An efficient and effective inventory control and management in any organization is very vital in the survival of such organization. Inventory is defined as “An idle resource of any kinds that possesses economic values, and is classified in many ways thus: production inventories like raw materials, parts and components which enter the firm’s product in the production process. MRO inventories that is maintenance, repair and operating supplies which are consumed in the production process but which do not become part of the product, in process inventories, that is semi-finished products found at various stages in the production operation and lastly finished goods which are ready for shipment.
These inventories require high cost and investment commitments. Most businessmen view inventories and their attendant cost as “necessary evil” hence failing to asses carefully the benefits afforded their company or business by the existence of the inventory.
In a manufacturing company where these inventories are handled, the introduction of a well-planned and effective system or means of controlling these inventories is necessary for profitability and accountability to both the management and shareholders of the company whose interest, objective and aims under which the company or business was established must be protected. It is on this basis that the researcher chose the project topic relevant to manufacturing companies in Nigeria and with Akaraka Industries Nigeria Limited in mind.
In choosing this very topic, the researcher is not claiming any authority in the subject matter neither is he of the view that the topic is over flogged by other researchers. Rather, he is of the view that the topic should be related to present day happenings in the economy, an approach he adopted in the project work.
The project work has been divided into five chapters. Chapter one deals with the introduction of the approach.
Chapter two is a review of related literature on both the general economy and how it has affected the operation of Akaraka Industries Nigeria limited.
Chapter three outlines the methodology and procedure used in gathering the data.
Chapter four deals with analysis of data which simple percentage frequency was used and chapter five is the summary of the work, the conclusion and recommendation.
TABLE OF CONTENTS
Title Page i
Approval Page ii
Table of Contents vii-x
List of Tables xi-xii
1.0 Introduction 1
1.1 Background of the Study 2-6
1.2 Statement of problem of the study 7
1.3 Objective of the study 7-9
1.4 Scope of the study 9
1.5 Research Questions 9-10
1.6 Research Hypothesis 10-11
1.7 Significance of the study 11
1.8 Limitation of the study 11-12
1.9 Definition of Terms 12-15
2.0 Review of Related Literature 16
2.1 Introduction 16
2.1.1Inventory Management and Control 16-19
2.1.2Types of Inventory 19-20
2.2 Reasons for Holding Stock/Inventory 20-23
2.3 Inventory Control Policy 23-25
2.4 Meaning of Inventory Control 25-27
2.5 Inventory Control System/Techniques 28
2.5.1The Cyclical Ordering System 28
2.5.2Fixed Order Quantity System 29
2.5.3Material Requirements Planning (MRP) System 29
2.6 Stock levels 30
2.6.1The Minimum Stock Level 30-31
2.6.2The Re-order Level 31
2.6.3Hastening Stock Level / Danger Warning Level 31
2.6.4Maximum Stock Level 32
2.7 Determinants of Stock Levels 33-34
2.8 Use of ABC/Pareto’s Analysis in Management
of Materials 35-39
2.9 Economic Order Quantity [E.O.Q] 40-43
2.10 Inventory Valuation 43-44
2.10.1 Specific Identification 44
2.10.2 First-In-First-Out (FIFO) Method 44
2.10.3 Last-In-First-Out (LIFO) Method 45
2.10.4 Weighted Average Method 45
2.11 Benefits of Inventory Control 46-47
2.12 The Effect of Non-Maintenance or Inefficient Control of Inventory 47
3.0 Research Methodology and Procedures 48
3.1 Introduction 48
3.2 The Research Design. 48-49
3.3 The Questionnaire Design 49-51
3.4 Sampling and Selection of Respondent 51-53
3.5 Other Techniques Used 53
3.5.1Observation Technique 53-54
3.5.3Data sources 55
3.5.4Primary sources 55
3.5.5Secondary sources 55
3.5.6Data analysis method 56
4.0 Presentation and Analysis of Data 57
4.1 Introduction. 57
4.2 Analysis of Date 57-77
4.3 Testing of Hypothesis 77-78
4.3.1The Hypothesis 78-79
4.3.2The Second Hypothesis 79
4.4 Discussion of Findings 80-81
4.4.1Raw Material Sourcing 81-82
4.4.2Receipt Issue and Documentation 83-86
5.0 Summary, Recommendation and Conclusion 87
5.1 Summary 87-88
5.2 Conclusion 88
5.3 Recommendations 88-94
LIST OF TABLES
Table 3.1 Questionnaire distribution & response profile.
Table 3.2 Showing sectorial distribution & return profile.
