APPLICATION OF COMPLETE SYSTEM IN MATERIAL MANAGEMENT IN NBC

APPLICATION OF COMPLETE SYSTEM IN MATERIAL MANAGEMENT IN NBC

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CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Material management can be defined as a process that coordinates planning, assessing the requirement, sourcing, purchasing, transporting, storing and controlling of materials, minimizing the wastage and optimizing the profitability by reducing cost of material. Baldva (1997) noted that Materials management is a process for planning, executing and controlling field and office activities in Manufacturing. While Eduardo (2002) viewed Materials management as the system for planning and controlling all of the efforts necessary to ensure that the correct quality and quantity of materials are properly specified in a timely manner, are obtained at a reasonable cost and most importantly are available at the point of use when required. 

According to Khyomesh and Chetna, (2011) Building materials account for 60 to 70 percent of direct cost of a project or a facility, the remaining 30 to 40 percent being the labour cost. Therefore, efficient procurement and handling of material represent a key role in the successful completion of the work. It is important for the project manager to consider that there may be significant difference in the date that the material was requested or date when the purchase order was made, and the time at which the material will be delivered. These delays can occur if the contractor needs a large quantity of material that the supplier is not able to produce at that time or by any other factors beyond his control. Chan (2002) noted that the project manager should always consider that procurement of materials is a potential cause for delay. The management of Manufacturing processes to reduce, reuse, recycle and effectively dispose of wastes has a serious bearing on the final cost, quality, time and impact of the project on the environment. (Dania, 2007)

The goal of materials management is to ensure that Manufacturing raw materials are available at their point of use when needed. The materials management system attempts to ensure that the right quality and quantity of materials are appropriately selected, purchased, delivered and handled on site in a timely manner and at a reasonable cost, (khyomesh and chetna 2011). The scope of materials waste is vast, and this waste occurs in the industry irrespective of the size of the building firm, instructions about handling, storage and stacking are not provided with the goods or sent in advance to the site (Abdulazeez, 2000).

Materials management in Manufacturing is also regarded as the efficient use of goods and equipment before, during and upon completion of a building process. Petra (2013) observed that Successful materials management requires the participation of all persons involved in a Manufacturing process. For Materials may deteriorate during storage or get stolen unless special care is taken. Delays and extras expenses may be incurred if materials required for particular activities are unavailable. Ensuring a timely flow of materials is an important concern of material management (Shah, 1993).

Thus, Materials management is an important element in project management. Materials represent a major expense in Manufacturing, so minimizing procurement costs improves opportunities for reducing the overall project costs. Poor materials management can result in increased costs during Manufacturing. On the other hand, efficient management of materials can result in substantial savings in project costs. If materials are purchased too early, capital may be held up and interest charges incurred on the excess inventory of materials (Wendy, 2006).

Johnston (2001) opined that Material Management is divided between head office and site in major Manufacturing companies. The selection, pricing, ordering, preparation of schedules and payment accounts are dealt with at head office, learning the receipt storage, protection and use of materials to management on site. Due to the high cost of materials, if not properly managed during the period of execution of contract can lead to abandonment of project.

In his submission, lan (2008), opined that the rate at which materials are been squandered on site due to poor management is getting too rampant in our society and if not curbed, it can jeopardize the future of our Manufacturing industry. This is particularly true in view of the fact that mismanagement of Manufacturing resources (i.e materials, plants and labour) affects the continuity and profit margin of such project and if not checked can lead to technical insolvency or bankruptcy.

Therefore, attention must be paid to how materials are been procured, stored and managed in order to achieve perfect work, effective handling of materials, right usage of materials and control of Manufacturing resources.

This, explain the reason why Johnston (2001), noted that Materials management begins with planning and estimation, these can be achieved through proper site co-ordination measure of reducing wastes, the location and security of materials on sites, procurement of quality materials as being specified and effective administration of site together with quality control.

