CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

The contribution of the manufacturing sector to the growth of an economy cannot be overemphasized especially in developing economy like Nigeria.  The breweries industries impacts on the manufacturing sector undisputedly. Considering the increase demand for beer, in recent years and effort being made by private and public sectors to satisfy the demand.  This has giving rise to the establishment of breweries firms all over the country.

In any manufacturing organization, the cost of raw material form a substantial part of the production cost, the highlight the need for efficient management of raw materials. I am taking Guinness Nigeria Plc as a case study of the breweries industry which itself is a subset of the manufacturing sector of the economy. It is universally accepted fact that business organization have a  primary objective of maximizing profit and cost utilization,  for here in lies the continue existence of the organization, this has always been made possible through the improvement in overall performance of the organization especially in the area of material management and control. Inventory represent an important portion of most firms, assets, and also require substantial investment. Material management involves planning, organizing and control of handling inventory in such a way to achieve the set goals of the organization. In other words, material management is the management of inventory for profitability and consumer satisfaction while maintaining a minimum inventory investment wit maximum facility and man power utilization. In other words, material control is an insurance against supply failure.

Coming to the Nigerian economy which is filled with uncertainties, the business/manufacturing sector cannot afford wastage especially as regard to material and so there is the need for proper and effective utilization of materials in order to prevent any short fall in the level of production which wills most likely lead to decrease in the priorities of an organization. Material control and management system exists to ensure that proper and adequate utilization of material on other to prevent any short are made and that optimum level of material investment are determined and maintained.

The high premium place on business efficiency prompt the motivation to study material management and control system in the manufacturing sector of the economy. With the uncertainties in the Nigerian economy, raw materials required by company for production purpose are very scarce and limited with the federal government bounding the importation of a large variety of items / materials, foreign exchange has become difficult and expensive to obtain.

These factors have substantially and subsequently led to the liquidation of many companies in Nigeria due to their inability to acquire raw materials. On the other hand, those which are still in production are only able to acquire few materials for production at an exorbitant prices as such, they cannot affords or entertain wastage maximum and efficient utilization of materials acquired are very sought for by management.

In the brewery industry for instance, the federal government of Nigeria has bound the importation of sorghum and with which are the basic raw materials required for beer production.

In reaction of this brand the lending companies in beer production such as Nigeria breweries limited (NBL) etc have resulted to local production of sorghum and wheat. The climate of Nigeria is not sufficient for efficient and maximum production as such the harvest of these grains is very small compared to the quality required. Therefore maximum use of the amount of harvested grains will have to be made in order to ensure greater efficiency and subsequently make food profit.

Material management and control system exist to ensure proper utilization and impart control of material in order to achieve greater efficiency and subsequently better and higher priorities.

The development of modern inventory control started at the early of twenties century. This period marked the application of analytical techniques in studying inventory problems.

A lot researchers, accountant, economist, mathematics and engineers alike have taken interest in material management and control techniques and models. Not withstanding the sophistication of the techniques so far developed, there is still room for further development. Inventory control system can be computerized for efficiency.

1.2    STATEMENT OF THE PROBLEM.

The growth and efficiency of any organization is dependent on how well their material resource are manage and controlled as noted by Harold Koontz etal (1998) management is the establishment of the environment for good effort in such away that individuals will contribute to group objective with least amount of such input as money, time, effort, discomfort and materials.

Although it can be argued that the ban and importation of raw materials such as sorghum, wheat’s, and limited available resources coupled with the uncertainties that abound will affect company growth yet the argument cannot be substantiated, hence this research is to confirm the argument or otherwise. This is the dilemma of this study with respect to organizational growth and development in brewery industries.   

The following questions subsequently arose. Is there any major problem involved in implementing material management and control system?

Does inventory control affect the companies’ profit?

Is there any relationship between sales and inventory level and between inventories level and production cost.

1.3    OBJECTIVE OF THE STUDY.

The objective of the study is to examine and appraise the system of material management and control system in the brewery industry.

The focus being on Guinness Nigeria plc Benin City.

Therefore this research will seek answers to the clarification of some of the following research problems.

1     to identify the major problem involved in implementing material management and control system and the manufacturing brewery companies.

2     To examine the influence of material management and control level on the profit of the company.

3     To ascertain the effect of material management and control system on wastage.

4     To find out different methods Guinness Nigeria Plc is to carry out material management and control.

1.4    RESEARCH QUESTION

This research work is aimed at providing answers to the following central issues, addressed by the research work. The research questions are actually formed.

1       What are the problem involved in material management and control?

2       Does material management and control increase the profitability to the           company?

3       What effect does material management and control have on organization           wastage?

1.5    SIGNIFICANCE OF THE STUDY.

Giving the reality of the economic situation in Nigeria brewery industries must of necessarily employ cost management techniques since the cost of raw material takes a large percentage of total production cost, it is imperative that these materials be incurred and handled effectively.

Hopefully, this research work shall of benefit to present managers, future or other researchers shall definitely benefit from the research work. Other who would want to have information regarding brewery industries shall find this research work as a ready tool. The general public the brewery industries will see the need to improve efficiency and effectiveness of the raw material management as a result of this research.

1.6    SCOPE OF THE STUDY

This is a comparable study of Guinness Nigeria Plc; it is an analytical survey of the problems of this brewery with respect to the application by Guinness Nigeria Plc. This project seeks to investigate how Guinness Nigeria Plc manages its materials management level of finished goods. Investigation will also be carried out in this project as to what extent the material management policies have affected total corporate objectives of the company.

1.7    LIMITATION OF THE STUDY

The research study opened me up to encounter a lot of inexplicable unforeseen and unpredictable problems, deceits, constraints and difficulties such as;

Inadequate Data: Most time when I get a data towards the project, I surely found out that it is always inconclusive in some cases.

Finance: due to lack of much finance, high cost of things and no reality available transport facilities to facilitate the movement, it therefore give inadequacy to the project initially.

Time: Essentially, time constraints was a limitation because most time to spend on lectures and reading goes to gathering materials for this project.

Altitude of the respondents: Uncompromising attitudes of respondents due to balances or ignorance on material management cause a limitation to this research study enormously.

1.8    OPERATIONAL DEFINITION OF TERMS

Manufacturing Organization: Is a port or branch of a particular area of activity where goods are made using machinery.

Brewery Industry: Building in which beer is manufactured or produced?

Management: Is the establishment of the environment for group effort or control in organization of a business.

Efficiency: Safe of being able to work well.

Technology: Is the scientific way of doing things

Planning: Is the setting of objective and strategies for reducing the aims or goals.

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