ANALYSIS OF THE PROBLEMS AND PROSPECTS OF INVENTORY CONTROL IN A MANUFACTURING COMPANY (A CASE STUDY OF NIGERIA BOTTLING COMPANY PLC ILORIN PLANT)
TABLE OF CONTENTS
TITLE PAGE PAGES
LIST OF TABLE IV
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 2
1.3 AIMS AND OBJECTIVE 3
1.4 SIGNIFICANCE OF THE STUDY 4
1.5 SCOPE AND LIMITATION OF THE STUDY 6
1.6 RESEARCH METHODOLOGY 8
1.7 THE HYPOTHESIS OF THE STUDY 8
1.8 ORGANIZATION AND PLANS OF THE STUDY 9
2.O LITERATURE REVIEW11
2.1 INVENTORY CONTROL DEFINITION AND TYPES 11
2.2 IMPORTANCE OF INVENTORY CONTROL 12
2.3 MATERIAL PURCHASE 12
2.4 MATERIAL STORAGE 13
2.5 CENTRALIZATION OF MATERIAL STORAGE 13
2.6 INVENTORY VALUATION METHOD (MATERIAL PRICING) 14
2.7 STOCK TAKING 16
2.8 BRIEF HISTORY OF THE ORGANIZATION 17
2.9 COMPUTERIZATION OF NBC PLC 18
2.10 CALCULATING THE ECONOMIC ORDERING QUANTITY (EOQ) 19
3.0 INTRODUCTION 24
3.1 RESEARCH DESIGN 25
3.2 POPULATION OF THE STUDY24
3.3 SAMPLE SIZE24
3.4 SOURCE OF DATA AND DATA COLLECTION INSTRUMENT25
3.5 QUESTIONNAIRE BASIC ASSUMPTION 26
3.6 STATISTICAL TECHNIQUES/TOOLS 26
3.7 PROFILE OF THE CASE STUDY 26
4.0 DATA ANALYSIS AND PRESENTATION 28
4.1 INTRODUCTION 28
4.2 CHARACTERIOSTICS OF RESPONDENT ANALYSIS 28
4.3 THE HYPOTHESIS RESULT 33
4.4 DISCUSSION OF FINDINGS 34
5.0 SUMMARY OF INDINGS, CONCLUSSION AND RECOMMENDATION 37
5.1 SUMMARY OF FINDINGS 37
5.2 CONCLUSSION 38
5.3 RECOMMENDATION 38
1.1 BACKGROUND OF THE STUDY
A major problem facing the stock control has affected the growth of business or company is the determination of an economic order quantity that will minimize total inventory cost. The purchasing department only orders the amount needed to attain the maximum stock level whenever stock reaches or fall below the minimum stock level. While the company fails to realize that the minimum level does not have to be attained always, it has cost implications whenever stock falls below minimum level, ordering cost per unit decreases as quantity increases, however, there will be an increase in carrying cost. Hence, total cost is not minimized whenever the quantity order is greater than the optimum required that is the economic order quantity.
The company is faced with the problem of delayed with regards to local supplies of its production materials such as sugar, and water bottle soften carbon(iv)oxide02. even though local supplies constitute only 28% of the total production material used in most cases, supplies fail to meet the delivery date upon because they do not know the exact materials required and yet will not admit ignorance. The high value part of the materials on the one hand and the financial inability on the part of suppliers initially may not realize the huge amount of capital involved with the result that they will not supply at all and fail to inform the company of their inability to supply.
Consequently, the company incurs cost in sending remainders and in cancellation of orders prompt delivery of production material is of primary concern to management.
Delay in the delivery of these materials will lead to the increment of enormous cost by the company.
1.2 STATEMENT OF THE PROBLEM
The importance of stock in any organization can be over emphasized and its control must be accorded a great attention so as to minimize some of the problems associated with inventory control. Some of these problems are:
i. inventory valuation method are many
ii. There are improper record keeping
iii. The supply of raw material by contractors is ineffective
iv. No policy regarding minimum and maximum stock levels determination
v. The company adopts manual inventory control system
vi. The bi-annual stock taking is not enough for effective control.
B. PROBLEM OF STOCK MANAGEMENT DUE TO INEFFECTIVE STOCK CONTROLL SYSTEM
For accurate pricing of stock, these has to be an effective means of recording the movement of stock. This is to say that the recording must be up to date regarding materials prices. The following are major problem of stock management due to ineffective stock control system.
i. Material are brought at different prices
ii. These material becomes unidentifiable from other undesirable from costing point of view
iii. Profit calculation is affected by the pricing method adopted by an organization, particularly where materials from a large of raw material due to suppliers cause problem of stock inefficiency management
iv. Storage: material like concentrates chemical require fully air conditioned, very cold room
v. Ineffective supply of raw material due to suppliers cause problem of stock inefficiency management.
vi. Capital tied down due to ineffective control system
vii. Quality of materials; there may be available found but in absence of materials of the desired quantity for graded materials, problems ensure.
1.3 AIMS AND OBJECTIVE OF THE STUDY
Inventory forms a large proportion of any firms working capital and therefore, there is need for effective control by management which is like major objective of this study on inventory control system
i. To have a general critical review of managing problems arising from stock control of the soft drinks industry
ii. The Bi – annual stock taking adopted by NBC plc to be used as a case study industry.
iii. Ways of correcting faulty valuation method and at the same time determine the suitable stock valuation method for the particular circumstances of soft drink companies Nigeria
iv. To check the problem of determining the E.O.Q
v. To suggest appropriate policy regarding determination of maximum and minimum stock levels.
vi. To look at possible means of bringing to minimum the huge expenditure on stock control
vii. The effective management of available funds will be the result of effective stock control system
viii. Management information system (MIS) to enhance control system on introduction of computer
ix. Clerical operations account for inefficiencies in management control on inventory
x. To look at the ways of making maximum and effective use of the seemingly washing human resources who are not fully utilized in management control system of stock other implement to efficiency of stock management in organization which with equally draw attention in this study include
xi. Fraud and misappropriation of stock balance (quality) and of pricing (price)
1.4 SIGNIFICANCE OF THE STUDY
Significantly the study is aimed at achieving the significantly purpose in the NBC plc and in the soft drinks industry as a whole
i. To achieve inventory control function of ensuring that sufficient goods are retained in the stock to meet all requirements
ii. The key to stock control system and efficiency of stock management is in ensuring a balanced position providing material needed for production, maintaining the economic level for material of different nature, at the right time and place yet keeping the cost incurred in so doing to a minimum level.
iii. The possibility of carrying unnecessary large stock resulting in obsolesce of stock items wastage and eventual lost of funds will be tackled
iv. In financial management, it is believe that few percentage saving on a large scale would mean large amount of money high ways of bringing the huge expenditure on stock control system to the best minimum.
v. To provide an insight to student, researchers and other interested persons or organization on inventory system practiced in real life situation as compared with the theories of inventory really applies, especially to soft drink companies
vi. This study will highlight the cause of problems encountered in controlling stock in NBC plc and find suitable solution to eradicate these problems
vii. To suggest ways of ensuring continuous supply m of materials to facilitate an uninterrupted production process
viii. To control invest met in stock
ix. To attain a high level of efficiency by reconciling the practice with the theory because the theoretical aspect is a model system on which the practice of inventory control is based
x. This study will reveal the need for the company (NBC PLC) to go computerized regarding inventory control
xi. Problems which arise in the course of inventory control in practice are highlighted and suggested solution proffered
xii. It is hoped that the study will serve a very useful purpose to the ,Nigeria Bottling companies (NBC PLC) as well as other soft drink have been produced in the area of inventory control
1.5 SCOPE AND LIMITATION
The scope of this research work concentrated on three segments, they are: section, time and area of inventory control in manufacturing company
a. Section of inventory control: The major section of inventory would be classified into three ways namely; raw material, work in progress and finished goods.
Raw materials: Material purchased or produced in either natural or manufactured condition used for production or operating activities
Work in progress: This project work will look into the work in progress that has not reached the state of completion as part or component. There are items which are still incomplete in the course of production that is they are still under the production process or part processed materials.
Finished goods: There, we would look into items, which had undergone production process. This constitute product awaiting sales or dispatch.
b. Time of inventory purchase/lead time for
delivery; material is the corner store of any production process, without material, the bottling (production) process can not take place. This is because material serve as the input which is change during the production process and becomes output. In order to obtain an out put of the derived quality materials of appropriate quality and specification should a supplying department, very necessary. The irresponsibility of this department amongst other include negotiation for good price quality material of the right specification timely delivery fall which are crucial.
According to Owler and Brown- the buyer in a manufacturing to business has considerable responsible and is large concern much money can be lost shred by his department. He required a good technical knowledge of constant torch with market prices, report and market tendencies and have a working knowledge of con
Tract law and procedure, together with a practical understanding of the principle of economic laws. With regard to price the supply functional/department has to make sure that the price at which it is buying the material is the most.
REASONABLE: Represents a balance between price quality and delivery time (lead or procurement time) the reasonable price can also be achieved by taking advantage of bulk purchasing. The purchasing action has to ensure that the three factor (price quality and delivery time) are thoroughly considered and weighted in order to achieved an optimum result.
C. Are of Inventory control: In this area, stores department function and responsible will examined economically material identification receipt and inspection issue and dispatched and store accounting economy. It will be the responsibility of store to manage store economically in order to avoid breakage, whether or absorption of moisture by material ,and ensure maximum efficiency.
Material identification:- Then store will expect to prepare a code, adopt material specification and introduce a degree of standardization which will according to the senior store office is aimed at:
i. Preventing duplication of item
ii. Simplification of material recording and control
iii. Simplifying of ,mechanical recording
Receipt and inspection- This ,means a process of accepting from all source, all material equipment and part used in the organization and inspection, the examination of incoming consignment to see that the material is required one, and if it will be good for the job.
LIMITATION OF THE STUDY
In carrying out this project, I was faced with some limitations ,and constraints such limitation and constraint includes:
I. Time available for the research work: The time given to exceed the project is not much and considering the fact that the research is time consuming and needed enough time.
II. Finance in acquiring text books, journals and other materials on stock control are limited
III. Convenience: Undertaking a project is not commodious, it is time consume and materials.
1.6 RESEARCH METHODOLOGY
This chapter deals with various methods used in collecting the data needed for the purpose of this study, this includes design data collection and identification of population determination of sample size, questionnaire assumption and secondary source of data, which consist of questionnaires, interview and observation and information collected from secondary source of data are books, magazine and journals.
1.7 HYPOTHESIS TEST
A hypothesis is some testable believe or opinion, hypothesis testing is the process by which the believe is tested by statistical methods. When hypothesis is tested, there are only four possible result that are obtainable, they are:
a. We do not reject a true hypothesis is correct decision
b. We reject false hypothesis- correct decision
c. We reject true hypothesis- correct decision known as a type of I error
d. We do not reject false hypothesis.
In correct decision known as type II error hypothesis testing is also known as a significance testing.
REPLACED QUESTIONNAIRE FOR HYPOTHESIS TESTING
For the purpose of this research, two hypothesis were formulated and shall accordingly be tested in chapter four.
These hypothesis are
i. That the determination of the
*Computerized inventory control system will enhance efficiency of stock management, growth and cost reduction.
ii. That the policy adopted by the company regarding inventory level determination is the best for the particular circumstances.
1.8 ORGANIZATION AND PLAN OF THE STUDY
The project is broken into five chapters, and each chapter carried a significant role to the meaningful and completion of this project. The chapter goes thus:
Chapter one, comprises of the introduction aspects of the project which are background of the study, statement of the problems, aims and objectives, significance of the study, scope an d limitation of the study and organization and plans of the study.
Chapter two dealt with the literature review of the study which talks about inventory control definition, type of inventory, importance of inventory control, material purchase, material receipt and inspection, material storage centralization vs decentralization of material storage, inventory valuation method material pricing, stock taking continuous stock taking, brief history of the organization, social responsibility through sport development and computerization of NBC PLC.
Chapter three contains the research methodology data collection, questionnaires
Chapter four deals with data analysis where test were carried out to prove reliability of the data gathered.
Response testing of hypothesis and gives a comprehensive summary, finding an d of the treatise and recommendation to the management of Nigeria Bottling company plc.
Reference: are given at the end of chapters..