TOPIC: The need for efficient stock management in a manufacturing company. A case study of Anambra Automobile manufacturing company (ANAMMCO) Emene Enugu State.
The efficient stock management of available resources as a pre-requisite to a stable and healthy growth of every company, this is a foundation for survival of the company in a competitive market. And for this is to be achieved, eventually is one of the resources concerned the management of various company are always in a dilemma as far as this stock management is concerned. The problem then is whether to wild stock too low or too high, too large or too little, any of the alternatives affects the profitability of the company.
Therefore the problem of inventory management revolves around the determination of or maintaining an optimal level of inventory. The optimal stock varies from one company to anther depending on the nature and volume of operation. This problem prompted the researcher into stock management in a manufacturing company.
The study is designed to study how effectively country is being managed in the company and to find out the likely consequences of over-stocking and under-stocking. The study is also to examine the factors that influence the stock of raw materials in the company.
This research work will be carried out in three departments of the company. They are production, accounts and store departments.
To really determine the effectiveness of inventory management in the company the researcher employed both primary and secondary method of data collection. The primary data involves oral/personal method of investigation and questionnaires, while secondary data involves data extracted from text books, past projects and journals. Some major finding shows that over investment and under investment has adverse effects on the company and therefore affects the profit earning of the company.
Then from the results of the analysis other findings were obtained and recommendation and conclusion were also reached.
TABLE OF CONTENTS
1.2 Background of the study
1.3 Statement of the problem
1.4 The importance of study
1.5 Definition of important of term
2.0 Literature review
2.1 The origin of the subject area
2.2 Schools of thought within the subject area
2.3 The school of thought relevant to the problem of study
2.4 Different methods of studying the problem
3.0 Data presentation (highlights of the study)
3.1 Analysis of the data
1.2 BACKGROUND OF THE STUDY
In this study, inventories constitute the most significant part of current assets of a large majority of companies, for example current asset in public limited companies, industries such as the plantation, edible vegetable, and hydrogerated oil, sugar, tobacco cotton, Jute and woolen textiles, non-ferrous metals (other than Aluminum) transport equipment and foundries and engineering workshops. Inventories form more than 60% of current assets while it accounts for only 30% and below the printing and publishing electricity generation, supply, trading and shopping industries.
Inventories are the stocks of the product a company is manufacturing for sales and component that make the products. The various component of stock are raw materials, Work In Progress (WIP) and finished goods. Raw materials are those basic input materials that are converted into finished good through the manufacturing process.
Raw materials stock are those units of input which have been purchased and stored for future productions.
Work-in-progress stocks are semi manufactured products. They become finished goods, inventories are those completely manufactured products which are ready for sale stocks of raw materials and work-in-progress facilitate production while stock of finished goods is required for smooth marketing operations.
The levels of three kinds of inventories differ depending on the nature and volume of business operation. A manufacturing firm will have substantially high levels of all three kinds of inventories while a retail or wholesale firm will have a very high level of finished goods inventories known as inventory supplies. These include office plant cleaning materials (Soap, brooms etc) viz, fuel, light bulbs and the like. These materials do not directly enter into the production, but are necessary for production.
Sophisticated, system of inventory is not maintained for them, because they firm and not much funds are committed on them considering the large sum of money that are committed onto these stocks of materials work-in-progress and finished goods, it therefore becomes obvious that these stocks should be managed efficiently in order to maintain the profit position of the firm. An under taking neglecting the management of inventories will be jeopardizing its long-run profit ability and may fail ultimately. The only sure way by which this risk can be avoided in a company is for the company to install a sound stocks management system.
There is an optimum level of investment from any asset whether cash, physical plant, or industries for example, the balance of cash may be too large or too small. One of the reasons for having earnings made by the shareholders on the other hand the reason for holding too low cash balance might due to the poor credit rating of the firm. Therefore for every asset there most be that ideal optimum level of investment that compared with the other asset classes, helps maximize long-term profit.
This study therefore studies stock management at Anambra with a view to arriving at conclusion on the practice of stock management in manufacturing industries.
1.3 STATEMENT OF PROBLEMS
It is obviously clear and certain that inventory form part of total asset of a company and also constitute the most significant part of current asset of a large major companies inventory management. And effective management cannot therefore be divorced from one another. The ultimate aim of the effective inventory management is to maintain an optimal level of inventory as to forestall economic growth and the development of the company.
Inventory management problem boarder on how to minimize investment in inventory without hampering the activities or effective functioning of the enterprise. The problems of inventory management usually centers on stock which are:
1. Aids the company to understand how long production activities can be sustained.
2. It affects the ability of the company to stay in production especially incase where among combination of stock is available thereby making it unsuitable for the firm to acquire on available stock at extra cost, sometime with bank loan.
3. It affects the production efficiency of industries especially where there is low stock available, without the management noticing, this can lead to stoppage of production.
4. It affects the price of product sometimes, especially in cases were due to storage of wrong combination of stock, the industry is forced to take a loan, to acquire additional necessary stock to facilitate production.
1.4 THE IMPORTANCE OF THE STUDY
The importance of this study to the manufacturing concern in general, And Anambra motor manufacturing company (ANAMMCCO) in particular, is to find solution to this ending problem, how much can the basing afford to invest in stocks without adverse financial effects on he company profitability, since companies have some many other operations needing money, investing two much on stocks means that there will be little or no funds to meet up the expenditures on those operations. Therefore there is the need for the manufacturing companies to invest wisely on stocks.
1.5 DEFINITION OF IMPORTANT OF TERM
1. Stock is the finished goods held for sale at the beginning or at the end of a production process of an organization or company of financial year.
2. Economic order quality is the optimum or maximum level of stock
3. Carrying cost is the desired rate if returns on investment in inventory and cost of storage breakage, like insurable change, obsolesce
4. Ordering cost is the expenses incurred in the event of making an order on the price or pays for ordering for a given item.
5. Re-order point is the point where it becomes necessary to place another order for stock.
6. Safety stock is the minimum or better stock which serve as a custom against reasonable expected maximum usage.
7. Lead time is the time interval between placing an order and receiving delivery.
8. Minimum stock level is the level stock should not be normally allowed to fall.
9. Maximum stock level is the level above which stocks should not be normally allowed to rise or exceed.
10. Re-order quantity is the quantity, which is most economical to other quantities.
11. Stock turnover explains how many times the inventory rotates at the time in question or during the accounting period.
12. Inventory is the stock of a product a company is manufacturing for sales and the components that make up the product.