CHAPTER ONE
INTRODUCTION
1.1 Background
to the Study
Inventories are contemporary with human beings.
Inventories are in the form of raw materials, work in progress and finished
products. The knowledge of inventories
was not scientific; however, inventory management control and its application
experienced a phenomenal growth in real life. Harris (2005) was able to develop
an equation on economic lot size, which demand was known much by industrial
engineers, economist and mathematicians. Since the start of 1950s until now, an
enormous wealth of inventory material have been published.
It is followed by permanence acceleration of interest
in the analysis and control of existing real inventories. They are the result
of strong motivation for theoretical and practical work in the area of
inventory system, while the theoretical aspect of inventory management control
has raised such question as to forecasting, decision making and complex
optimization problems. Deterministic and statistic in nature, the practical
aspect of inventory is considered as containing numerous items with a wide
variety of demand pattern, mode of commodity or multiple stock structures.
In fact, there had been more presentation of papers,
monographic manual and textbooks on inventories to facilitate better and
scientific understanding of inventory management control.
1.2 Statement
of the Problem
The lifeblood of any organization being it private or
public sector is material, and this has been neglected long ago by various
businesses concerned. The survival of any business set up depends upon efficient
application of inventory function, policies involved and recognition according
to the function, up till now, inventory control has not been able to occupy its
rightful position due to reason of the other. There has been infringement- on
the right inventory management personnel. They are often restricted to more
electrical work in organization.
The lack of recognition for inventory control function
in much organization has caused so many havoc for instance where the function
is force to be recognized and established because of the demand, wrong
ill-equipped personnel are assigned to manage the affairs of the various
activities to compound this problems, the function responsible for the manpower
operation have few or no plans for the low level personnel to benefit from the
staff training programmes which would have enhance the basic skills
professionally. Therefore, this research work seeks to focus on the following
questions among others.
a. Dose inventory control has any direct effect
on profit?
b. How
can inventory control be effectively handled in an organization?
c. What
are the factors that can affect inventory control in an organization?
d. Where
is good delivered to in the organization?
e. Does
the organization always keep store records for accountability?
f. Where
does purchase requisition originated?
g.
How
are goods located in the warehouse?
1.3 Objectives
of the Study
The objectives of this study
are as follows:
1. To take general look at inventory control
techniques as a tools for enhancing profitability in manufacturing
sector.
2. To also
analyze how issue of inventory is done as well as inspection and stock taking in the organization and how it
affect inventory control.
3. To show how
material, tools and other shop supplied at required time and in the required
quantity to meet the factory programme.
4. To reveal to
the management of the organization that proper implementation of inventory can
reduce wastage cost.
1.4 Statement
of Hypotheses
H0: Effective
inventory control has no positive impact on the productivity of an
organization.
H1: Effective
inventory control has a positive impact on the productivity of an organization.
1.5 Significance
of the Study
The study tries to portray the need for planning and
controlling inventory since inventories are as productive of earning as other
types of capital investment the need for this is further emphasized in a
developing country like Nigeria, where inflation is rampant and lack of
improper management of inventories will lead to cost maximization or loss of
revenue to a company as a result of inadequate inventories to meet customer
demand.
This study will be of immense value to all manufacturing
organization, as it will facilitate their inventory management and control
problem by fixing solutions. This study we saved as a good base for further
researchers into inventory management in production firms. I also consider this
extended project report as a good opportunity for me to unfold more facts about
the role of inventory control in an organization or in any manufacturing
sectors. It is also for the benefit of other students who may wish to read
through this project work in the future.
1.6 Scope
of the Study
The scope of this study
is based on the impact of inventory control as a technique for increasing
employees’ productivity in an organization. But the study is limited to
Coca-Cola Bottling Company Plc, Kaduna. The period covered by the research is
2005 – 2010.
1.7 Limitations
of the Study
Every research
activity has its constraints. This particular one is however not an exemption.
Certain factors limit the process of writing this research work, which include:
1) Inadequate
Research Materials:
The research
materials on this subject matter were very few. The much relied library is
filled up with outdated books, which are of little relevance to current
research.
Moreover, the
cost of new and up-dated materials is exorbitant, which make them not readily
affordable.
2) Lack
of Cooperation of Subjects:
Sourcing for
information from respondents was not an easy task, particularly with regards to
some information that are regarded as classified or highly confidential to the
company. The degree of cooperation of staff of Coca-Cola Bottling Company was
very minimal.
3) Low
Return of Questionnaires:
In the process of
gathering data, it was discovered that not all the questionnaires issued out
were returned. Some of them were also wrongly filled which means a great deal
of relevant information was held back, and which could have enhanced the
quality of this study.
4) Inaccessibility
to Subjects:
Another
constraint encountered during the research is the inaccessibility to the
General Manager who was not always on seat to provide desired data.
These constraints however, did not have too much
effect on the research work because the researcher did not retard, and she was able to present an
all-inclusive research report
worthy of recognition and acceptance.
1.8 Definition
of Operational Terms
Inventory: An inventory is a stock or store of goods firm typically
stock hundreds or even thousand of items in inventory, ranging from small thing
such as pencils, paper clips to large items such as machines, trucks.
Naturally, many of the items a firm carries in inventory relate to the kind of
business it engages in.
Control: Control is the measurement and correction of the performance
of activities of subordinate in order to make sure that enterprise objectives
and plans are attained.
Raw Materials: These are items which are to be processed through production
processes to obtain the desirable finished goods.
Finished Goods: These are product of the whole
production process.
Warehouse: Is a building where materials or it items held in stock are
kept and protected against an authorized removal and also a place where
materials are received store accounted for recorded and replenished when
due.
Safety Stock: This is the quantity as items, which provides a buffer
against variation in lead time.
Lead Time: Cost to carry an item in inventory for a length of time,
usually a year.
Ordering Cost: Costs of ordering and receiving
inventory
Shortage Cost: Goods resulting when demand exceeds that supply of inventory
on hand: often unrealized profit per unit.