ABSTRACT
A major sources of great
concern to manufacturing companies has been the all-important, all pervading
recurring issue and question of inventory management. This is
understandable; as a dominant constituent of current assets is attributable to
the very nature of inventory and the fact that it is among others, a potent
tool for cost reduction.
The importance of
inventory management as a tool for cost reduction cannot therefore be over emphasized
since it has been established to play leading role in the continued efficient
and profitable productive existence of any manufacturing organization. For that
reason, the trust of this research work is essentially to analyse the
importance of inventory management, its problem and solutions and as a
tool for cost reduction will Nigerian breweries plc 9th mile
corner, near Enugu as a case study.
The data for the
research work were collected and collated through the use of questionnaires and
personal interviews systematically designed and administered on the
respondents. Four department of the company were used for the survey and
ninety copies of the research questionnaires were returned.
Analysis of the data collected was based on the use of simple percentages.
The research findings
shows that effective inventory management enhances efficiency, accountability
and reduces cost in Nigeria breweries PLC 9th mile corner.
First-in-first-out method of stock valuation was highly favoured.
In line with the
objectives of the research recommendations were made, which when properly
implemented will help the company immensely. Sequel to the research findings,
it is recommended that manufacturing companies should strive to determine the
level of stock, the optimum stock to maintain so as to in equilibrium
between safety and profitability and thereby reduce cost.
With this adhere to the
performance of manufacturing companies in Nigeria will improve tremendously.
TABLE OF CONTENT
CHAPTER ONE
1.0 Introduction
1.1
Background of the study
1.2
Statement of the problem
1.3
Objective of the study
1.4
Significance of the study
1.5
Definition of terms
1.6
References
CHAPTER TWO
2.0 Literature
review
2.1 Introduction (the origin of the subject area)
2.2
School of thought within the subject area
2.3
School relevant to the problems of study
2.4
Deferent method of studying the problem
2.5
References
CHAPTER THREE
3.0 Conclusion
3.1 Presentation of data
3.2
Analysis of data
3.3
Recommendation
3.4
Conclusion
3.5
References
CHAPTER ONE
1.0 INTRODUCTION
1.1
BACKGROUND OF THE STUDY
“Inventories” and
“stock” are used interchangeable in this study.
The most significant
component of current asset of majority of predominately large manufacturing
companies is constituted by inventories or stock. It has been stated that.
“On an average,
inventories are approximately 55% of current assets in public limited
companies.
Evidently therefore, the
above statements is an affirmation that the greater proportion of the valid,
both quantitatively and qualitatively, of what a manufacturing company produces
is ascribable to or a factor of the material cost. This element of cost, in
other words, represents a large percentage of production cost and as such,
special and careful consideration must be given to materials acquisition,
storage and usage. Ben. O. Nweke (Collins) (2000) affirmed this much when he
asserted that.
“The holding of these
ingredients in the from of stock at a reduced cost serves an important
management function. Permits continuous production to meet the need of the
consumer at a reasonably cost and time”. Different components of stock are raw
materials, work-in-progress and finished goods. Raw materials are those basis
input materials that are converted into finished goods through the
manufacturing process and they include the units of input, which have been
purchase and store for future production.
Work-in-progress
inventories are semi-manufacturing products. They represent product that need
more work before they become finished goods for sale or consumption.
Finished goods
inventories are those completely and fully manufactured products which are
ready for sale or consumption. The stock of raw materials and work-in-progress
facilities production, while stock of finished goods is required for smooth and
effective marketing operations. Inventories therefore serve as a link between
the production and the consumption of goods.
The motivating factors
for holding inventories are generally three and they include the following:
1.
THE TRANSACTIONS MOTIVES:
This emphasis the need to maintain inventories
to facilitate growth, production and sales operations.
2.
THE PRECUATIONARY MOTIVE:
This necessitates holding of inventories to
guard against the risk of unpredictably changes associated with demand and
supply force and other factors.
3.
THE SPECULATIVE MOTIVE:
This influences the decision to increase or
reduce inventory or stock level to take advantage of price fluctuations.
For these various
reasons and more such as cost and profit maximization reduction elimination of
waste for holding stock or inventories, viable firms always recognize the need
to hold inventories.
Nevertheless, this
should not be at the detriment of wealth maximization which is the bedrock and
main purpose of every profit oriented organization or firm. Consequently, firms
are faced with the problems of meeting two conflicting needs namely.
a.
Maintaining a large size of inventory for efficient, effective and smooth
production and sales operation.
b.
