This research is on
impact of inventory management on productivity in an organization with zarewa
aluminum and plastic limited as a case study. Its primary aims is to determine
the level of inventory of goods and documented with the organization. It also
the aim of the research is to find out the methods of control of goods with a
view to eliminate the element of waste and thereby minimize the amount of
material purchased from tying down capital stock out. The researcher divided
the protect into five chapters. Chapter one forms the general introduction,
brief history of zarewa aluminum and plastic limited, statement of general
problems, hypothesis, limitations and significance of the study. Chapter two
deals with review of related literature. While chapter three deals with the
research methodology. Chapter four was used to analyzed and present the data collected
in a tabular form. While chapter five deals with the summary, conclusion and
TABLE OF CONTENTS
Table of contents vii
for the study 1
of general problem 5
and objectives 6
of hypothesis 7
of the study 7
and limitation of the study 8
background of Zarewa Aluminum and Plastic Limited 9
of terms 13
TWO: LITERATURE REVIEW
2.1 Introduction 16
2.2 Receipt of goods 22
2.3 Stock or (Stores) issues 24
2.4 Authorization of issue 28
2.5 Stock records 29
2.6 Store-house locations system 32
2.7 Inspection of incoming goods 35
2.8 Stock-taking 36
2.9 Perpetual inventory 39
2.10 Stock valuation 41
3.1 Research methodology 46
3.2 Research methods or approaches used 46
3.3 Justification for approaches used 47
3.4 Instruments or tool used 48
3.5 Research population and sample size 49
3.6 Sampling procedures 50
3.7 Justification for sampling procedures used
and sample size 50
3.8 Statistical techniques used in analyzing the data 50
4.1 Data presentation and analysis 52
4.2 Testing of hypothesis 67
4.3 Testing of hypothesis using chi-square 68
5.1 Summary, Conclusion and Recommendation 72
5.2 Summary of findings 72
5.3 Conclusions 74
5.4 Recommendations 75
1.1 BACKGROUND OF THE STUDY
in the form of raw materials, work in progress and finished goods constitute
significant proportion of assets of most organization. But why is it pertinent
to keep any eye on these items in other words, why do we engage in inventory
items cost money to acquire, they cost money to store and to look after, which
means storage facilities has to be provided so as to make sure that these
materials or items do not get spoilt until they are turned into sellable goods,
they do not produce money. When stock are held, it means tying down capital
that would have been used in other areas, so it all represent cost and should
be managed properly to acquire efficiency.
must however, hold stock to meet production needs and sales needs. This is
because if we do not hold stocks in sufficient quantities, we stand the risk of
running out of stock.
if we are short of finished goods, we may disappoint our customers. Inventory
shortages in both of these forms will likely lead to loss of customers and
money. For the organization not have the above problems, they should strike a
balance between carrying too much stock (over stocking) and carrying too little
stock (under stocking).
is essentially the importance of inventory management. Managing assets of all
kinds is basically an inventory problem, the same methods of analysis applies
to cash and fixed assets as to inventory themselves.
of all, a basic stock must be on hand to balance in flows and outflows of
items. The size of the stocks depends on the pattern of flows whether fast
moving or regular items, slow moving or irregular items.
because the unexpected may occur, it is necessary to have safety stock on hand
representing, extra stock to avoid the cost of not having enough to meet
additional amount may be required to meet future growth needs these are called
anticipation stocks, related to anticipation stocks, is the recognition that,
these are optimum purchases sizes defined as economic order quantity (EOQ).
borrowing money, for buying raw material for production or purchasing plants
and equipment, it is cheaper or more economical to buy more than just enough to
meet immediate needs.
firms generally have three kinds of inventories:
level of raw materials; inventory is influenced by anticipated production,
seasonality of production, reliability of sources of supply and efficiency of
scheduling purchases as well as production operations.
in-progress inventory is greatly influenced by the length of the production
period, which is the time between planning raw material in production and
completing the finished products. Inventory turn over can be increased by increasing
the production. One means of accomplishing this is to perfect engineering
techniques there by spreading up to manufacturing process. Another means is to
buy rather than make them. The level of finished goods inventory is a matter of
coordinating production and sales.
