ABSTRACT
This work evaluated the stock control practices and its contributions to the effective management and profitability of fast food establishments in Awka Capital Territory of Anambra State. The data for this research were collected using questionnaires. While the demographic information of the respondents were analyzed using simple percentage, the hypotheses were tested using chi- square at a significant level of 5%. The research revealed that the fast food establishments in Awka Capital Territory adopt inventory control measures in their operational activities. The first- in- first- out (FIFO) and Just In Time (JIT) were the commonly used inventory control practice in the study area. The study also revealed that the fast food establishments in the study area perceived effectiveness procedures of incorporating economic aim, environmental aim and social aim as positive for the profitability of the fast food establishments. The study also showed that the practice of stock control has positive effect on the profit margin of the fast food establishment in Awka Capital Territory. Based on the findings recommendations were made.
TABLE OF CONTENTS
Cover
page ………………………………………………………………...i
Title
page………………………………………………………………….. ii
Approval
page……………………………………………………………..iii
Certification………………………………………………………………..iv
Dedication…………………………………………………………………..v
Acknowledgment…………………………………………………………..vi
Table
of content…………………………………………………………...vii
Abstract…………………………………………………………………...viii
CHAPTER
ONE
1.1 Background of the research…………………………………………1
1.2 Statement of research
problem……………………………………...9
1.3 Objectives of the study……………………………………………..10
1.4 Research question …………………………………………………..10
1.4.2
Research Hypothesis……………………………………………….10
1.5 Significance of the study……………………………………………11
1.6 Scope of the study………………………………………………….12
CHAPTER
TWO:
LITERATURE
REVIEW
2.1 Conceptual Literature………………………………………………14
2.2 Theoretical framework……………………………………………...29
2.3 Philosophical Framework…………………………………………..37
2.4 Review of Empirical study…………………………………………44
2.5 Summary of the Literature
Review………………………………...45
CHAPTER
THREE:
RESEARCH
METHODOLOGY
3.1 Research Design…………………………………………………….47
3.2 Area of Study……………………………………………………….47
3.3 Population of the Study…………………………………………….49
3.4 Sample Size of the
Study…………………………………………...49
3.5 Instrument for Data
Collection……………………………………..50
3.6 Validation of the
Instrument………………………………………..51
3.7 Reliability of the Instrument………………………………………..51
3.8 Data Collection
Technique……………………………………….... 51
3.9 Data Analysis
Technique…………………………………………...52
CHAPTER FOUR:
DATA PRESENTATION AND ANALYSIS
4.1
Data presentation and Analysis………………………………………54
4.2
Analysis Based On Research Question……………………………....58
4.3 Hypothesis
Testing……………………………………………………63
4.4
Findings……………………………………………………………….66
4.5
Discussion of Findings……………………………………………….67
CHAPTER FIVE :
CONCLUSION
AND RECOMMENDATIONS
5.1 Conclusion………………………………………………………….70
5.3 Recommendations…………………………………………………..71
References…………………………………………………………………73
Appendices………………………………………………………………..77
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
Inventories
are basically stocks of resources held for the purpose of future production
and/or sales. Inventories may be viewed as an idle resource which has an
economic value. Better management of inventories would release capital for use
elsewhere productively, (Ghosh and Kumar, 2003). Hence Inventory control
implies the coordination of materials accessibility, controlling, utilization
and procuring of material. The direction of activity with the purpose of
getting the right inventory in the right place at the right time and in the
right quantity is inventory control and it is directly linked to the production
function of any organization. This implies that profitability of any
organization directly and indirectly is affected by the inventory management system
operated (Miller, 2010). Inventory of goods has many reasons why organization
should maintain it. It is economically unsound and physically impossible to
have goods arrive in a system exactly when demands for them occur. Without
stock at hand customers would have to wait for long period before their orders
can be fulfilled. Stock management is the control of materials used and stored
in an establishment with the objective of providing exactly what is required
where and when it is required employing a minimum of residual stock and thus
incurring the least possible cost (Agha, 2010). Hollander (2000) reveal that
many organizations are integrating the inventory system with the production
system in an attempt to reduce the amount of idle inventory on hand. Inventory
means stock at hand. It could be referred to an enterprise idle resource. Those
item which are either stocked for sale or are in the manufacturing process or
are in the form of materials which are yet to be utilized represents
inventories. As stated earlier, a day-to-day practice in all field of human
endeavor, households, manufacturing firms, servicing firms etc, is stock
control. Stock control is the ability to supply goods and services at the right
time with the right quality and quantity. It is a reliable means in which
businesses are managed to ensure customers are satisfied and organizations
remain in operation via minimization of losses. A reliable inventory system
implies higher confidence of customers and their attendant continuous patronage.
