IMPACT OF INVENTORY MANAGEMENT ON ORGANIZATIONAL PRODUCTIVITY

IMPACT OF INVENTORY MANAGEMENT ON ORGANIZATIONAL PRODUCTIVITY

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CHAPTER ONE

INTRODUCTION

1.1            Background to the Study

Inventory planning is an extension of stores keeping, which has been in practice since the history of man. It has a widened scope of activities today. Inventory planning is an act of loading often some valuable items for future uses and to produce them when the need arises. Inventory planning goes beyond, the scope of keeping and producing the items only but also involves controlling of operations, receiving, inventory control, quality control, activities training of stores staff, control of all store houses, stock handling as well as clerical documentation

Inventory management is not just an inventory activities in an organization but also a profit oriented function. The function directly effect profitability of the organization through the intelligent and effective management of material into the store and out of the store, in the light of this inventory management and control is meant to ensure that material are readily available to be used in the department at all times considering the effect of non availability of materials to the organization’s operation.  Stock items make up more than half of the organization fund and as such personnel in the store department must ensure that proper records of store transactions are kept at all the times. In fact it has been estimated that in manufacturing industry an average of more than half of its total sale revenue is spent on procurement of material and component parts, thus consideration must be given to such function.

The increase specialization of industry in modern time has progressively enhanced the importance of the subject of this study, because firms that concentrate on the manufacturing of their own specialized line of product and at times buy out an increased proportioned of materials either in form of raw materials, semi processed or even finished goods and parts need to have a control measure to ensure that materials are not over stocked. The economic purchased storage and control of materials which can make significant contribution to the profit margin is often neglected by management and as such a reflect on the impact of effective inventory management is essential.

Mistakes are mistakes and everyone makes them, however, not following a specific procedure is a conscious decision made by the employee to not do what he/she was instructed to do. Year-end physical inventories are tools used by accountants and do very little for inventory on a continuous basis (cycle comting) to maintain high levels of accuracy. This is one of the best ways of identifying problems areas on a timely basis and providing an environment conductive to continuous improvement. The way you count and the frequency of your counts should be designed for your specific type of operation. You should be regularly reevaluating your processes and procedures. Results of your cycle count program should point you in the direction of areas where enhancements are needed. Business condition often change and new processes are added which will require evaluation. It is more effective to plan a revision data and group multiple revisions release of the procedures. These revisions should be implemented with the proper training and testing as was done during initial implementation improving imentory accuracy is not very complicated, the implementation can pure to be demanding. Depending on the environment you are working in, it can sometimes seem to be an insurmountable task to change the attitude of people towards invnentory accuracy. It will require a high level of effort and deliquesce to ensure success. Developing the discipline and the skills in stocktaking is very significant in ensuring success of the operation. To maintain personal and professional accountability, fellow few simple guidelines are of paramount in carrying out effective stocktaking exercise.

This project is aimed at finding an avenue to lay a foundation for a solid inventory management of the inventory operations especially at this time of economic recession which has engulfed the whole nation. Inventory exists to secure the interest of the people (department) and to provide these services efficiently it must maintain a clear link with the rest of the department maximization.

1.2            Statement of the Problems

The study of Inventory management or administration stated late, unlike the study of other fields of human endeavour, such as medicine, engineering, law sociology accounting and public administration to mention but few. This is not to say that it did not exist at all. This field has not attracted people who could see public interest perhaps man have been taught that “Dick and Harry” can work in this area (Inventory). Every year organization prepared and implemented one type of economic policies/budget whereby a large sum of money is spent on acquisition of materials other than terms without making an adequate planned effort to provide for Inventory facilities. These lapses coupled with improper stock control system and call and lack of trained personnel account for the ineffectiveness of Inventory function in the public and private sectors in which the Nocaco Nig Ltd, Kaduna is one.

Some of these problems include shortage of stock, over stocking, poor recording of stock wastage, stock out etc. However, it is pertinent to note that there is problem associated with unreliable delivery of stock by suppliers as  a result of transportation routine, strike, lack of expediting, political instability etc.

It is against this background that this study assessed the impact of inventory management on organizational productivity of Nocaco Nigeria Ltd Kaduna.

 

1.3            Objectives of the Study

The main objective of this study is to assess the “impact of inventory management on organizational productivity. Other specific objectives are to:

i.                   Determine the effectiveness of the inventory management techniques used by Nocaco.

ii.                 Identify the benefits of inventory management to Nocaco.

iii.              Identify the factors affecting Nocaco’s inventory management.

iv.              Determine the impact of inventory management on profitability.

1.4            Research Question

The following research questions was drawn for the purpose f the study

i.                   How effective is inventory management techniques used?

ii.                 What are benefits of inventory management?

iii.              What are the factors affecting inventory management?

iv.              What are the impacts of inventory management on profitability?

1.5            Significance of the Study

The research work will carry out to benefit the followings:

-         Researcher

-         Organizations

-         Society in general

Organizations

It is also assumed that this study emphasize on the reason why inventory management should be proactively approach many organization and also taking corrective action for any defective items. It will also help organization on how efficient inventory management can contribute to the survival and profit level of an organization with particular references to Nocaco Nig Plc, Kaduna and other organization stand to gain if they employ and   apply the right inventory management manned by qualified and trained professionals.

To the Society

The study will also provide the public with first hand information and knowledge on how store or material are managed in organization with regards to Nocaco Nig Plc, Kaduna.


 

Researcher

The project work will be beneficial to subsequent researchers who will want to undertake a research into similar or related field of study as it will provide them with relevant information on the subject matter.

Furthermore, it is also a requirement in partial fulfillment for the award of Post-Graduate Diploma in Procurement and Supply Chain Management of Kaduna State University.

1.6            Scope of the Study

The scope of this study is limited to inventory management of NOCACO Nig Plc, Kaduna. In trying to decide the relationship that exists between the variables under study, and critical review of related literature is made including, inventory management definitions, Rationale behind the firms decision for keeping inventories, inventory techniques, objective of inventory management, factors affecting inventory control system and classification of inventory etc. This will provide insight into the variables under research.

 

1.7            Definition of Key Terms

Stocktaking – stocktaking can be defined as source of stock discrepancy information

Accountability – is taking responsibility for your words and actions

Economic order quality – is a quality of materials to be ordered at a time.

Minimum stock level – is the lower limits which the stock of any stock item should not normally be allowed to fall.

Maximum stock level – represents the upper limit beyond which the quality of any item is not normally allowed to rise to ensure that unnecessary working capital is not blocked in stock items.


 


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