Holding stock in whatever form cost money.
The capital tied down by the stock itself has to be serviced by the payment of
interest and the land or warehouse needed for the stock has to be bought or
rented. The handling of the securing of the stock and any quality deterioration
that occurs also cost money. The sample type of stock control system used in
most organizations is two, the bin system of stock control and is of two
The first quantity is the stock level
below which is new order is to be placed. Under this system, the units of stock
are held in two: one and two stock is taken from bin as required until this bin is empty.
More are then order by the quality being
determined by the rate of usage or consumption rate; comprehensive inventory,
planning and control system have been successfully installed or established in
many organizations. The major objectives of inventory management is to discover
and to optimum level of investment in the inventory. Inventories may be too
high or too low, if too high there are unnecessary carrying cost and risk of
obsolescence. If too low, production may be disrupted or sales permanently lost
and loss of good will, reputation, and customers to other firms in the same
The optimum inventory level is that which
minimize the total cost associated with inventory.
1.2 STATEMENT OF GENERAL PROBLEM
life blood of any organization both private and public sector is material and
this has been neglected long ago by various business concerned. The survival of
any business set up depends upon sufficient application of material functions,
policies involved and recognition according to the function.
till now inventory management has not been able to occupy it rightful position
due to one reason or the other. There has been infringement on the right of
inventory management personnel. They are often restricted to mere clerical work
in many organizations.
lack of recognition for inventory management function in many organizations has
caused so many havoc.
instance where the function is forced to be recognized and established because
of the demand to manage the affairs of various activities. To compound these
problems, the functions responsible for the manpower operations have few or no
plans for the low level personnel to benefit from the staff training programmes
which would have enhanced the basic skills professionally.
1.3 AIMS AND OBJECTIVES OF THE STUDY
aims and objectives of this research work are to take a general look at
inventory management as a tool for enhancing profitability in manufacturing
project is also aimed at providing information on how effective inventory
management can enhance profitability.
the project is geared towards analyzing how issues of inventory is done as well
as its inspection and stock taking in the organization and how it affects
inventory management. The project also tends to reveal to the management of the
organization their proper implementation of inventory can reduce wastage cost
and filferages will be minimized. Therefore, this research work seeks to focus
on the following questions:
is good delivered to in the organization?
the organization always keep store records for accountability?
does purchase requisition originated?
are goods located in the warehouse?
1.4 STATEMENT OF HYPOTHESIS
following are the hypothesis developed to guide this research work
Effective inventory management will not reduce material wastage/cost and hence
cannot improve profitability.
Effective inventory management will reduce material wastage/cost and will
1.5 Rationale of the study
study is aimed at having a look at inventory management as a tool for enhancing
profitability and come out with some problems associated with the function and
necessary ways of solving such problems. The researcher choose zarewa aluminum
and plastic limited as its case study.
equally an attempt to disabuse the impression of manufacturing organization
that inventory is not a profit generating center but to see inventory
management as a managerial function which need to be accorded a proper
attention than merely treating it as a dumping ground.
work can be very useful and helpful to those engaged in inventory management
function in organization and to students studying production operation
management in various institutions of higher learning. The study is also a partial
fulfillment for the award of higher national diploma in all colleges of
technology and polytechnic. The study is also to improve the function of
inventory management in the organization under study and the entire
manufacturing industry at large.