Production input like raw materials, human, financial equipment are included in
the industry inventory. Other forms
of
inventory are partially finished goods (work in progress) and spare parts.
Inventory is kept to meet reliability of operations, flexibility in production
scheduling, change in raw material, delivery time an change in economic
purchase order size (Inyama, 2006).
An
inventory system provides the operating policies and organizational structure
for maintaining and controlling goods to be stocked. A proficient management of
inventory system requires an appropriate way of making decisions about how much
to order and when to order and a means of keeping track of items in inventory.
Decision on inventory in any organization depends on facts about on-hand stock
level, demand information with regards to the forecasted quantity (with
consideration of the forecasted errors), lead time and lead time variation,
inventory holding costs, ordering cost and shortage cost. This information help
the manager in charge of controlling inventory to meet the competitive
advantage desired by the organization (Jossop, 1986).
Historically,
inventory management has been referred to as excess inventory and inadequate
management or shortage of inventory and adequate management practice. Several
penalties could be apportioned to excesses in either direction.
Inventory
problem has escalated as progress in technology increases the ability of
organizations to produce goods faster in multiple design variation and greater
quality (Letinkaya and Lee, 2000). Since the mid-1980’s inventory management,
production planning and scheduling has become the obvious strategic benefit
(Larrson , 1995).
In
recent years, many of the firms have raised the bar yet again by coordinating
with other firms in their supply chains. For instance, instead of responding to
unknown and variable demand, they share information so that the variability of
the demand they observe is significantly lower . Colling (1990) argue that in
the United States of America and other Western countries, improvement in
productivity was achieved through reducing the direct manufacturing labour
expenses cost per unit of output. This strategy was justifiable because of the
high labour content in many manufactured products. However, the ratio of unit
cost due to labour has constantly decreased in recent years.
Inventory control is the supervision of
the storage, supply and accessibility of items to ensure an adequate supply
without excessive oversupply (Miller, 2010). It means availability of materials
whenever and wherever required by stocking adequate number and kind of stocks.
The sum total of those related activities essential for the procurement,
storage, sales, disposal or use of material can be referred to as inventory
management. Inventory managers have to stock-up when required and utilize
available storage space resourcefully, so that available storage space is not
exceeded. Maintaining accountability of inventory assets is their
responsibility. They have to meet the set budget and decide upon what to order,
how to order and when to order so that stock is available on time and at the
optimum cost (Benedict and Margeridis,1999). Hence, Inventory management
involves planning organizing and controlling the flow of materials from their
initial purchase unit through internal operations to the service point through
distribution (Smaros, 2003).
Inventory
constitute one of the largest and most tangible investment of any retailer or
manufacturing organization. Intelligent inventory management strategies can not
only help boost profit but they can mean the difference between a business
thriving or barely surviving. Holding inventories at the lowest possible cost
and giving the objectives to ensure uninterrupted supplies for on-going
operations is the aim of inventory management. When making decisions on
inventory, management has to find a compromise between the different cost
component, such as the cost of supplying inventory, inventory holding cost and
cost resulting from sufficient inventories (Peterson and Silver, 1998; Zipkin,
2000). According to Miller (2010), inventory control is the activity which
organizes the availability of item to the customers. It coordinates the purchasing,
manufacturing and distribution functions to meet the marketing needs. This role
include the supply of current sales items, new product, consumables, spare
parts, obsolescent items and all other supplies. Inventory enables a company to
support the customer’s services, logistics or manufacturing activities in
situation where purchasing or manufacturing of the items is not able to satisfy
the demand. Inventory plays an ineligible row in the growth and survival of an
organization in the sense that failure to an effective and efficient management
of inventory, will mean that the organization will lose customers and sales
will decline. In other to attain its organizational objectives, a business is
to meet customer’s needs. Customer
desire has always been a vital issue in a company not only to maintain sales
but also to increase it (Tersine, 1994; Potilen & Goldsby, 2003). Kotler
(2002), posits that inventory management refers to all the activities involved
in developing and managing the inventory levels of raw materials, semi-finished
materials (working-progress) and finished good so that adequate supplies are
available.
Ghosh
& Kumar (2003) defined inventory as a stock of goods that is maintained by
a business in anticipation of some future demand. This definition was also
supported by Brag (2005) who stressed that inventory management has an impact
on all business functions, particularly operations, marketing, accounting, and
finance. He established that there are three motives for holding inventories,
which are transaction, precautionary and speculative motives. The transaction
motive occurs when there is a need to hold stock to meet production and sales
requirements. A firm might also decide to hold additional amount of stock to
cover the possibility that it may have under estimated its future production
and sales requirements. This represents a precautionary motive, which applies
only when future demand is uncertain. The speculative motive for holding
inventory might entice a firm to purchase a larger quantity of materials than
normal in anticipation of making abnormal profits. Advance purchase of raw
materials in inflationary times is one form of speculative behaviour.
