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CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

The main objectives or pre-occupation of any business oragnisation is profit. The company need profit to satisfy the owners, income to pay salaries of employees as well as to pay corporate taxes to government (so that they will be in a better position to be well omitted in other to keep the business a float to enhance the oragnisation  set objectives.

The need for efficient and inventory control and management in oil servicing company cannot be overemphasized or overstressed as it tends to be the pivot upon which any business oragnisation involving stocking rest.

Profit maximization depends on proper inventory control and management without it on business might not operate profitability. Any business oragnisation can run for several days, weeks or months without inventory hence much important is adequately attached to its management it is noted that despite the fact that substantial fund are invented in inventory as control and management are placed in the hands of non professionals, those are made it impossible for many organisations to adopt the scientific method inventory control and management.

However, inventory management over the years has undergone some sophistication since industrial revolution due to dynamic. Presently, a good number of companies have been able to computerize stock inventory to meet the dynamic and physiological need of the society.

As a result of the increasing tends or changes in technological advancement this research work able to identify Halliburton Energy Services Nigeria Limited as one of the company in Nigeria that is fast growing with the advancement in computer technology which has been the living force of this trend.

The company, stocked equipment repair parts, vehicles repair parts, comments float equipment and chemicals. These materials are kept in store before they are issued for various operations. The company major operations include survey of oil wells, development and maintenance of farm routine services to its abandonment. Therefore, this research work is directed towards inventory control and management of Halliburton Energy Service Nigeria Limited in relation to profit margin. The question then asked is does efficient and effective inventory control and management leads to profit maximization?

1.2    STATEMENT OF THE PROBLEMS  

Inventory occupies a unique position in the financial records of almost every business oragnisation and as a result its management cannot be ignored.

In this study, the researcher identified two problems needs faced by the company is the management and control of its inventories such as;

a.   The problem of maintaining a large size of inventory for efficient and smooth operating services.

b.   The problem of maintaining a minimum investment inventories to maximize profitability.

The company’s management ability to effectively manage the above conflicting objectives according to Abotti A.A. (2002:53) help to strike a balance between the cost of ordering and carrying the company inventory. This is because of both excessive and inadequate inventorate as associated with cost.

An excess inventory will consume a large proportion of the company’s funds which otherwise could profitably employed in other areas whilst a situation in which the company unemotionally runs out of stock of materials is costly in terms of loss of returns on investment and customers goodwill, therefore the effective management and control of inventory in the company will involve the problem of determining how much stock is to be ordered (i.e. the economic order quantity) and when to order for stock (.i.e. the re-order level).

1.3    OBJECTIVE OF THE STUDY

The objective of inventory control and management in any business concern cannot be over-emphasized a good and efficient inventory management minimizes cost and maximizes profit has been very impressive over the years and this has also been attributed to various factors which include good and efficient management from both human and materials resources efficiently in operating department and adequate maintenance system but lapses are not totally rule out. Therefore effort has been made for purpose of the research to analyze the company’s inventory control and management system.

However, the primary purpose includes

(1)     To examine the relationship between the frequency and extent of inspection and plant breakdown.

(2)     To evaluate the efficiency of inventory control and management in the institution understudy with a view of attaining of the objectives of the oragnisation.

(3)     To determines the effect of inventory control and management policy on operating profit margin of Halliburton Energy Service Nigeria Limited (HESNL).

(4)     To ascertain the relationship between effective inventory management and profit maximization.

(5)     To find way of accounting for goods purchased and as far as practicable to trace then through the business until they have been delivered and changed to customers on operations.

(6)     The need to place an order at the right time, the right resources to acquire the right quantity at the right price.

1.4    RESEARCH QUESTIONS      

The studies shall answer the following questions.

(a)     What is the relationship between the frequency and the extend of inspection and plant breakdown?

(b)     How is the effectiveness and efficiency of inventory control and management in the institution?

(c)     How effective is inventory control?

(d)     Control and management policy on operating profit margin?

(e)     What is the relationship between effective inventory management and profit maximization?

(f)      How is the organization account for good purchased and to trace goods through the business until they have been delivered and charge to operation?

(g)     What is the used to place an order at the acquire the right time with right resources to acquire the right quantity at the right price?

1.5    SCOPE OF THE STUDY

The research study is intended to cover a period of five(5) years from 2002-2007 on inventory and management as practiced by the company. It also intends to examine the organization and planning of inventories held by the company.

The study intends to look at the system of inventory control and management with emphasis on;

i.         Minimum stock level

ii.        Maximum stock level

iii.       Re-order point

iv.      Economic order quantity

v.       Cost incurred

1.6    LIMITATION OF THE STUDY 

Various dimension of problems are encountered in the bid to obtained information and data from the company under study because of researchers lack of familiarity with staff and management. Furthermore, the ethics of society and privacy enshrined in the corporate world hindered the obtaining of up to data information of the company operational orientation in the area of inventory control and management.

Secondly, financial constraints and inadequate statistical data in Nigeria pose a serious drawback during this course of study.

Lastly, textbooks are other limiting factors during the course of this study the school library is not sufficiently equipped with these texts and available ones are not easy to come by.

1.7    SIGNIFICANCE OF THE STUDY   

This study on the management of inventory control in Halliburton Energy Services Nigeria Limited is of paramount importance because it tend to investigate the minimization of the cost associated with inventory system.

Therefore for a business whose inventory constitutes a higher proportion of its operating cost to survive, grow and yield profit for its owners, the effective and efficient management of its inventory becomes very vital. This is based on the fact that if inventories are mismanaged by formulating wrong inventory policies, it could result in higher operating costs, low profit and owners dissatisfaction.

Therefore, it is based on the fact that if inventories are mismanagement of the company if they use it. The benefits could be

a.   Increase the profit margin

b.   Finding ways to reducing ordering and carrying costs

c.   Reducing over stocking and stock-out.

d.   Using it in designing a more effective inventory control and management system.

Secondly the research is of importance to Delta State Polytechnic, Ozoro when finally it has decided to run consultancy, services units seeking to their help on inventory control and management. The study is of importance to the business administration department of the institution and the researcher since the research work is used for the partial fulfillment of the award of the national diploma in business administration.

Thirdly, the work could be of benefit to researchers and scholars since it can help to increase their knowledge in this field. Other beneficiaries includes creditors, firms analyst and media houses.

1.8    OPERATIONAL DEFINITION OF TERMS 

To the course of this study, the following terms shall be used to mean.

Company: This is an artificial person or a legal entity created by or under the authority of the laws of the state or nation consisting of an association of numerous individuals.

Inventory: Is the stock of items used in the operation of a business concern.

Management: Is the planning, organizing, directing and controlling the activities of an oragnisation to achieve best objectives.

Maximum stock level: This is the level above which stock should not be allowed to rise.

Minimum stock level: This is the stock at which stock should not be normally allowed to fall.

Economic order quantity: Is an Inventory level which minimizes the total ordering and caring cost.

Lead time: Is the time as the that will elapse between placing the order and the actual delivery of the stock.

Danger level: This is the level at which normal issues of materials are stopped and issues are made only inter specific instructions.

Buffer stock: This represent the quantity of stock hold as insurance against possible unexpected fluctuation in the supply or demand rate. 


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