EFFECTIVENESS OF INVENTORY MANAGEMENT IN A MANUFACTURING COMPANY
(A CASE STUDY OF AMA GREENFIELD BREWERIES PLC, ENUGU, NIGERIA)
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ABSTRACT
This study examines the essence of effective inventories control and management to manufacturing companies with particular emphasis on Ama Greenfield Breweries plc. The aim of this study is to investigate and ascertain areas of lapses by the company and offer effective ways and solutions in which the manufacturing company can explore the services of inventory management to effect its objectives. In carrying out this study, various research instruments such as questionnaires and oral interview were used to collect data from respondents and a research design was adopted with a sample size of 52. The statistical tool used for this work is Chi-square. Based on the analysis, it was discovered that inventory management plays a vital role in the manufacturing company. A well functional inventory management following the recommendations can bring about proper management thereby enhancing proper and effective production and it will equally ensure the effective, efficient and adequate use of materials and resources in the manufacturing company.
TABLE OF CONTENTS
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| CHAPTER ONE | ||||||||
| 1.0 | Introduction – | – | – | – | – | – | – | -1 |
| 1.1 | Background of the study – | – | – | – | – | -1 | ||
| 1.2 | Statement of the problem | – | – | – | – | -5 | ||
| 1.3 | Objective of the study | – | – | – | – | – | -6 | |
| 1.4 | Test of hypotheses – | – | – | – | – | – | -6 | |
| 1.5 | Research questions – | – | – | – | – | – | -7 | |
| 1.6 | Significance of the study – | – | – | – | – | -8 | ||
| 1.7 | Scope of the study – | – | – | – | – | – | -8 | |
| 1.8 | Limitation of the study – | – | – | – | – | – | -9 | |
| 1.9 | Definition of terms | – | – | – | – | – | -9 | |
viii
| CHAPTER TWO | ||||||||
| 2.1 | Introduction – | – | – | – | – | – | – | -11 |
| 2.2 | Concept of inventory- | – | – | – | – | – | -11 | |
| 2.2.1 Types of inventory- – | – | – | – | – | – | -13 | ||
| 2.3 | Classification of inventories – | – | – | – | – | -15 | ||
| 2.4 | Inventory policy- | – | – | – | – | – | – | -16 |
| 2.4.1 Reasons for inventory – | – | – | – | – | – | -17 | ||
| 2.5 | Inventory control – – | – | – | – | – | – | -19 | |
| 2.5.1 Purposes of inventory control – | – | – | – | – | -21 | |||
| 2.6 | Cost associated with inventory – | – | – | – | -21 | |||
| 2.7 | Inventory model – | – | – | – | – | – | – | -25 |
| 2.8 | Economic order quantity – | – | – | – | – | -26 | ||
| 2.8.1 Replenishment model- | – | – | – | – | – | -28 | ||
| 2.9 | Inventory level – | – | – | – | – | – | – | -28 |
| 2.10 | Inventory valuation method – | – | – | – | – | -30 | ||
| 2.11 | Inventory Accounting System – – | – | – | – | -33 | |||
| 2.12 | Stock taking methods- | – | – | – | – | – | -34 | |
| References – – | – | – | – | – | – | – | -35 | |
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CHAPTER THREE
RESEARCH METHODOLOGY
| 3.0 | Introduction – | – | – | – | – | – | – | -36 |
| 3.1 | Research design – | – | – | – | – | – | – | -36 |
| 3.2 | Area of the study – – | – | – | – | – | – | -36 | |
| 3.3 | Population of the study- | – | – | – | – | – | -37 | |
| 3.4 | Determination of the sample size and technique- | – | -37 | |||||
| 3.5 | Sources of data – | – | – | – | – | – | – | -40 |
| 3.6 | Method of data analysis – – | – | – | – | – | -40 | ||
| 3.7 | Validity of the test – | – | – | – | – | – | -41 | |
| 3.8 | Reliability of the test – | – | – | – | – | – | -41 | |
| CHAPTER FOUR | ||||||||
| DATA PRESENTATION AND ANALYSIS – | – | – | – | |||||
| 4.0 | Introduction – | – | – | – | – | – | – | -43 |
| 4.1 | Presentation of data- | – | – | – | – | – | -43 | |
| 4.2 | Analysis of data – | – | – | – | – | – | – | -44 |
| 4.3 | Test of hypothesis – | – | – | – | – | – | -54 | |
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CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
| 5.1 | Summary of findings- | – | – | – | – | – | -58 | |
| 5.2 | Conclusion- – | – | – | – | – | – | – | -61 |
| 5.3 | Recommendation – – | – | – | – | – | – | -62 | |
| Bibliography – | – | – | – | – | – | – | -65 | |
| Appendix- – | – | – | – | – | – | – | -68 | |
CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY
Inventory is one of the resources that are managed by business
organizations and it was first recorded in 1601. The need for inventory control cannot be overemphasized as it is a means for improving the performance of manufacturing industries. Inventory can be defined as a record of a business current assets including property owned, merchandise on hand and the value of work in progress and work complete but not sold and it is classified as a current asset because it can be turned into liquid cash within a short period of time. Inventory has created a great impact on the profitability of the manufacturing firm which resulted to the deep research of this topic. Effectiveness of inventory management in a manufacturing company. Inventory plays a major role in the operation of many businesses and manufacturing companies. In manufacturing, inventories of raw materials allow companies to operate independently of their sources of supplies. Day to day operation are not dependent on deliveries from supplies since stock of the necessary mateials are maintained and used s needed. Without inventory control, millions of naira could be lost year because of non accountability of stocks and inaccurate checks and balances. The process of control and management of inventory is a very important factor in the success or failure of any business for example, little stock will result in stock out which will disrupt the production distribution cycle that is crucial to the survival of all manufacturing companies while too much stock will tie down the resources of a company. Poor or inadequate inventory management can present a serious challenge to the productive capacity of a manufacturing organization. In addition to raw materials and finished goods, many companies also maintain items of assets, property, inventories of work in progress, office supplies, business firms and general operation supplies. Inventories often constitutes the most significant part of current assets of large companies. In the public limited companies, inventories are approximately 60% of current assets on the average. The US Burean of the census stated that inventory and accounts receivable ate the two largest accounts of equal magnitude and together they comprise almost 80% of current assets and over 30% of total assets for all manufacturing companies in 1982. Considering the large sum of money that are committed to the stocks of raw materials, work in progress and finished goods, it is therefore of paramount necessity that these stocks be managed efficiently and effectively in order to avoid the jeopardizing of the profit position of the firm. In inventory, there is an optimum level therefore inadequate inventory causes loss of sale and disrupts the production process while excessive stock level leads to unnecessary carrying cost and obsolescence or spoilage risks. According to Charles T. Horngren (2007), the optimum inventory. Level lies between the inadequate inventories and the excessive inventories. Inventory management aims at maintaining an optimum inventory level that will be carried at the least cost.
A BRIEF HISTORY OF AMA GREENFIELD BREWERY IN ENUGU STATE, NIGERIA
Ama Greenfield Brewery is the jewell in the crown of Nigeria Breweries Plc and is reputed as one of the most modern Breweries. Precisely on Friday October 24, 2003, the much ultra modern Ama Greenfield Brewery located in Enugu state was officially commissioned. It is Nigeria breweries second to be located in Enugu state. The multi-billion naira Ama Brewery boasts of the best cutti….