Objectives of stock control includes:
Demand
A
retailer stays in business when he has the product the customer wants on hand
when the customer wants them. If not, the retailer will have to back order the
product. If the customer can get the goods from some other source, he or she
may chose to do so rather than wait in order to allow the original customer to
meet demand later (through back-order). Hence, in some instances a sale is lost
forever if goods are not in stock.
Running Operations
In
order to manufacture a product a manufacturer must have certain purchased items
(raw materials component or subassemblies). Completing the production of a finished goods can be prevented when a
manufacturer is running out of only one item. Inventory between successive
dependant operations also serves to decouple the dependency of the operations.
A work-centre often depends upon the previous operation to provide it with
parts to work on. If work stops at a work-centre, all subsequent centres will
shut down for lack of work. Each machine can maintain its operation for a
limited time, hopefully until operations resume at the original centre if a
supply of work-in-progress inventory is kept between each work-centre (Kuku,
2004).
Lead Time
Lead
time is the time that elapses between when order is placed (either a production
order issued to the factory floor or a purchase order ) and actual time goods
ordered are received. If an external firm or an internal department or plant
(supplier) cannot supply the required goods on demand, then the client firm
must keep an inventory of needed goods. The larger the quantity of goods the
firm must carry in inventory depends on the longer the lead time.
Hedge
Inventory
can also be used as a hedge against price increases and inflation. Before a
price increase goes into effect, salesmen routinely call purchasing agents.
This gives the buyer a chance to purchase material in excess of current need at
a price that is lower than it would be if the buyer waited until after the
price increase occur (Kuku, 2004)
Quantity Discount
Purchase
of large quantities of goods often times attracts a price discount to the firms.
This also frequently results in inventory in excess of what is currently needed
to meet demand. However, the decision to buy in large quantities is justifiable
if the discount is sufficient to offset the extra holding cost incurred as a
result of the excess inventory.
Flexibility
Inventory Service
Flexibility
of inventory service provides an organization with the ability to keep
inventory services to an agreed service level in a predictable fashion with
acceptable risk and cost. This capability can be tested and valued by
customers. Managing inventory to ensure high customer service level is critical
in the supply chain. However, to maintain asset is very costly. Reflecting the
level of availability of inventory to the customers is in three categories
namely, raw material inventory, work-in-progress inventory and finished goods
inventory (Lieberman , 2002)
Fast
food is the term given to food that can be
prepared and served very quickly. While any meal with low preparation time can
be considered to be fast food, typically the term refers to food sold in a
restaurant or store with quality preparation and served to the customer in a
packaged form for take-out/take-away. Outlets may be stands or kiosks, which
may provide no shelter or seating, or fast food restaurants (also known as quick
service restaurants).
Fast
food outlets are take-away or take-out providers, often with a
"drive through" service which allows customers to order and pick up
food from their cars; but most also have a seating area in which customers can
eat the food on the premises. People eat there more than five times a week and
often, one or more of those five times is at a fast food restaurant. Nearly
from its inception, fast food has been designed to be eaten "on the go",
often does not require traditional cutlery, and is eaten as a finger food.
Common menu items at fast food outlets include fish and chips, sandwiches,
pitas, hamburgers, fried chicken, French fries, chicken nuggets, tacos, pizza,
hot dogs, and ice cream, although many fast food restaurants offer
"slower" foods like chili, mashed potatoes, and salads.
Profitability means ability to make
profit from all the business activities of an organization, company, firm, or
an enterprise. It shows how efficiently the management can make profit by using
all the resources available in the market. According to Harward & Upton,
“profitability is the ‘the ability of a given investment to earn a return from
its use.” However, the term ‘Profitability’ is not synonymous to the term
‘Efficiency’. Profitability is an index of efficiency; and is regarded as a
measure of efficiency and management guide to greater efficiency. Though,
profitability is an important yardstick for measuring the efficiency, the
extent of profitability cannot be taken as a final proof of efficiency.
Sometimes satisfactory profits can mark inefficiency and conversely, a proper
degree of efficiency can be accompanied by an absence of profit. The net profit
figure simply reveals a satisfactory balance between the values receive and
value given. The change in operational efficiency is merely one of the factors
on which profitability of an enterprise largely depends. Moreover, there are
many other factors besides
efficiency,
which affect the profitability.