Maintaining a minimum investment in inventories to maximize
profitability.
Neither excessive
investment of inventories nor inadequate investment in inventories are
desirable. The former will cause unnecessary tie-up of the firm” funds and loss
of profit while the lather will have the consequences of production hold-up and
failure to meet delivery commitments or targets.
Thus, inventory
management should aim at avoiding excessive and inadequate levels of
inventories and so to maintain sufficient inventory for the smooth production
and sales operations. Ineffective, maintaining an optimum level of inventory
should be the good and is most desirable. Accordingly clarles T Hongren (1990
states that:
“The optimum inventory
level is some where between the two danger points.”
Also, Ben. O. Nweke
(Collins) (2002) asserts that “ The efficiency of any activity for production
of goods and services depend on the supply of materials, equipment, and
manpower made available in their right proportions”
1.2
STATEMENT OF THE PROBLEM
Inventories management
in manufacturing companies is a function of the observation of product
inventory accounting techniques. Which aim at not only helping the sustenance
of manufacturing industries or setting it on the parth of growth back also
bolster and improves the industry as a going concern and thereby fostering long
term profitability through and by cost reduction. One of the problems that
indeed usually confronts manufacturing companies is how to maintain and value
their inventories and by so doing achieve optimum inventory. Often these
companies lack the requisite expertise or manpower hence the knowledge of the
right valuation method and the optimum level to maintain their stock.
The problem
associated with inventory management is the maintenance of an optimum level of
inventory so as to among others, reduce cost. To elliviate this, efforts should
be made by management to eliminate pride distortion and high expenditure on the
frequent re-order levels, find the true value of the order quantity over labour
sector inefficiency. Production stop pages should be avoided, if not
eliminated, as they constitute some of the major problems arising from under
stocking.
Various methods of stock
valuation impact differently on the financial statement. As such there is
need to verify reliability effort of each specified and accepted method on the
financial statement.
Finally the problem of
desperately has always lingered. Authors are however not agreed as to whether
this difference exists as far as inventory management and valuation are
concerned.
1.3
OBJECTIVE OF THE STUDY
Precisely, the aims and
objectives of the study are:
1.
To evaluate the management of inventories in Nigeria breweries plc.
2.
To ascertain the importance of inventory management as a tool for cost
reduction.
3.
To ascertain the effort of various valuation methods on the reliability of
financial statement.
4.
To ascertain the extent of application of inventory management valuation
methods in Nigeria breweries plc.
5.
To determine the effort of poor storage spaces, under or over stocking of
materials.
1.4
SIGNIFICANCE OF THE STUDY
Since it means a lot to
its users, especially the users of financial statements, manufacturing
companies, researchers and readers, the significance of the study cannot be
over-emphasized.
To the user of financial
students, this study will give an in-dept knowledge of the proper composition
and valuation inventories as a significant and essential part of current
assets.
It could, to the
manufacturing companies, mean the break of a new down since they could borrow a
loaf on how the tackle their age-long seemingly intractable inventory
management problems will a view to among others, reducing cost.
1.5
DEFINITION OF TERMS
For purposes of this
study and clarify, the following terms are defined:
i.
Lead time: This is the time below even when
an order is placed and the time order is received.
ii.
Safety stock or Buffer stock: This is the extra stock that should be kept
to allow for the possibility that demands may increase or that supply may be
delayed. It is kept to minimize stock out.
iii.
Stock out: This is a failure to meet
customer’s order or material requisition on desired data simply because the
materials ordered are not available.
iv.
Economic order quantity (EOQ): This is
other wise know as re-order quantity. It is the quantity which is most
economical to order. In other worlds, it is a calculated ordering quantity
which minimizes the balance of cost between inventory holding costs and
re-order cost.
v.
Ordering cost: Ordering cost consist of all the costs inlured though writing
purchase orders, sending inquires, receiving and inspection of goods.
vi.
Carrying
stock: This
is a made up of all stock associated with keeping stock.
vii. Maximum
stock: This is a stock level
selected as the maximum desirable which is used as an indicator to slow when
stocks have arisen.
viii. Re-order
level: This
is the level of stock at which a further replenishment order should be placed.
Department | Business Administration and Management |
Project ID Code | BAM0111 |
Chapters | 3 Chapters |
No of Pages | 61 pages |
Methodology | Null |
Reference | YES |
Format | Microsoft Word |
Price | ₦4000, $15 |
|
|
Contact Us On | +2349067372103 |
Contact Us On | +2349094562208 |
|