CHAPTER ONE

INTRODUTION

1.1     Background to the Study

Stock is very crucial in an organization is day to day activities, such as maintenance of plant and machinery and for other operational requirement the normal way is to have more invention so that most of the items will be available when needed. This result in typing down the money which otherwise have been used more productively.

The need for inventory control has been attracting the attention of managers over the past years, this is because it is a general belief among scholars that 50% to 90% of organizations financial resources are kept in the store. The management becomes very concerned if the inventory cost are higher owing to the fact that stock is part of asset of a firms balance sheet and there fore is under close management care.

Stock control can be defined as an art and science of achieving the objective of the inventory in an organization. It involves planning, organizing, staffing, controlling and coordinating all the inventory operational activities for provision of efficiency service. Inventory is a serving center and the service to produce must be carefully handled more organized to meet the demand of all units or department that constituent the organization for optimum profitability.

More so, the management is very critical about any shortage of item required for production. Any increase in the downtime of the machine due to the shortage of material lead to production loss. These two extremes calls for continuous inventory control. Also stock control is not all about physical balance of consideration areas of minimizing inventory cost, that is cost reduction of the organization’s spending avoiding shortages, avoiding excessive stocking and increasing inventory turnover are some vital issues concerning stock control. This means that the purchase of material should be for the quality needed and the purchase quality should be neither in surplus nor less. So purchase has to be made at the right time and at the most economic costs.

In today’s business environment, control of inventory is the final management control and at least the Japanese have proven this to be true. It is therefore important to note that organization that succeed in controlling the quantity and cost of inventory stands the chance of doing Well when they fail in exercising the strategic function the organization suffers.

Thus, inventory control is therefore a strong tool for cost reduction and profitability in an organization. Stock exists to secure the interest of the people (department), and to provide there services efficiently. The researcher decides to write on the implication of stock control on profitability. a case study of Nestle Food Company Nigeria Plc. The researcher develops the interest to carry a lot of research on this topic and also to find out the effect on organizational performance. The researcher also feels that

this is an opportunity for him to research on the implication of stock control insuch organization and see practically how Inventory control activities are been carried out. Also the role and importance of inventory control has been on the increase in recent times, there fore, a need to find solutions to its problems so as to enhance improve and better efficiency in the organization.

The basic concept of stock control is quite simply the right material, in the right quantity, of the right quality at the right time and place. Continuity in production demands a constant availability of materials. Holding material cost money and not having enough to support production requirement as at when due cost the organization money, therefore materials. Control, in organisation needs to be adequately planned for control and coordinating in such a manner that organization will strike a balance between cost of holding stock and costs of stock but with minimum investment in materials acquired by the organisation. Therefore stock control is the process of ensuring that the stock held by the organisation is supplied to those parts of the operation that require items, bearing in mind the factors of time, location, quantity, quality and cost.

1.2     Statement of the Problem

Stock control has problems in general, especially in area of discoveries, theft fraud obsolescence, deterioration and breakages. All these constitute a great loss to establishment coupled with this is also the problem of excess stock of some items with its attendant consequence of tying up capital in stock. Malpractice are mostly experienced with materials which are small in nature but of very high value. These materials are easily stolen because there is no proper method of control.

These problems are not limited to a single establishment rather, they are universal problems still facing many establishment. In the establishments, large sum of money is spent in acquiring material and they are left lying down idle and uncontrolled, this is because the management pay little or no attention to the control of inventories.

They do not see stock control as a contributing factor to project ability or major contribution not efficient in the organization. Stock problems are also connected with failure on the side of establishments to employ adequate and competent qualified staff.

Stock have always been flooded with illustrated and semi illustrate or regarded as unproductive personnel because of the notion that the stores is nothing more than receiving and issuing section. In most establishment, the inventory lack proper control and security. Most of the stores building were colonial in nature which can no longer cope with modern facilities such as facelifts, side loaded cranes, store equipment to mention but a few. The result is that, valuable inventory space which could have been utilized is wasted.

It is clearly to see in many organisations the rate of obsolescence, obsolete, deterioration and redundant materials spread or scattered all over the available open space and store in many firms this day. The reason behind this is poor stock control system adopted by some of these firms.

Moreover the researcher observed that stock is very important to any organization to their manufacturing or merchandizing, such function needs to be strategic approach by many organisation. The decision of stock control should formed part of the organisational vision, mission and objectives statements and should always be discussed in the board meeting of the firm, because stock is the life blood of the organizational cost reduction and profitability.

 

 

1.3 Objective of the Study

The main objective of this study is to examine the impact of stock control on profitability of Nestle Food Company Nigeria Plc.

Other specific objective include to;

i. Determine the degree of importance placed on stock control by Nestle Food Company Nigeria Plc.

ii. Determine the extent to which stock control strategies adopted by the organization help in reducing cost in Nestle Food Company Nigeria Plc.

iii. Determine the methods of stock control system adopted by the Nestle Food Company Nigeria Plc.

iv. Know the challenges facing Nestle Food Company Nigeria Plc stock control method employed

v. Determine necessary solution required to put an end to the challenges of stock control in Nestle Food Company Nigeria Plc.

1.4 Research Questions

In order to achieved the above objectives, the following research questions were formulated and answered.

i.                   What is the degree of importance placed on stock control by the organisation of Nestle food company Plc Kaduna?

ii.                 What are the extents to which stock control strategi.es adopted by the organisation help in reducing cost in Nestle food company Plc Kaduna?

iii.              What are the methods of stocks control system adopted by Nestle Food Company Plc Kaduna?

iv.              What are the challenges facing the organisation stock control methods employed by Nestle food company Plc Kaduna?

v.                 What are the necessary solutions required to put end to these challenges of Nestle food company Plc Kaduna?

1.5     Significance of the Study

The study is embarked upon to shed more light on the impact of stock control on profitability in Nestle food company Nigeria Plc Kaduna. Therefore, the study will be of benefit to the organizations, the executives, the academics and the entire society.

To the companies be it manufacturing or merchandising firm, the study will draw their attention to the significant of stock control as a profit contribution, why it need to be proactively giving the required attentions in an organization.

Also the study will also bring to the or noticed the benefits they stand to derived such as cost reduction, minimum investment, in materials and ability to match supply with demand as at when required if the function is given the required attention.

The executives, this research study will explained in detail the various types of inventory control available in which they can employed the best to manage their stock and why is very important to plan, control and coordinate stock control activities of their respective organization.

To the academics, such as the lecturers, the research material can serve as a reference and study materials for them also to the student and the researcher in administration field the study will also serve as reference book, study material, thereby broad in their knowledge.

The entire population, the research study will expose them to know how important materials is to the achievement of their objectives, because it was observed that virtually almost everybody deal with one materials or the others, as such the study will help them to know how best to manage their stocks economically.

Also the research study will be of most benefit to the researcher to the world of stock control, it important and benefit and why it need to be control, thereby broad in her prospective and adding value to her knowledge also prepare her ahead of future challenges.

The study is also a requirement in partial fulfillment for the award of Post Graduate Diploma in Procurement and Supply chain Management, Department of Accounting, Kaduna State University.

1.6     Scope of the Study

This study examined the impact of stock control on profitability in Nestle food company Plc, Kaduna. The study is restricted to data retrieved from the management and staff of Nestle Food Company Nigeria Plc, with Special concentration on the information slathered from the store unit, Purchasing unit, Inventory control unit and the production department of the organization of Nestle Food Company located at Ahmadu Bello Way, Kaduna.

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