacturing at future date.

Stock taking, this is the physical counting of materials that are held in the store.

Stores layout, this is how the stores floor is laid and how the materials are kept in the shelves.


Chapter Five


Discussion of Findings, Conclusion and Recommendations

5.0 Introduction

In the previous chapter, the researcher reviewed theoretically and empirically the under lying issues about the relation between stock management and organizational success. The researcher will therefore discuss, summarize, conclude and give some policy recommendations and suggest areas of the further research within this chapter.


5.1 Discussion of Findings

The chapter presents discussion of finds in chapter four in relation to literature review and objectives of the study.

The findings indicate that UTC Nigeria holds stock. These findings are in line with Lysons (2000) who says that almost every organization holds stock whether raw materials, finished goods or in any other form.

The analysis of findings show that respondents attach a great degree of importance to raw materials and finished goods followed by work in progress and lastly maintenance Repair operations Supplies. These findings are in agreement with Bandenhorst and Rooyen (2002) who explain that raw materials and finished goods are part of manufacturing firms. They urge that while materials have been undergoing processing, work in progress assumes existence while maintenance is also crucial for proper and smooth operation of business.

The research indicate market size, total cost reduction, daily sales rate of sales turn over, how corporate goals are achieved, reduced waste, customer satisfaction, total profits, quality production, co-operation rate of returns on investment and achieving mission and vision of the organization.

This shows that measuring organizational success is important. According to Host 1992, Kermally (1997) the success of an organization can also be implied in how the organization achieved its mission and satisfy its customers’ needs in most competitive way. Their argument does not differ from the findings above.

5.1.1 Establishment of Inventory Management Systems and Techniques in Place

The study under this objective focused on the relevant inventory management systems and techniques in UTC Nigeria Ltd.

The study further reveals that UTC Nigeria Ltd carries stock taking. These findings are exactly related to assessment of Baily (2002) that stock taking is partial of inventory management in most manufacturing and production firms. Stock taking is done continuously and periodically. This is in line with CIMA(1998)

The research findings further indicate that manual stock taking is applied most compared to computerized system. However, both complete each other. The response also shows that both manual and computerized are applied in the organization. These findings are in line with Drury (1996) who explains that increase in information technology has necessitated the use of computers in organizations.

It has been discovered that there are certain locations where stock is controlled and managed by competent staff. At this point, all data relating to stock is entered in the computer. This data range from quantity, manufacturer, expiry date, date of manufacturer, and so on. As soon as an issue is done, the computer automatically updates its data accordingly.

The analysis of finding show that the organization holds stock for a number of reasons with most preference on; meeting any future demand and ensure sufficient availability. However, other reasons are also considered but with less degree of importance. These are to take advantage of bulk buying and providing buffer between processes. This is in line with Birichall and Morris (1995) who explains that basing on the analysis of past stock wage and delivery times, a series of stock management levels can be calculated and used to stock at their optimum levels / a level which minimize costs. These levels will determine when to order and how much to order.

The study further reveals that determination of stock levels is dependant on a certain yardstick which varies from organization to organization. To find out how these points are determined, respondents were required to attach degree of importance on some factors raised by the researcher and the analysis was as discussed here in. a large number of response show that consumption pattern and durability of items is considered extremely important and stock holding cost come next. One of the respondents suggested supply pattern as one of the factors. This shows a great agreement with Durry (2002) and CIMA (1998) who identify a few criteria for establishing stock levels.

The findings also indicate that other factors contribute to organizational success. These are ; Proper resource allocation, proper marketing and distribution channels, supplier effectiveness in terms of quality, lead timeliness, streamlined human resource structure, production planning, proper utilization of resources, advertising and brand royalty, team work and motivation, quality products, technology and proper buyer supplier relationship. These findings are in agreement with the findings of Lysons (2000), Jessop (1986) and Baily (1997) who suggest that the success of an organization is dependant on many variables which are varying from industry to industry.

5.1.2 Costs Associated with Holding Inventory in an Organization

The study under this objective intended to find out costs associated with holding inventory in UTC Nigeria Ltd.

