CHAPTER ONE

1.1             Introduction

The creation of management within the procedure of purchasing and storing activities is nothing but to see that the store department which houses the purchasing section achieves it goals. The manner with which materials are handled can have serious effect on thecompany that is, if materials of complex nature or high values are mis-handled this could lead to damage or deterioration of materials which may render them useless by the user’s department and also constitutes a great loss to the organization so to avoid this, materials should be handled in the best manner.

1.2         Background to the Study

Stocks 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 stock classes. But, whatever may be the stock 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 stocks. 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

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organizations. Tock often represents as much as 40% of total capital of industrial organizations. 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 management be practiced to ensure organizational growth and profitability.

According to Temeng et al (2010), historically, however organizations have ignored the potential savings from proper inventory management, 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. Based on the above analogy, therefore this paper evaluates the inventory management on the productivity of business organization in, with respect toFan Milk Plc., Ibadan.

1.3         Statement of Research Problem

The major challenge that material manager face is to maintain a constituent flow of materials for production. There are factors that inhabit the accuracy of stock which results in production shortages premium freight and often adjustments.

According to the journal of Business logistics (2009). The major issues that all material managers face are incorrect bills of materials, in accurate cycle counts, unreported scrap shipping error, receiving errors and production reporting errors material managers have strived to determine how to manage these issues in the business sectors of manufacturing since the beginning of the industrial revolution. Although there are no known methods that eliminate the afore-mentioned inventory accuracy, inhibitor there are best method available to eliminate the impact up on maintaining an interrupted flow of materials for production. Reluctance can be

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reduced and effectiveness when service point are clustered to reduce the amount of reluctance. An effective material handling program can also revolve island approaches to shipping, receiving and vehicle movement solutions can include creating a new central loading location as well consolidating service areas and docks from separate building into one. Developing better circulation infrastructure also means reevaluating thick delivery and service vehicle routes. Base on above statement that this research seek to examine the issue of material management and the effect it has on an organization using a manufacturing company as the case study.

1.4             Objectives of The Study

The main objective of this study is to examine the impact of stock management and productivity of a business organization. The specific objectives are:

i.                    To determine the effect of inventory management on organizational productivity.

ii.                  To evaluate the nature of correlation between inventory management and organizational profitability.

iii.                To examine the level of efficiency and product improvement in material management.

iv.                To proffer useful suggestions and ideas on how to effectively manage materials in an organization (Sander 2002).

1.5         Research Questions

The following questions shall guide the study:

1.      To what extent does inventory management contribute to an organization performance?

2.      Does specification on materials have any impacton the material management?

3.      To what extent does material handling help in the enhancement of un-interrupted production?

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4.      Does forecasting for material requirement help the organization to have smooth operations?

5.      Does stock taking and proper stock checking essential for material management?

6.      Does materials management contribute to the success of an organization?

1.6         Statement of the Hypothesis

The Following Hypothesis are Formulated?

Hypothesis One

Ho: Gender is not significantly related towhom is responsible for the effective store control, stock holding and assessment of goods.

H1: Gender is related towhom is responsible for the effective store control, stock holding and assessment of goods.

Hypothesis Two

Ho: Age does not determine effective material management which contributes to the success of an organization.

H1: Age determines the effective material management which contributes to the success of an

organization.

Hypothesis Three

H0: Inventory management does not significantly impact organization performance.

H1: Inventory management significantly impact organization performance.

Hypothesis Four

H0: Specification on material does not significantly impact material management.

H1: Specification on material significantly impact material management.

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1.7        Significance of the Study

The result of this research when concluded will be of great benefit to the following: Companies in the beverage industry especially Fan Milk Plc.The findings and the recommendation will asset production managers to find better ways to manage their inventory. The findings and recommendation can also be used as a stepping stone to other researcher in the areas for further research work.

1.8         Justification of The Study

A research of this nature is significant in the sense that the impact of stock management and productivity of business organization requires a constraint research. It is belief that the study will throw light on the essence and importance of stock management and productivity of business organization and the choice of selecting Fan Milk Nigeria plc. As my case study.

1.9          Scope of the study

This research study centered on materials handling in a manufacturing company. It covered such areas as storage, transportation procurement, materials handling planning control and value engineering. The research is also intended to cover a specified period of time and also information are going to be drawn within the domain of Fan Milk Plc.

1.10     Definition of Terms

There are numerous terms and concepts associated with material handling. It is considered most appropriate to define some of these terms and concept.

1.      Inventory Management: This is the part of operation management concerned withmaintaining the optimum level of inventory investment. It is concerned with policy making on inventing planning and inventory control.

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2.      Holding/carrying Cost: These include the cost for storage facilities, handling, insurance,pilferage, obsolescence, depreciation, taxes and the opportunity cost of capital obviously high holding cost tend to favour low inventory and frequent replenishment.

3.      Ordering cost: these include certain clerical costs incurred in preparing order deliveryand material handling costs, such costs usually represent a fixed amount for order placed regardless of the quality ordered.

4.      Stock valuation:- This is the method of assigning value to items of stock of a company.It helps company management to make inventory level decision. They use different method like last in first out (LIFO) first in first out (FIFO).

5.      Inventory Control: This involves regulation of quantities of materials or inventory onhand in such a way as to ensure the meeting of current needs of the organization while avoiding excess stock, the calculation being based on the rate of withdrawals and the time necessary of replenishment.

6.      Inventory: This is the stock of any item or resources used in an organization. It includesinput such as human, equipment, financial and raw materials.

7.      Inventory System: These are set of policies and controls that monitors levels ofinventory and determines what levels of should be maintained when stock should be replenished and how large orders should be.