INVENTORY CONTROL AND ORGANIZATIONAL GOAL ATTAINMENT (A STUDY OF NIGERIAN BREWERIES DEPOT, UYO)
ABSTRACT
This study was intended to examine inventory control and organizational goal attainment in Nigeria Breweries Depot,Uyo. This study was guided by the following objectives; to determine whether inventory control can reduce materials wastage/costs and improve profitability, to examine the relationship between inventory control and organizational goal attainment and to examine the relationship between inventory control and organizational effectiveness, productivity and profitability. The study employed the descript and explanatory design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the chi square statistical tool at 5% level of significance which was presented in frequency tables and percentage. The respondents under the study were 20 staff of Nigeria Breweries Depot, Uyo. The study findings revealed inventory control plays a vital role towards increasing the productivity in an organization. Based on the findings from the study, adequate storage facility conducive for modern inventory management should be provided to help the store perform service function effectively.
TABLE OF CONTENTS
Title Page - - - - - - - - - i
Approval Page - - - - - - - - ii
Declaration - - - - - - - - - iii
Dedication - - - - - - - - - iv
Acknowledgement - - - - - - - - v
Abstract - - - - - - - - - vi
Table of Contents - - - - - - - - vii
CHAPTER ONE – INTRODUCTION
1.1 Background to the Study - - - - - - 1
1.2 Statement of the Problem - - - - - - 4
1.3 Objectives of the Study - - - - - - 7
1.4 Research Questions - - - - - - 7
1.5 Research Hypothesis - - - - - - 8
1.6 Significance of the Study - - - - - - 8
1.7 Scope of the Study - - - - - - - 9
1.8 Limitations of the Study - - - - - - 9
1.9Definition of Terms------9
CHAPTER TWO – REVIEW OF RELATED LITERATURE
2.1 Theoretical Framework - - - - - - 11
2.2 Conceptual Framework - - - - - - 11
2.3 Empirical Review - - - - - - - 32
CHAPTER THREE – METHODS OF STUDY
3.1 Research Design - - - - - - - 39
3.2 Population of Study - - - - - - 39
3.3Sample size and Sampling Techniques---40
3.4 Method of Data Collection - - - - - 40
3.5 Research Instrument - - - - - - 40
3.6 Validity of the Instrument - - - - - 41
3.7 Reliability of the Instrument - - - - - 41
3.8 Data Analysis and Technique - - - - - 42
CHAPTER FOUR – DATA PRESENTATION RESULT AND ANALYSIS
4.1 Data Presentation and Analysis - - - - - 58
4.2Testing Hypothesis------60
CHAPTER FIVE – SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary - - - - - - - - 63
5.2 Conclusion - - - - - - - - 63
5.3 Recommendations - - - - - - - 64
5.4Contribution to Acknowledge------
REFERENCES
APPENDIX
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Inventories are vital to the successful functioning of manufacturing and retailing organizations. They may consist of raw materials, work-in-progress, spare parts/consumables, and finished goods. It is not necessary that an organization has all these inventory classes. But, whatever may be the inventory items, they need efficient management as, generally, a substantial share of its funds is invested in them. Different departments within the same organization adopt different attitude towards inventory. This is mainly because the particular functions performed by a department influence the department’s motivation. For example, the sales department might desire large stock in reserve to meet virtually every demand that comes. The production department similarly would ask for stocks of materials so that the production system runs uninterrupted. On the other hand, the finance department would always argue for a minimum investment in stocks so that the funds could be used elsewhere for other better purposes. (Vohra, 2008).
Inventory represents an important decision variable at all stages of product manufacturing, distribution and sales, in addition to being a major portion of total current assets of many organizations. Inventory often represents as much as 40% of total capital of industrial organizations (Moore, Lee and Taylor, 2003:321). It many represent 33% of company assets and as much as 90% of working capital, (Sawaya Jr. and Giauque, 2006). Since inventory constitutes a major segment of total investment, it is crucial that good inventory control be practiced to ensure organizational growth and profitability.
According to Temeng (2010), historically, however organizations have ignored the potential savings from proper inventory control, treating inventory as a necessary evil and not as an asset requiring management. As a result, many inventory systems are based on arbitrary rules. Unfortunately, it is not unusual for some organizations to have more funds invested in inventory than necessary and still not be able to meet customer demands because of poor distribution of investment among inventory items (Temeng, Eshun and Essey, 2010).
Inventory control involves the coordinating of materials availability, controlling, utilization and procuring of materials. Inventory control is the direction of activities with the purpose of getting the right inventory in the right place at the right time and in the right quantity and it’s directly linked to production function of any organization which implies that the inventory control system operated will affect the profitability of an organization directly and indirectly (Alm, 2000).
Inventories are the stock of raw materials, work in progress, finished goods and supplies held by a business organization to facilitate operations in the production process, (Pandey, 1995).Also if the company fails to manage its inventory efficiently, it is likely to face profitability problems (Block and Hirt, 1987).The goal of inventory control therefore is to provide the inventories required to sustain operations at minimum costs (Dickerson 1995).
Inventory control helps organization to establish the proper inventory levels through the economic order quantity; and to keep track of this level through inventory control system which many be manual such as two bin method and red line method, or computerized inventory control systems. Proper inventory controls also require an organization to undertake stocking and use appropriate method to value stock so as not to under or over state profits (Kotabo, 2002).
