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PROJECT TOPIC: EFFECTIVE INVENTORY CONTROL AS A MEANS OF IMPROVING THE PROFITABILITY OF MANUFACTURING FIRM IN NIGERIA

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CHAPTER ONE

1.0   INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Inventory control refers to the management function concerned with the acquisition, storage, handling and usage of inventory, so as to ensure availability of inventory when needed, provide adequate cushion for contingencies and denying maximum economic benefits and at the same time minimizing wastage and losses.

        Independently, inventory purse can be defined as a quality of goods or maternal in the control of the enterprises and hold for a time in its relatively idle or unproductive state, awaiting its intended use or sale. It is equally identified as stock on hand at a given time.

        Control is necessary so as to minimize cost and at the same time keep our services good enough so that an organization do not lose business. The control and maintenance of inventory is a problem that is common to organization in different sectors of the company. Inventory problems have proliferated as technological ability to produce good in greater quantities and at a factor rate. Cash invented in inventories could be used some where else for profit making, debt servicing on dividend distribution. Management is therefore  becoming increasingly aware that the overall efficiency of company’s operation is directly related to inventory situation existing within the company. The real problem therefore has been in the determination of inventory level at which many invested in the inventory will produce a rate of return higher than it would if it had been invested in some other areas of business.

1.2   STATEMENT OF PROBLEM

        The issues of failure, poor quality products, “out of stock,” unnecessary delays in and in extreme cases of shut down in some organizations can be attributed to non-existence of effective inventory control system.

        Most managers are ignorant of inventory control hence they fall victim of the above listed circumstances. A few of them who are aware of usefulness of stock control excel in their various business.  

        Inspite of these, effective inventory control has not been without a lot of problems as observed by the researcher as follows:

1.     Most firms have no clearly identified inventory countries system.

2.     Most firms do not have enough money for keeping reasonable inventory.

3.     Most organization have little or no space for inventory. This affects the number of products to produce and stock.

1.3   FORMULATION OF HYPOTHESIS

For the purpose of this study, the following hypothesis have been formulated.

1.     Ho:  A well-planned and effective inventory control                            technique does not contribute to the profitability of a                 manufacturing firm.

Hi:   A well-planned and effective inventory control technique partly contribute to the profitability of a manufacturing firm.

2.     Ho:  The amount of inventory stock does not have             significance impact of the level of productivity.

        Hi:   The amount of stock has a significant impact on the                   level of productivity.

3.     Ho;   A well-planned and effective inventory control technique does not provide a check on the accuracy for misappropriation in stores of most firms.

Hi,    A well-planned and effective inventory control technique provide a check on the accuracy for misappropriation in stores of most firms.

Statistical technique to be used in testing the above hypothesis is the “T” value.

        t = X1 – X2

             S2P      S2P

              N1       n2

Where X1   =      Mean of Management Sample

         X2    =      Mean of Supervisory Sample

        S2p   =      Variance of both the population sample

        N1     =      Size of the Management Sample

        N2     =      Size of the Supervisory Sample

1.4    OBJECTIVES OF THE STUDY

        The values of inventories in an industry are carefully detached by inventories regarded as “ring leader” of industry. James H. Greene said, “inventory is of such great consequence to the manufacturer that it shows up in the most importance financial statement balance sheet and profit and loss statement.

        Difference inventory control problems are being encountered by different organizations. A selection and adoption of an inventory control system that will result to the much needed improvement in the organizational profitability can achieve effective inventory control.

        The research therefore aims at:

1.     Funding the extent to which an effective and efficient inventory control system can contribute in improving the profitability of a firm.

2.     Identify some of the factors militating against a true adoption of an effective control system of inventories in a firm.

3.     Recommending ways through which a firm can enhance/adopt effective inventory control system in a firm like Emenite Nigeria Limited Enugu.

The research will however not lose sight on requisition problems of raw materials and how best to solve it.


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