The Importance Of Inventory Management In Small Scale Enterprises

Project and Seminar Material for Business Administration and Management BAM

The Importance Of Inventory Management In Small Scale Enterprises

Chapter One


1.1 Background of the Study

Most business organisation that makes investment that will make them to achieve their corporate objectives, these investment are typically in land, building, machinery, stocks of various types, debtors and cash when organisation are assessing investment project account must be taken not only on the investment in a mom durabh (fixed) assets but in the current assets as will. Current assets are these that will not remain permanerntly in a company of which stock inventory is our will be linked up with its performance not to put too times a point in the organisation efficiency. Basically inventory (stock) falls under three broad categories.

Raw materials, which are the item, the company holds ready for use in the production process reguired.
Work-in- progress, these are particularly manufactured product of manufacturing industry

The finished good, which are the goods a stock which are the goods or stock which are ready for sales by the organization, for the benefit of this research work, we shall be concerned with the position or benefit of industry control in manufacturing. One should not that when controlling inventory, one should let share holders maximization to be in consonance with the times goals. When inventory control is imbalanced there should be stock which, could lead to reduction of sales and which can lead to lose of customer to another competitors.

1.2 Statement of the Problem

Business today sly away from running a small or medium business many have neglected opportunities because of their fear of failure the first problem limitating against most industries is lack the inventory control system to be used which will suit the need of the organization.

Problem also occur in the area of production, marketing, personnel, and finance there has leen the problem of internal valuation via inventory controls the inventory control system has a direct impact on the profitability of the organization operation and that is why the study came to being.

1.3 Statement of Objectives

Despite the limitations of this research work our porpose and focus of writing this is to work out the impact of inventory control as part of capital with respect to organization performance.

Secondary to have an over view of inventory control, store procedure pricing stock taking and of course the general problem accoutered to the above mentioned process, increases is to establish an empirical, justification for the introduction of means and wants of remediating the stated problems and also to recommerd more objective and rational is carried out mainly to sofeguard the assets, check agueacy and reliability of accounting department and to promote operation efficiency, encourage adlierence to presentable management policy and ensure accurate reporting.

1.4 Statement Of Hypothesis

  1. (Ho) poor inventory management is s a result of inadequate stock control facilities.
    (Hoi) poor inventory management is not as a result of inadequate stock control facilities
  2. (Hoi) storage space limited the size of inventory held by small scale firm.
    (Hoi) storage do not limit the size of inventory held by small scale firm.
  3. (Ho) proper classification of stock is a major or determinant of efficient inventory control
    (Hi) proper classification of stock is not a major determinant of efficient inventory control.
  4. (Hi) poor inventory management results to either overstocking or under stocking problem.
    (Hi) poor inventory management is not as a result of inadequate stock control facilities.

1.5 Limitation and Delimitation of the Study

To say there was to limitation during this research will be an under standing as the research focuses on inventory control. Apart from the limitation is inadequate information some data were given as expected within others were given as all they were classified as given companies secrets.

However due to financial constraints and time factors the researcher has decided to further limit the study to inventory control system. The research was able to collect information.

1.6 Definition of Term

It is important at this point to offer some delimitation and encourages to some of the terms that form the operational framework for the research work in order to facilitate clarify of purpose.


The quality of goods on hand and available for sale at any given time similarly, it is the measure amount of some goods which varies in quality war time in response to demand process, which operate to diminish the stock and a replenishment process which operate to increase it.

Charging Cost:

Are cost incurred for holding inventories including opportunity cost of fund lavested inventory insurance, cost of deterioration and obsihucence.

Suffer Stock:

Otherwise know as state stock is guantity of stock held in order to ensure. That demand is not even when order one in transit.

Lead Time:

This is time of actually receiving the materials (orders).

Ordering Cost:

This consist of the clerical cost preparing a purchase order and the special processing and receiving cost related to the number of order processed.

Economy Order Quality:

The optimum quantity of inventory to be purchase that minimize the carrying cost and ordering cost.

Minimum Stock Level:

The level below stock should normally be allowed to fall.

Raw Material:

This one these basic input materials that one contented into finished product through various processing.

Chapter Five

Summary, Conclusion and Recommendation

In view of the data gathered summary conclusion and recommendation would be analysis as followed.

5.1 Summary of Finding

Having analysis and interpreted the data gathered from Raz resources limited Kaduna, here are the findings
Findings shows a clear analysis of the contribution of efficient inventory control as it improved the performance of the organization particular reference to Raz resources limited Kaduna.

The findings also specified the types of inventory records kept by organization which also help in keeping adequate records to stock or material kept in the store.

The working experience of personal in the organization Raz resources limited was also shows clearly in the finding with the large number of staff working for less then two (2) years.

It also shows where raw materials one sourced from by the organization and also the ways and manner in which stock are received and issued in the organization.

The result of the findings shows the problem encountered by inventory control and also the problem of lack of adequate fical personal in relevant areas in the store.

5.2 Conclusion

Conclusion has been readied based on findings in the chapter written. The major problem of inventory control in Raz resources limited are in area of stock taking improper or wrong store procedure and practices and the insufficient qualified personnel in relevant department.

However it was noted that the organization is a profit making organization which of courses did not need the level of stock in the store to be at maximum or minimum, level before utilization. It was also noted that, there exist an overwhelming problem of absolute machinery and store items.

More over the cost accountant can contribute to the solution of inventory problem by supplying reasonable accurate cost data that are needed as inputs thus conventional accounting report will tend to reveal less about the efficiency of inventory decision rules that will specially aim at obtaining information for specified inventory decision.

5.4 Recommendation

No matter how perfect an organization is there must be one or two lapses interest in the system. In light of the findings and discoveries made, the following recommendation are provided by the researcher

  1. The procedure for receiving and requisition of inventory control items should be well taught and an trolled.
  2. Inventory must be maintained so that were department would not be faced with the problem of stock out of available materials in the central store.
  3. There should be a research to know more ways of improving some of the planning and control system which have coursed some difficulties in the whole system.
  4. The inventory control should be adequately organized to monitor inventory balance in such a way that the primary activities of the company are not disrupted recording and stock taking are vital because its help to highlight danger point which must be avoided.
  5. Proper record should be kept of Naira amount as well as the physical units of the inventory.
  6. Inventory problem such as stock out should be avoided by palling order and receiving deliveries to coincide with peak period.
  7. Organization should employed more qualified personnel into central store department so that store can be more effective manage.
  8. The Organization should avoid the change of staff in the store frequently except if it is necessary in the since that the new staff employed may required training which for more additional cost.

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