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PROJECT TOPIC: IMPACT OF INVENTORY MANAGEMENT ON ORGANIZATIONAL PRODUCTIVITY

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CHAPTER ONE

INTRODUCTION

1.1            Background to the Study

Inventory planning is an extension of stores keeping, which has been in practice since the history of man. It has a widened scope of activities today. Inventory planning is an act of loading often some valuable items for future uses and to produce them when the need arises. Inventory planning goes beyond, the scope of keeping and producing the items only but also involves controlling of operations, receiving, inventory control, quality control, activities training of stores staff, control of all store houses, stock handling as well as clerical documentation

Inventory management is not just an inventory activities in an organization but also a profit oriented function. The function directly effect profitability of the organization through the intelligent and effective management of material into the store and out of the store, in the light of this inventory management and control is meant to ensure that material are readily available to be used in the department at all times considering the effect of non availability of materials to the organization’s operation.  Stock items make up more than half of the organization fund and as such personnel in the store department must ensure that proper records of store transactions are kept at all the times. In fact it has been estimated that in manufacturing industry an average of more than half of its total sale revenue is spent on procurement of material and component parts, thus consideration must be given to such function.

The increase specialization of industry in modern time has progressively enhanced the importance of the subject of this study, because firms that concentrate on the manufacturing of their own specialized line of product and at times buy out an increased proportioned of materials either in form of raw materials, semi processed or even finished goods and parts need to have a control measure to ensure that materials are not over stocked. The economic purchased storage and control of materials which can make significant contribution to the profit margin is often neglected by management and as such a reflect on the impact of effective inventory management is essential.

Mistakes are mistakes and everyone makes them, however, not following a specific procedure is a conscious decision made by the employee to not do what he/she was instructed to do. Year-end physical inventories are tools used by accountants and do very little for inventory on a continuous basis (cycle comting) to maintain high levels of accuracy. This is one of the best ways of identifying problems areas on a timely basis and providing an environment conductive to continuous improvement. The way you count and the frequency of your counts should be designed for your specific type of operation. You should be regularly reevaluating your processes and procedures. Results of your cycle count program should point you in the direction of areas where enhancements are needed. Business condition often change and new processes are added which will require evaluation. It is more effective to plan a revision data and group multiple revisions release of the procedures. These revisions should be implemented with the proper training and testing as was done during initial implementation improving imentory accuracy is not very complicated, the implementation can pure to be demanding. Depending on the environment you are working in, it can sometimes seem to be an insurmountable task to change the attitude of people towards invnentory accuracy. It will require a high level of effort and deliquesce to ensure success. Developing the discipline and the skills in stocktaking is very significant in ensuring success of the operation. To maintain personal and professional accountability, fellow few simple guidelines are of paramount in carrying out effective stocktaking exercise.

This project is aimed at finding an avenue to lay a foundation for a solid inventory management of the inventory operations especially at this time of economic recession which has engulfed the whole nation. Inventory exists to secure the interest of the people (department) and to provide these services efficiently it must maintain a clear link with the rest of the department maximization.


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