This work was carried out to appraise the Cost Reduction Techniques
and Productivity in a Manufacturing Firm. Cadbury Nigeria Plc. was chosen as a
case study. The researcher is assessing the Cost Reduction Techniques and
Productivity of Manufacturing Firm. Organization is faced with myriad of
challenges. Some of these challenges are unexpected; others are complex issues
that must be dealt with at various times in the business cycle. Regardless of
whether it is unexpected or a regular challenge, each challenge will include
variables that will require creative methods of navigating the complex
In today's competitive
world corporate and businesses are struggling to
maintain profits and healthy bottom lines. Cost of production, fuel, raw
material and human resources is rising each year. These developments have
prompted people to look for Cost reduction Ideas & methods. Those who have
opted for focused cost reduction strategies have survived those who could not
managed have perished. In recent economic down turn it becomes more important
to make cost reduction program a major initiative in industry. Companies are
finding it difficult to retain people and are laying off people which are un -
precedence in recent history of industrial recession. Companies have to develop
its own cost reduction program for savings without cutting jobs.
This research is primarily carried out to identify cost reduction
techniques and productivity in manufacturing firms. Furthermore the study will
identify factors that inhibit the accuracy of inventory which results in
production shortages, premium freight, and often inventory adjustments.
The major issues that inhibit productivity in a firm are incorrect
bills of materials, inaccurate cycle counts, un-reported scrap, shipping
errors, receiving errors, and production reporting errors.
Information on the subject matter was obtained through extensive
review of literature by different authorities and scholars who have carried out
similar researches. Survey research design was used to carry out the study.
Three hypothesis differences were postulated.
A sample of fifty (50) respondents was randomly selected from the pool
of employees in Cadbury Nigeria Plc. they were administered questionnaires from
which data was obtained. This data was-analyzed and the three hypotheses were
tested. Tables were used for data presentation, simple percentage was used to
analyze the data and the chi - square technique was used to test the
Of The Study
Of The Problem
Of The Study
Of The Study
Of The Study
history of Cadbury Nig. Plc. An overview
LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK
2.2 Importance of Cost Reduction
2.2.1 Keeping a Competitive Advantage
2.2.2 Razor Sharp
2.2.3 Internal Focus
2.3 Cutting Costs in Business
2.4 Objectives and Functions of Cost Reduction Techniques
2.4.1 Primary Objectives
Control of Materials
2.2.6 Make and Buy Decisions
2.5 Challenges in Cost Reductions Techniques
2.6 Types of Cost Reduction Techniques
2.6.1 Negotiated Discounts against Material Cost Increases
2.6.3 Waived Fees
2.6.4 Inventory Reduction
2.6.5 Process Improvement
2.7 Cost Control
2.7.1 Very Constraining
2.7.2 Unconstrained Success
3.2 Research Design
3.3 Restatement of Research Questions and Hypotheses
3.4 Study Population
3.5 Data Collection Instruments
3.6 Primary Source
3.7 Secondary Source
3.8 Validity and Reliability of the Instrument of Research
3.9 Method of Data Collection
3.10 Method of Data Presentation and Analysis
ANALYSIS AND INTERPRETATION
4.2 Presentation and Analysis of Data
4.3 Proof of Hypotheses
4.4 Discussion of Results
RECOMMENDATION AND CONCLUSION
5.2.1 Theoretical Findings
5.2.2 Empirical Findings
5.4 Suggestions for Further Studies
OF THE STUDY
Cost Reduction Techniques are very important element
in any Manufacturing Firm or in a project planning and control. Materials represent
a major expense in Manufacturing Organizations, so minimizing procurement or
purchase costs present important opportunities for reducing costs. Poor
materials management can also result in large and avoidable costs during
operation. First, if materials are purchased early, capital may be tied up and
interest charges incurred on the excess inventory of materials. Even worse,
materials may deteriorate during storage or be stolen unless special care is
taken. For example, electrical equipment often must be stored in waterproof
locations. Second, delays and extra expenses may be incurred if materials
required for particular activities are not available. Accordingly, insuring a
timely flow of material is an important concern to the Organizations.