Table 4.1 Responses showing existence of store unit.
Table 4.2 Responses showing the department in-charge of making purchases.
Table 4.3 Responses showing the organizational Representation of the store unit.
Table 4.4 Responses showing the size of the store house.
Table 4.5 Responses showing the centralized store.
Table 4.6 Responses showing the management of the store department
Table 4.7 Responses showing the classes of materials stored.
Table 4.8 Responses showing the equipment used in storing.
Table 4.9 Responses showing the classification of items
Table 4.10 Responses showing the coding systems used.
Table 4.11 Responses showing the number of store staff employed
Table 4.12 Responses showing the department in-charge of stock regulation.
Table 4.13 Responses showing the educational qualification of stock control staff.
Table 4.14 Responses showing the stock items
Table 4.15 Responses showing the receiving procedure used.
Table 4.16 Responses showing the main sources of raw materials supply.
Table 4.17 Responses showing the methods of issuing materials.
Table 4.18 Responses showing the stock control system in use.
Table 4.19 Responses showing the stock control level in use.
Table 4.20 Responses showing the timing of stock replenishment.
Table 4.21 Responses showing the time of materials issue.
Table 4.22 Responses showing the existence of shift work.
Table 4.23 Responses showing the shift work.
Table 4.24 Responses showing the existence of stock out.
Table 4.25 Responses showing the rate of stock-out.
1.1 BACKGROUND OF THE STUDY
Advancement in all business activities has brought about the need for efficient inventory management and control. For the past decade inventories were handled by a clerk in a routine manner. But in recent times proper attention has been given to it. As a matter of fact, a well planned and effectively controlled inventory can contribute substantially to the organization’s growth and efficiency. Inventory control is a vital element in the management of materials.
However, before delving into this plight, it is appropriate to give the definition of inventory control.
According to Baily [1983:73] inventory control is the means by which materials of the correct quantity is made available as and when required, with due regard to economy in storage and ordering cost, purchase price and use of working capital. It involves the following processes.
[a] Accessing the items to be held in stock
[b] Deciding the extent of stock holding of items individually and collectively.
[c] Regulating the input of stock into the storehouses.
[d] Regulating the issue of stock from the storehouses.
Therefore, through these process, it is possible to adjust continuously the quantity and value of inventory held to confirm to circumstance at all times.
The functionary name given to the activities in the stores is known as inventory control or stock control. The inventory controller or stock controller takes custody of the day to day movement of stocks.
Inventory procedure includes receipt, storekeeping, issue and balance of stocks. In practice, the three major functions involve the overall activities that take place in the stores.
Some of the activities are: communication with other department, identification of stores, receipt and inspection, issue and dispatch, stock records, stores accounting, stock control, stock taking and stock checking, storage of equipment and so on.
Inventory control is the clerical control of the movement of goods into and out of the stores, and of the level of inventories in the stores. Different inventory records are kept to know when inventories fell to minimum, maximum inventory level, and re-order point. The success or failure of any organization depends largely on efficient system of their inventory control, since inventory control is regarded as a procedure in which appropriate system containing information are fed to various department for recording or action.
Actually different systems are operated in different organizations in controlling their inventories. Some of these systems work out well while others failed in their purposes. These systems and other relevant point will be discussed fully in the next chapter.
The researcher could not close the general introduction without giving a brief historical background of the company he is researching on.
Akaraka Industries Nigeria Limited [AINL] was incorporated as a private limited liability company in 1994 under the companies’ allied matters Act of 1990. The company is an industrial/Agro-chemical industry located at Oboama Enyiogugu Aboh Mbaise along Owerri Umuahia road. It has her head office at 186 wetheral road Owerri and her factory at Mbaise in Imo State Nigeria.
It was formed mainly to process solid minerals as industrial chemicals and production started with a capacity of 144 tones per day using two machines at its factory in Mbaise along Owerri – Umuahia road. Each machine has a rated capacity of 3 tones per hour and is capable of pulverizing solid minerals to a more scale of hardness not exceeding 7 and humidity below 6 percent.
The grain size of finished products from the pendulum pulverize may be adjusted in the range of 0.125mm to 0.44mm [equivalent to 120 to 320 mesh per inch] according to customers requirements or specification.
The staff strength of Akaraka Industries Nigeria Limited is about 325 with 75 percent of the total workforce coming from the immediate community.
All raw materials of Akaraka Industries Nigeria Limited are naturally as sedimentary metamorphic and igneous rocks in millions of tones.
Her product range includes: