CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Inventories are vital to the successful functioning of manufacturing and retailing organizations. They may consist of raw materials, work-in-progress, spare parts/consumables, and finished goods. It is not necessary that an organization has all these inventory classes. But, whatever may be the inventory items, they need efficient management as, generally, a substantial share of organizations funds is invested in them. Different departments within the same organization adopt different attitude towards inventory. This is mainly because the particular functions performed by a department influence the department’s motivation. For example, the sales department might desire large stock in reserve to meet virtually every demand that comes. The production department similarly would ask for stocks of materials so that the production system runs uninterrupted (Anichebe and Agu, 2013).

Inventory represents an important decision variable at all stages of product manufacturing, distribution and sales, in addition to being a major portion of total current assets of many organizations. Since inventory constitutes a major segment of total investment, it is crucial that good inventory management be practiced to ensure organizational growth and profitability. According to Temeng et al (2010), historically, however organizations have ignored the potential savings from proper inventory management, treating inventory as a necessary evil and not as an asset requiring management. As a result, many inventory systems are based on arbitrary rules. Unfortunately, it is not unusual for some organizations to have more funds invested in inventory than necessary and still not be able to meet customer demands because of poor distribution of investment among inventory items (Temeng, Eshun and Essey, 2010). Based on the above analogy, therefore this research work evaluates The effect of inventory management and control on the performance of manufacturing enterprises in Ikot Ekpene Local Government Area.

1.2 Statement of the Problem

Problems of inventory management and control have been around for a very long time. The need to collect goods when it is readily available and then store it for times of shortage is perhaps the fundamental stock holding problem, which was tackled long ago by man. Nowadays, we usually think of stocks being held by organizations to allow efficient and continuous operations. Managers are aware of the vital roles inventory plays in the activities of organizations. In most organizations, direct materials represent up to 50% of the total product cost, as a result of the money entrusted on inventory, thereby affecting the profitability of the organization. Organizations at times do not control their inventory holding, resulting in under stocking and causing the organizations to stay off production, thereby resulting to manufacturing enterprises organizational ineffectiveness. This therefore creates relationship problems between inventory management and organizational productivity, profitability and effectiveness.

1.3 Objectives of the Study

The broad objective of this study is to evaluate the effects of inventory management on the performance of manufacturing enterprises, while the specific objectives are:-

1. To determine the effect of inventory management and control on the performance of manufacturing enterprises
2. To determine the various inventory systems in manufacturing enterprises.
3. To examine the challenges of inventory management in manufacturing enterprises.
4. To reveal the strategies that can be used to overcome the challenges of inventory management in manufacturing enterprises.

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