The research findings reveal that there are a number of costs associated with inventory holding in an organization. A large number of response shows that stock holding costs and purchasing costs are frequently experienced than quality costs, moreover, other writers like Lysons (2000) and Bhimani, Harsher, Foster and Datar (1999) critically explain that purchasing and stock holding costs are mostly experienced in organizations that hold inventory.

It was however seen that organizations need to reduce these costs to the absolute minimum or else they will continue to impinge on the profits of the organization.

5.1.3 Measures of Success in an Organization

The research reveals that many factors combine to bring the organization success a reality. These according to research findings these are; personal opinion on how organizational success is measured and the response indicate that market size, total cost reduction, daily sales turn over, how corporate goals are achieved, reduced waste, customer satisfaction, total profits, quality production, co-operation, rate of returns on investment and achieving mission and vision of the organization.

This shows that measuring organizational success is important. According to Host (1992), Kermally (1997) the success of the organization can also be implied in how the organization achieves its mission and satisfy its customers’ need the most competitive way. Their argument does not differ from the findings above.

5.1.4 The Relationship Between Stock Management and Organizational Success

From the findings, it can be drawn that stock management is used to evaluate organizational success. These findings agree with the findings of Host (1992) and Kermally (1997) who express the success of an organization is applied in many variables including customer satisfaction and total cost reduction. Basing on the contribution of stock management to the total performance of the organization, the findings answer research question three that there is a relationship between stock management and organizational success.


5.2 Summary of Findings

The study tends to suggest that stock management is the back bone of organizational success. It is widely believed that most production and manufacturing originations hold stock of different types. Therefore the organizations need to take keen interest on management of its stock.

Another significant finding of the study is how stock management is done, the data reveals that there is formal stock management and several steps are applied to manage stock and these are as well s well indicated as stock taking and inventors level tracking.

The findings indicate that stock management is not the only factor contributing to organizational success. Other factors have been discovered in the study as proper marketing and distribution channels, suppliers’ effectiveness in terms of quality and others.

A significant finding of the study s how success of the organization is measured. The findings show that market size, total cost reduction, daily sale, rate of sales turn over, reduced wash, customer satisfaction are used weigh organizational success.

Stock management has got a big impact on the success of an organization. Therefore organizations need to strictly put enough emphasis on the stores department.

There are a number of costs associated with inventory holding in an organization. These range from acquisition, holding and disposal. There are a number of challenges encountered in achieving organizational success which among others include poor management skills, stiff competition and financial constraints.


5.3 Conclusion

Findings from the study show that stock management is important almost to every organization. However, this practice needs to be aligned with the company objectives in order to achieve the intended benefits.

Some employees seem to have inadequate information about stock management. There is a trend of advancement in technology which is significant in originations. This is exemplified by the appreciation of computerized and manual stock taking techniques on inventory management.


5.4 Recommendation

Stock Identification

Organizations hold a wide range of items and identify these items as they are needed is a complicated task. Therefore, stock identification and standardization should be introduced in order to simplify stores operation. However, introducing codes and product standardization are very complicated tasks and therefore the organizations need a thorough understanding of these complete operations.

Costs

Management need to be aware that there are a number of costs directly or indirectly attribute to stock. These costs range from acquisition, storage and disposed costs, these costs need to be eliminated to absolute minimum.

Inventory Management Skills and Techniques

Stores operations are very complicated tasks and therefore require adequate skilled personnel. Management therefore needs to take keen interest on store personnel in terms of qualifications, capacity and interest.

Monitoring and Evaluation

Firstly management need to understand that stock is always at risk whether with in or outside the ware house or store. The risks may include fire, theft, pilferage, damage and destruction.

Precautionary measures therefore need to be put in place to guard against there occurrences for example installing fire fighting equipments in stock, training employees on the use of the equipments, installing CCTV cameras to monitor movements, proper lay out and design of stores and electronic operations like electronic point of sale.

Management needs to note that are recent trends and Philosophies about stock management. For example just-in time, materials requirement planning and many more. These advocate for little or no inventory in organizations. Many organizations that have used them have been successful.


5.5 Areas for Further Research

Accordingly, the following area should be subjected to further research.

  1. Buyer supplier relationship and operational effect.
  2. Procurement and material requisition and organizational efficiency.
  3. The relationship between stores departments and other departments

The result of the findings shall be useful in directing resources which may improve the general position of the organization in the industry.


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