Cost Reduction Techniques are not just a concern
during the monitoring stage in which production is taking place; decisions
about material procurement may also be required during the initial planning and
scheduling stages. For example, activities can be inserted in the project
schedule to represent purchasing of major items such as raw materials to be
used for production. The availability of materials may greatly influence the
schedule in production with a fast track or very tight time schedule,
sufficient time for obtaining the necessary materials must be allowed. In some
cases, more expensive suppliers or shippers may be employed to save time. Cost
Reduction Techniques are also a problem at the Organization level if central
purchasing and inventory control is used for standard items.
In this case, the various projects undertaken by the
Organization would present requests to the central purchasing group. In turn,
this group would maintain inventories of standard items to reduce the delay in
providing material or to obtain lower costs due to bulk purchasing. This
organizational materials management problem is analogous to inventory control
in any Organization facing continuing demand for particular items.
Materials ordering problems lend themselves
particularly well to computer based systems to ensure the consistency and
completeness of the purchasing process. In the manufacturing realm, the use of
automated materials requirements planning systems is common. In these systems,
the master production schedule, inventory records and product component lists
are merged to determine what items must be ordered, when they should be
ordered, and how much of each item should be ordered in each time period. The
heart of these calculations is simple arithmetic: the projected demand for each
material item in each period is subtracted from the available inventory. When
the inventory becomes too low, a new order is recommended. For items that are
non-standard or not kept in inventory, the calculation is even simpler since no
inventory must be considered. With a materials requirement system, much of the
detailed record keeping is automated and project managers are alerted to
OF THE PROBLEM
This research was embarked upon to Access Cost
Reduction Techniques and Productivity in Manufacturing Firm. There are many
factors that inhibit the ability of a Company to keep cash flow at necessary
levels for operations, inaccuracy of inventory which, results in production
shortages, premium freight, and often inventory adjustments. The major issues
that all manufacturing firm face are: Raw Material Procurement, Logistics-
inbound and outbound, Warehouse and Stores, Manufacturing Process (Production),
Energy, Packaging, Recycling of waste and Waste Reduction, Information
Management and Human Resources. Materials Managers have striven to determine
how to manage these issues in the business sector of manufacturing since the
beginning of the industrial revolution.
The dependent and independent variables of this
research have been established. It therefore follows that effective material
management is the dependent variable. Productivity of any Organization will
have a multiplier effect on the economy in general is the independent variable.
To achieve the desired efficiency and productivity levels, business
establishments rely on a highly monitored materials and equipment and workforce
that share the vision and aspirations of the establishment.
Economic growth and productivity of the Organization
is determined by the variables, a, b, c.......u, where a = Effective Cost
Reduction and the availability of materials may greatly influence the schedule
in projects with a fast track. b = Timely flow of material is an important
concern of project managers. c = Incentives.
u = Variables unspecified.
OF THE STUDY
The general objective of this study is to determine
cost reduction techniques and productivity in a manufacturing firm with a
particular reference to Cadbury Nigeria
Plc. In order to achieve this objective, the researcher focused on the
following specific objective.
To identify the significant
importance of cost reduction techniques and productivity in Manufacturing Firm.
To estimate the of cost reduction
for effective performance growth.
To examine the impact of poor material management on
productivity and cost of operation
OF THE STUDY
The findings from this study will help to highlight
those areas where they are problems; cost reduction techniques are about
improving profitability. By reducing expenses, profits are increased without
even addressing sales program enhancements. If the cost reduction plan is
matched with a sales increase program, it doubles the results. It is just one
more reason why a cost reduction program must be an integrated plan that is
results-oriented. A structured plan will put a Company on track to achieve
maximum profitability. In some Companies materials management is also charged
with the procurement of materials by establishing and managing a supply base.
In other Companies the procurement and management of the supply base is the
responsibility of a separate purchasing department. The purchasing department
is then responsible for the purchased price variance from the supply base.
In large Companies with multitude of customer changes
to the final product over the course of a year, there may be a separate logistics
department that is responsible for all new acquisition launches and customer
changes. This logistics department ensures that the launch materials are
procured for production and then transfers the responsibility to the plant
To execute the research effectively, data analyzed
will answer the following questions, which in turn will determine the problems
and prospect of cost reduction techniques in Cadbury Nig. Plc. They give focus
and direction to the research. They include
Is there significant relationship
between cost reduction techniques and productivity in Manufacturing Firms.