In Nigeria, the growing purchasing power in the country and increased
private equity investments, the Nigerian fast food industry experienced a great
growth in 2013, grossing a total of N230 billion in turnover up from the N200
billion it did in 2012. Based on the rebased GDP figures, the accommodation &
food services sub-sector contributed about 0.47 per cent of the nation’s total
value of goods and services compared to 0.55 per cent in 2012. The lower
contribution, according to a report by Agusto & Co., was as a result of the
GDP rebasing exercise, which resulted in a significant increase in the size of
the national economy to N80.2 trillion from N40.5 trillion. (Wikipedia).
The
Association of Fast Food Confectioners of Nigeria, has revealed that the Nigerian
organized fast food industry is currently worth about N250bn, with a growth
potential that is next only to the petroleum industry (Wikipedia). This growth in the fast food industry is
facilitated by several factors, including increase in average disposal income
of families, close gap between the cost of dining out and eating at home and
hectic and tight schedule in lifestyle. Due to this growth in the need for
quality,fast and convenient foods. The fast food industries in Awka have sprang
up to cater for these publics and institutions in Awka. The competition among
these numerous fast food establishments in Awka warrants effective management
for the profitability and survival of the fast food establishments in Awka.
Thus, this study sets out to investigate the stock control practices of fast
foods in Awka capital territory.
1.2 STATEMENT OF THE
PROBLEM
Low
profit margin and mismanagement of items have become every day issue in fast
food establishments. The mismanagement and other advance effect can be linked
to lack of effective control of stock of material for production and
operational activities. Great number of fast food establishments has not yet
recognized stock control practices as a very pertinent issue, which has led to
many problems such as theft, pilferages, shortage, wastage, inappropriate
accounting and inadequate record keeping and loses. As they cannot account for
the usage and management of materials like the food items, toiletries,
supplies, stationeries, production equipment, cleaning and laundry materials
etc. This poses a serious problem in terms of limited production and service,
low profit margin and inability to meet up to customer’s demands. The problem
associated with poor inventory control is what prompted the researcher to embark on this study to investigate and
determine the way forward for the fast food establishments in Awka capital
territory.
1.3 OBJECTIVES OF THE STUDY
The
broad objective of this study is to investigate stock control practices of fast food establishments in Awka capital
territory, Anambra state.
The
specific objectives are:-
1.
To determine the stock control practices employed by fast food establishments
in Awka.
2.
To examine the nature of relationship between stock control and organizational effectiveness.
3.
To evaluate the nature of correlation between stock control and organizational
profitability.
1.4. RESEARCH QUESTIONS
The
following questions will guide the study;
1.
what is the stock control methods employed by the organization
2.
What is the nature of relationship between stock control and organizational
effectiveness?
3.
To what extent does stock control correlate with organizational profitability?
1.4.1 RESEARCH
HYPOTHESIS
The
following research hypotheses were formulated for the study;
H1:
There is no significant difference on stock control
practices of the fast food establishments.
H2:
There is no significant difference of stock control practiced and profit margin
of the fast food establishments.
1.5 SIGNIFICANCE OF THE STUDY
This
study is important to the world of knowledge and to the fast food and
hospitality establishments as a whole. This is because it will help sharpen their
knowledge of the different stock control methods and their usefulness in the
fast food industry and help them survive in a highly competitive environment.
Furthermore, the research will serve as enlightenment to proprietors or owners of
fast food establishments because it will be a great assistance to them in the
areas of understanding the need to control their inventory to optimize
satisfaction and increase its profit margin. It will also help in recruiting
the right staff for the purpose of inventory control, to minimize waste and
maximize profit.
This
research work will also be useful to staff, it will enable them to understand
the importance of practicing the inventory and to raise and maintain materials
from the store. Enable them to control the usage, wastage and theft of the
items in their possession effectively.
Government
will benefit from the study because when the profit of hotel increases, their
revenue in the form of tax.
.
1.6 SCOPE OF THE STUDY
This
study is to investigate the stock control practices, as it relates to the
profitability of fast food establishments in Awka capital territory of Anambra
state. Which includes; uncle morgan, Lanthanides and Actinide company, Fidel
Bread cake, Momcy Distributors, Becky’s fast food and restaurant, Chop and
smile fast food, David world, Bejoy Big Bite, Chillers Catering service, Scala
Garden Africana, Dickies fast food, Clemsking Ventures, Garden of Eden Joint,
Macdons fast food, Chinng’s kitchen, Dorb Restaurant, Gellys Garden and Resort,
Tantalizers plc, Ofiaku Restaurant, Crunchies Fried Chicken, Supreme Taste
fries and Restaurant, Divine kitchen Africana and intercontinental and dishes,
Mr Biggs and Madam Stainless Stores.
Login To Comment