Companies incur substantial costs in the procurement and maintenance of inventories, which costs form a large portion of production costs. Inventory costs include: carrying costs such as storage and insurance; ordering costs like transporting and store placement; and stock out costs like redundancy and loss of sales. A company cannot achieve an outstanding performance without proper and efficient control of materials. Materials are as much as cash itself and any theft, wastage and excessive use of materials are of immediate financial loss and leads to poor performance of a company (Kotabo, 2002).
Laugero (2002) noted that Material control involved a systematic control and regulation of purchase, storage and usage of materials in such a way to maintain an even flow. In recent years, the breweries company has been facing a number of challenges especially in inventory management or material control, thus affecting the performance of most companies. There have been cases of materials overstocking which eventually get expired or out dated, under stocking lack of stock-taking theft of materials by workers and delays in deliveries of materials at the sites, among others
Inventory control can be done through introduction of different measures so as to prevent the company from incurring unnecessary losses made by different departments. Measures which can be put in place for example stock-taking which is the accounting of stock at every end of the month, so as to record the lost and available stock. Based on the above analogy, therefore this paper evaluates the inventory control and organizational goal attainment of Nigerian Breweries Depot uyo.
1.2 Statement of the Problem
In Nigeria, the size of industry, small, medium, and large scale, has a significant effect on both the numerical strength of staff and level of involvement in inventory control of both raw material and the finished product. The type of inventory system in practice in any organization depends on many factors among which are economic stability of the place, infrastructural facilities available, transportation network and many more which are called constraints For many companies the root cause of underproduction stoppages and high production cost could be easily traced to unscientific method of arriving at a general inventory policies and crucial inventory decisions. The situation is more acute in a developing country like Nigeria, where the practical application of operation research techniques in industry and business enterprise is in its infancy. Moreover, the bulk of raw material inventory and the finish goods inventory used by companies in developing countries have to be imported from the industrial nations of Europe, America and Asia, which gave rise to higher cost of procurement and higher uncertainty in the availability of such basic raw materials. Ogbo (2011), opined that inventories are the goods or materials that are waiting to be used or dispatched for sale. A day-to-day practice in all fields of human endeavour, households, manufacturing firms, servicing firms, etc is inventory control.
Inventory control is the supply of goods and services at the right time with the right quality and quantity. It is a reliable means in which businesses are been managed to ensure customers are satisfied and organization remains in operations via minimization of losses. Inventory control has been a problem to many business organizations in Nigeria. Inventories provide a significant link between production and sales of product, and constitute a large percentage of the cost of production. It is one of the most expensive and important assets of many manufacturing companies representing a considerable percentage of the total invested capital. At any level of a firm, inventory is among the largest investment made and therefore logically deserves to be treated as a major policy variable, highly responsive to the plans and style of top management. However, to date in most organization, both analysts and managers have been relatively unsuccessful in convincing top management to give this area the due consideration that it logically deserves (Ogbo,2011).
Problems of inventory control and control have been around for a very long time. The need to collect food when it is readily available and then store it for times of shortage is perhaps the fundamental stock holding problem, which was tackled long ago by man. Nowadays, we usually think of stocks being held by organizations to allow efficient and continuous operations.
Managers are aware of the vital roles inventory plays in the activities of organizations. In most organizations, direct materials represent up to 50% of the total product cost, as a result of the money entrusted on inventory, thereby affecting the goal attainment of the organization. Organizations at times do not control their inventory holding, resulting in
under stocking and causing the organizations to stay off production, thereby resulting to organizational ineffectiveness. This therefore creates relationship problems between inventory control and organizational productivity, profitability, effectiveness and goal attainment.
1.3 Objectives of the Study
The study sought to know the inventory control and organization goal attainment. Specifically, the study sought to;
i. determine whether inventory control can reduce materials wastage/costs and improve profitability.
ii. examine the relationship between inventory control and organizational goal attainment.
iii. examine the relationship between inventory control and organizational effectiveness, productivity and profitability.
1.4 Research Questions
i. Can inventory control minimize materials costs and improve profitability?
ii. What is the relationship between inventory control and organizational profitability?
iii. What are the relationships between inventory control and organizational profitability?
1.5 Research Hypotheses
Hypothesis
H01: Effective inventory control cannot minimize materials costs and hence cannot improve profitability.
Hypothesis
H02: There is no relationship between inventory control and organizational goal attainment
Hypothesis
H03: There is no relationship between inventory control and the organizational goal attainment and profitability.
1.6 Significance of the Study
This study would be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.7 Scope/Limitations of the Study
This study is on inventory control and organizational goal attainment.
1.8 Limitations of study
1. Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.9 Definition of Terms
Inventory: Inventory is the array of finished goods or goods used in production held by a company. Inventory is classified as a current asset on a company's balance sheet, and it serves as a buffer between manufacturing and order fulfillment.
Inventory Control: inventory control isthe fact or process of ensuring that appropriate amounts of stock are maintained by a business, so as to be able to meet customer demand without delay while keeping the costs associated with holding stock to a minimum. It can also be known as stock control.
Organization: is an organized group of people with a particular purpose, such as a business or government department.
Goal: A goal is an idea of the future or desired result that a person or a group of people envisions, plans and commits to achieve. People endeavor to reach goals within a finite time by setting deadlines.
Attainment: the action or fact of achieving a goal towards which one has worked.
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