1.6 SCOPE AND LIMITATION OF THE STUDY
management being a complex and dynamic concept, has a wider area of coverage,
so it is obvious that research of this nature can not hold without a problem,
which serves in most cases as problems. As such the work is limited to these
areas, the researcher feels are crucial or relevant to the problem under
investigation that “inventory management as a tool for enhancing profitability in
following are some of the problems that limited the extent of the study:
constraint: This is very important for one to get accurate and up to date data,
it is important to have enough time. But for a researcher to spend as much time
as possible collecting information (being a student) and at the same time
battling class room work, coupled with assignment it is infact not easy within
problem is restriction to vital
information and documents by the organization under study due to secrecy. The organization
is so strict with their documents and did not allow vital information to be
revealed for fear of leaking management secrets to competitors, this operated a
non chalant attitudes by some staff towards the research.
constraints is that of finance. To conduct a research of this nature, one needs
money to enable one to travel to different organization at different
is factual that there is nothing like enough money” in the country again. The
researcher therefore restricted the study to only the Kaduna branch of the
organization under study.
1.7 HISTORICAL BACKGROUND OF ZAREWA ALUMINUM AND
aluminum and plastic limited was established on 25th of May 2007. It
was also commenced its commercial activities in June, 2007 since then PVC
ceiling production has been growing within Kaduna and other part of the
country. Through hard work and determination, the company has been able to
expand its plants and distribution network to some parts of the country. Its
greatest period of growth actually started in July, 2007 with the opening of
the branch, solely for corrugation of long span roofing sheets, the third
branch which is in Jalingo, Traba state was opened in October, 2009 for
corrugation of long span roofing sheets also.
company’s vision statement is “to be the most admired and innovative company in
Nigeria by the year 2020”. The Kaduna branch engaged in production of PVC
ceiling, cornice which include angle, seven and join cornice, rubber pipes both
small and big ones. The Kaduna branch has a thirty (60) number of employees and
it was headed by the general manager.
activities of the Kaduna plant is headed by the general manager and coordinated
under four major section namely:
DEPARTMENT: This can be seen as the largest department or unit in the organization
headed by the factory manager. It comprises three departments, quality control,
production and engineering.
DEPARTMENT: This handles all administrative matters. It encompasses the
following department, accountants, human resources and computer (management
information system or MIS).
DEPARTMENT: This is charged with the responsibilities of managing sales
distribution, merchandising and product warehousing. It also handles marketing
issues of the following department, marketing and sales.
DEPARTMENT: This handles the aspects of plant material inventory. It
encompasses the stores and warehouse departments and is headed by the inventory
1.8 DEFINITION OF TERMS
Items usually held in stock by organization. This can be in form of raw
material, finished goods, work-in-progress, furniture, capital, equipment etc.
Are items which are to be processed through production process to obtain the
defined finished goods.
HOUSE: This is a building where materials or items held in stock are kept and
protected against unauthorized removal. It is also a place where materials are
received. Stored, accounted for, recorded, replenished when due.
GOODS: These are the new products of the whole production process.
TIME: This connotes the number of days, weeks, months, which lapses from point
of placing an order to the time the goods ordered for are received.
MANAGEMENT: This is a system used in the firms to control the firms investment
CONTROL: Is the means by which materials of the correct quality and quantity is
made available as and when required with due regards to economy in storage,
ordering cost, purchasing prices and working capital.
Items to be held in stock.
LEVEL: This is the point between the maximum and minimum stock level at which
time is essential to initiate purchase requisition for fresh supplies of
materials. The point is usually higher than the minimum stock level to cover
emergencies. Such as abnormal usage of materials.
ORDER QUANTITY: This is the size of the order, which minimizes the total cost
of acquiring and holding stock. It is the quantity that is most economical to
order at a time, taking into consideration the cost of ordering and carrying.
STOCK: This is the quantity of items which provides a buffer against variation
in lead time.
STOCK LEVEL: Is that level above which stock should not normally be allowed to
rise except in special circumstances to avoid both storage problems and over
investment in stocks.
STOCK LEVEL: Is that level below which stock should normally be allowed to
fall. If it goes below there is danger of shortage of supply which may result
to stoppages in production.
STOCK LEVEL: The average stock investment is a useful parameter for indicating
to management the extent to which the actual investment on average has
influenced from the target.