CHAPTER ONE

1.1   INTRPDUCTION

        Inventory in some big organization constitute the largest item of working capital and it’s control is very essential. The management’s of inventory have always been essential function of financial managers and are increasingly becoming a specialist function.

        It is important to recognize that a company’s inventory holding are essentially viewed as necessary evil. They are costly to maintain both the up working capital and also incurring what may be substantial expenses for the company in respect of storage e.g (Ware house, rent, security etc).

        Items that can be grouped under inventory include raw materials, work in progress and finished goods. Raw material inventory constitute the item necessary for manufacturing companies product. These items of raw material as to the company dealing with are concentrates, sugar c02 and piet.

        Inventory work in progress constitutes the items of raw material inventory undergoing some process of production, which have not yet been completed. Inventory of finished goods are actual product, which the company manufactures for sale. These are seven –up pepsi – Cola and Savanna. It is apparent that the effective management of inventory is maintained to maximize cost of production. While the company will certainly have An objective of minimizing cost of production it will equally have other conflicting inventory objectives. These other objectives includes:

1.     Avoidance of stock – out of raw materials through avoiding       disruption of production of finished goods.

2.     Avoidance of stock of finished goods thereby avoiding amongst other things;

-       Loss of contribution of customer sales

-       Need to buy emergency stocks when required at higher costs.

-       Customer dissatisfaction

3.     Taking advantage as far as possible of bulk quantity discount

4.     Not placing too many separate orders with supplies since order cost will because correspondingly advantage of possible price        advantage in the market.

        The fundamental questions to which answer are required are therefore;

1.     How many should the company order?

2.     When should the company order?

3.     How many should the company produce?

        Included in this chapter is the defiled discussion of the background information of the plant also an overview of the inventory management process in the company (seven – up Bottling Company Aba)

A.     ORGANIZATIONAL STRUCTURE

        There is a formal structure  with the plant manager as the head of the plant. He has  the responsibility of implementing corporate policies formulated at the top management level. He does this with the assistance of his supervisors and officer clerks.

B.     THE ACCOUNTS DEPARTMENT

        This section is headed by accountant who reports administratively to the managing director. He has under him the account supervisor who works in this section. The accountant interact with other departmental heads and he is a cosignatory to the final accounts. He helps the plant manager to monitor the actual level of inventory, sales and production through data made available to him by the sores, production and sales department as well as computation from within his own department. Such information help  the managing director to evaluate his performance against the manual budget.                                    

C.     SALES DEPARTMENT

        This is headed by the sales manager who monitors market trends. He is able to determine the level of where demand is outstripping production or where is a stock analysis made by reference to the different brands.

        His information is communicated to the production department through the managing director. The sales manager has as his subordinates the route supervisors, salesmen and helpers.   

D.     PRODUCTION DEPARTMNET

        The production department is headed by a production manager. He reports to the managing director and ensures that production is carried on smoothly and according to plan. As the major users department, he has to rare properly with the raw material store. There is quality control unit to ensure that the product meets the set standard.

E.     MATERIALS MANAGEMENT FUNCTION INVENTORY        POLICY

        The management of inventory could only be achieved when accurate plans and schedules are implement. In all cases of planning adequate information are needed.

        The inventory policy of the SEVEN – UP BOTTLING COMPANYT PLC, ABA  can only be appreciated in the context of its maintain quality market share and profit. This implies that enough inventories should be available for continuous production. This fact also determines the level of inventory the company maintains. The major problem of the inventory policy of the company is in the national economy itself. What happens in the policies and strategies of the company as a whole.    

F.     STORES FUNCTION

        The company has two sets of stores. The are the raw materials store and finished goods store the raw material store is headed by a store – keeper who is operationally under the officer of the production manager since most of his products are used by his department. However the store keeper is responsible directly to the managing director.

        The finished goods store id headed by a manager who takes responsibility of the goods as soon as production is completed. The major raw materials that are stored includes the following concentrates C02 and sugar.

G.     MATWRIAL RECEIPT ISSUE

        The purchasing department is responsible for the purchase of its raw materials locally. Since, stock levels are always being monitored, the store – keeper knows when certain items of stock are deficient. This is made known to ma managing director who authorizes the placement of orders. When the materials ordered arrive, they are cleared at the gate by the security personnel. This involves examining accompanying documents, recording arrival time, vehicle number and driver’s name. This inspection is carried out by the store – keeper with the assistance of the store clerks. They check for the correctives of the qualities which the recorded on the delivery notes show before recording them in the store receipt note acknowledgement of the receipt of the materials. Similarly, entries are also made in the cards. The store receipts roles and other relevant document are then forward to the accounts department and final recording in the store ledger. There is no elaborate inspection of the quality of materials at the store because those sent to stores conforms to standards.

        Issues from stores are made on request by the production manager who has to authorize the requisition. The quality of each materials needed by each department for the daily production are communicated to the managing director who has to approve the requisitions before stores can issue the materials. The materials so issued are transported by the use of Fork – Lifts to the raw materials store where they await production. Below are details of movement of materials in seven – up Bottling company PLC Aba.

MOVEMENT OF MATERIALS

SOURCES COMMPANY RECORDS 2000

INVENTORY CONTROL

        In order access the effectiveness and efficiency of the management of inventory performance must be measured against plan. A minimum balance must be attained of the cost of carrying and the cost of ordering inventory such that the quantity on land is just sufficient or optimal for the operation of the company.

        The production manager plays an important role as the head of the user department in the control of the inventory. He determines the quality of concentrates, C02 and sugar to be mixed with the additive such as be sodium Benzoate and Technical parts that are required for the production of planned output per day. He has to ensure that the required mix of products flavours are produced. However, the overall responsibility for control of inventory rests on the managing director who do not only analyze situation received from the production manager but also supervise the duties of the store – keeper.

        It is the managing director as the head of activities of various departments and the requirements of able to determine what amount will be needed and how well accordingly, to plan the plant – production. He inspects the facilities twice a day, the last inspection being just before the close of operation for the day. He also visits the store checking the stock level and occasionally interview the staff in production. In this way he is able to exert immediate control. As a means of control store department issues every month, accumulated figure, of all materials issued to production department. This serves as a means of reconciling records at the store with those of production.             

        Control is able enhanced by posting of security staff to the gate of the plants with raw materials. The raw materials are counted before taken into store by the storekeeper. Any discrepancy is noted and reported to the managing director. The finished goods are also counted before distribution.

1.     THE PRODUCTION PROCESS

        The production is carried on the three line with a combined capacity of 333,3.33 bottles per day. The line operates twenty – four hours on three shifts with each production line running  shift of eight hours production process involves the use of the following materials.

i.      Concentrates

ii.      C02

iii.     Sodium Benzoate

iv.     Sugar

v.     Technical puts

        Production starts with the weighting of the major raw materials and the additives at the batch control room.

1.2   PURPOSE OF THE STUDY

        In pursuance of the purpose of this research works the researcher with:

(a)    Find solution to the problem o managing inventory or stocks.

(b)    Determine the effects of inefficient inventory management.

(c)    See whether there is divergence between policy and practice of         inventory management at seven-up bottling company.

(d)    Find how best optimal stock level could be determined in Seven         – Up Bottling production.

(e)    Determine the impact of stock valuation and control producers.

(f)     Make recommendations in the light of the findings from the      above objectives.

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