Lee and Donald (2001), observed that the problem associated with the absence of proper materials management on Manufacturing site could be wastage of resources making contract cost more than budget sum, reduction of profit margin of the contractor ineffectiveness of project handlings reduction of output e.t.c. and if these are not properly taken care of it might be disastrous to the firm.

No Manufacturing project can commence and proved effective without an adequate supply of raw materials, apart from the careful planning of materials required by the builder, it is to his advantage to foster a good relationship with the suppliers, many of whom will have been selected due to their fulfillment of orders to the standard required and meeting of delivery times over a number of years (Pheng and Chuan, 2001).

Besides the builder’s own suppliers, the architect may specify that a certain supplier must be used and these are termed “nominated supplier” whatever the type of suppliers to be used, the information passed to them and receive from them is the same and in all but in the smallest firms this information and document will pass through the buyer. (Yang, et al., 2003).The buyer must also ensure that the architect receives any samples from the suppliers in the very early stage of contract procedure to satisfy him of the relative merits of the material. It may, for example, not be possible to obtain the specified material in time in conjunction with the building programme, but by obtaining samples of similar products the architect may decide on a new form of Manufacturing or design to prevent hold ups.

In most cases, a buyer will send enquiries to two or three suppliers or in some cases, direct to manufacturers for such items as sand, gravel, brick, block, cement, e.t.c, regarding prices, delivery dates and such, for use at the estimating stage of the project. This will enable the estimator to use the figures obtained in the preparation of the tender figure. 

To enable quick checks to be made on delivery or non-delivery of materials a card index system is generally adopted, this enables the purchasing or procurement department to keep a constant eye on the supplies. These cards contain all necessary information and are best filed in date offer for case of reference. Even when bulk delivers have been placed according to programme, by taking the extra time and trouble to write out a card for each delivery the chance of losing sight of the delivery date is very much reduced, as regular checks will be on the file. As materials are received, the information will be recorded on the card.

Manufacturing projects can be accomplished by utilizing management processes and these processes include planning, organizing, executing, monitoring, and controlling (Ahuja et al 1994 in Al Haddad 2006). During any Manufacturing project the three inter-related factors of time, cost, and quality need to be controlled and managed. Successful completion of projects requires all resources to be effectively managed. Prabu and Baker, (2006) regard Materials management as a means to achieve better productivity, which should be translated into cost reduction. For, according to Ademeso and Windapo (2008), poor planning and control of materials, lack of materials when needed, poor identification of materials, re-handling and inadequate storage cause losses in labor productivity and overall delays that can indirectly increase total project costs. Effective management of materials can reduce these costs and contribute significantly to the success of the project.

Materials management functions include planning and taking off materials, vendor evaluation and selection, purchasing, expenditure, shipping, material receiving, warehousing and inventory, and material distribution. (Narimah 2011), Almost 60% of the total working capital of any industrial organization consists of materials costs (Dey, 2001). Materials management can only produce what it should with the right quantities of the right material at the right time (Arnold and

Chapman 2004). Thus, any improper handling and managing of materials will cause a huge effect on the total project cost, time and quality. There is a need to explore on the area of materials management, the issues relating to materials management problems   

1.2    STATEMENT OF RESEARCH PROBLEM

The present state of the Manufacturing industry in Nigeria reflects various problems ranging from delays in project execution/delivery, substandard work, disputes, to cost and time overrun as a result of material shortage and wastages on sites, theft and displacement of materials on sites, as well as poor accounting and security system of the concerned sites/firms (Adafin, 2011). According to Dahiru (2010), lack of materials not only causes delays, but a consequent decrease in productivity and resulting to cost overruns. This is no doubt lack of effective material management is one of the major cause of this problem. Failure of the project manager to make available materials need could lead to delay. Non-compliance strictly with project bill of quantities, schedule of materials, specifications and Manufacturing programme in material stock control practice is another contributing factor which tends gradually to decrease profitability of a project also often leads to extension of time respectively, and hence no proper material stock control practice (Inyang Udoh, 2002). Besides that, Dey (2001) noted that the rate at which materials are being wasted due to improper management is becoming unbearable to the contractors due to its effect on their profit margin and proper usage of material to achieve quality job been done through various techniques.

1.3    JUSTIFICATION OF THE STUDY                             

A major part of professional production manager responsibility in production management entails the selection, purchase, testing, storing and use of Manufacturing raw materials. As noted earlier, materials are a major expense in Manufacturing, thus the ability of contractor to manage his team and the flow of supplies are absolutely necessary for the successful project delivery and profit maximization. This requires the architects and engineers to specify exact supplies during manufacturing to avoid overstock. The Manufacturing management team is required to buy the correct amount of material at the right time to avoid cash flow, storage and deterioration problems. Subcontractors need to keep track of inventories, while suppliers are required to deliver as ordered and on time. The post-Manufacturing team has to evaluate remaining materials for reuse and recycling purposes.

However, this is not easy; First, if materials are purchased early, capital may be tied up and interest charges incurred on the excess inventory of materials. Even worse, materials may deteriorate during storage or be stolen unless special care is taken. For example, electrical equipment often must be stored in waterproof locations. Second, delays and extra expenses may be incurred if materials required for particular activities are not available. Accordingly, ensuring a timely flow of material is an important concern of project managers. (Harris and MacCaffer, 2001)

Thus, to determine the misery behind proper materials management in Manufacturing firm in Nigeria, so as to guide against project delay and abandonment, also to create a standard method based on size of Manufacturing site to control cost of contract and materials wastage. It is not only desirable but necessary to undertake careful study of material management. Additionally, since Proper material management will benefit the firm in terms of increase profit margin, quick execution and reduce cost of the project. This brings the need for an evaluation of materials management in Nigeria Manufacturing industry.

1.4 RESEARCH QUESTIONS

The following are the research questions as related to this study.

1.  What are the principle and procedures of complete system in materials management? 

2.  What is the current practice complete system in materials management?

3.  What are the factors militating against materials management on Manufacturing firm?

4.  What are the measures to be put in place to ensure effective materials management on Manufacturing firm?

1.5   AIM AND OBJECTIVES                                      

1.5.1   Aim

The aim of the research is to assess the application of complete system in material management on Nigeria Bottling Company, Nigeria with a view to proffering solutions to the identified problems.

1.5.2   Objectives

The specific objectives of this research are;

1.  To establish theoretical frame work on Manufacturing materials management. 

2.  To study the practices of complete system in material management by Manufacturing firms in Nigeria

3.  To investigate the factors militating against effective materials management on Nigeria Bottling Company (NBC)

4. To assess professionals’ perception on the measures to be put in place to ensure effective materials management in the Nigeria Bottling Company in Nigeria. 

1.6 RESEARCH METHODOLOGY

In order to achieve the objectives of this research, the work was pursued through the following;

1.6.1 Literature Review

Relevant literatures were reviewed from various textbooks, past projects, journal, government gazette, and internet materials etc. so as to articulate existing knowledge on how effective Manufacturing material management is carried out.

1.6.2 Field Survey

Primary data were collected using structured questionnaire as the instrument of the study to those that are responsible for materials management in Manufacturing firms. Besides that, Personal interview of professionals were used to generate data in relation to the stated objectives. This was carried out by visiting the Manufacturing  site under Manufacturing. The head offices of these Manufacturing firms across Lagos, Abuja and Kaduna were also visited.

1.6.3 Analysis of Result          

Data analyses were undertaken using descriptive statistics. Frequency, means, percentages and standard deviation were used to express the statistical result. This was achieved using Microsoft excel and statistical package for the social science (SPSS) soft wares.

1.7 SCOPE AND LIMITATION

This work focused on materials management practices in Nigeria’s Manufacturing firm. The study covered factors militating against materials management, measures for effective materials management on Manufacturing firms. The study was limited to only the Nigeria Bottling Company (NBC) in Lagos, Abuja and Kaduna, therefore not all the country was covered. Site waste management was not part of this research





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