What are the process of cost
reduction, for effective performance growth
how does poor material management
result to large and avoidable costs during operation
The accuracy of the findings of the research will be
determined by testing the following hypotheses:
Ho: There is no
significant importance of cost reduction technology and
in a manufacturing firm
Hi: There is a
significant importance of cost reduction technology and
in a manufacturing firm
Ho: The poor
materials management cannot
result in large
costs during operation.
Hi: The poor
materials management can result in large and avoidable
Ho: Effective cost
reduction techniques cannot
help in reducing
that are too high and meet up clients demand.
cost reduction techniques help in reducing expenses that
high and meet up clients demand.
For the purpose of this research, a survey research
design was used. A sample of fifty (50) respondents was selected from the pool
of employees at Cadbury Nig. Plc using the Random Sampling Technique. The
respondents were then administered questionnaires to obtain primary data on the
topic of discussion. The research instrument was tested to be valid and
reliable by ensuring content validity and by using the test – retest method to
check its consistency.
The Data for this study was obtained from two sources:
The Primary and Secondary Sources are the two sources that make research
system. Making use of existing data and therefore mostly based upon a
The scope of this research entails the examination of
the problems and prospect of cost reduction techniques and productivity in a
manufacturing firm. It covers other costs as required for ordering the
materials, carrying the materials in inventory, its maintenance and handling
charges must be assigned to the cost of materials before it enters into a
product or transformed into some other form.
In order to economize all the costs of materials
management, Company has to adopt definite method of deciding the quantity of
materials to be ordered, quantity to be stored as inventory and work in
progress inventory. In order to reduce the material cost and all other costs
stated above, there has to be some efficient and effective cost reduction
techniques, which must be dynamic to adjust with changing demand and
OF THE STUDY
Some respondents requested to be paid by researcher.
Others were not too enthusiastic, especially those at the top who always gave
excuses of being too busy and because time was also not on the side of the
researcher, she had to make do with only the available respondents. Responses
given by respondents might not be totally accurate and honest.
In some circumstances, word may carry different
meanings. However, according to Thou less, if our thoughts are to be clearly
communicated to other people then we must have a method of fixing the meaning
of the word we used. For purposes of clarity therefore, some of the important
term used in this study are defined as follows:
ABC: Always Better Control
EOQ: Economic Order of Quantity
DGSD: Directorate General of Supply and
GRN: Goods Receipt Notes
PRA: Purchase Requisition Approval
PSO: Physical Stock Verification
MTD: Material Transaction by Date
BOM: Bill of Material Operation
MRP: Material Requirement Planning
IQC: Incoming Quality Control
SPC: Statistical Process Control
HISTORY OF CADBURY NIG. PLC. AN OVERVIEW
Cadbury Nigeria is a member of the Cadbury Schweppes
Group, a major player in the global confectionary and beverages markets with
over 40,000 employees and business operations in 200 countries. Cadbury’s
initial objective in the 1950s to source cocoa and prospect for a market in
Nigeria led to the establishment of a manufacturing facility in Ikeja, North of
Lagos, in 1965. The Company has since grown organically to become of the
leading manufacturers in Nigeria, with a rising profile in the Europe, Middle
East Africa (EMEA) Region, one of the five Regional Groups on which Cadbury Schweppes
currently runs. Listed on the Nigerian Stock Exchange since 1976, Cadbury is in
the top ten of the 258 quoted equities by market capitalization at the end of
2002. Cadbury Schweppes currently owns 46.3% of the equity, with the balance
stock held by about 40,000 individual and institutional shareholders.
CADBURY NIGERIA BUSINESS
With about 2000 employees and sales in excess of $130m
in 2002, Cadbury Nigeria is a top contributor to the Cadbury Schweppes business
in Africa by profitability. A ten year ambitions growth agenda to 2010 is been
implemented in a characteristically focused manner, based on opportunities in
the West Africa Sub-region.
Cadbury has been at the vanguard of promoting
sustainable development and high standards of corporate governance, and one of
the few signatories to date to the convention of Business Integrity. Its
commitment to corporate social responsibility has been given expression in the
area of Education, Health and Sport, the Arts and other important needs of
society. Brand Advertising has been anchored on projects that help create a
better society and sharpen Nigeria’s competitiveness. Support for leadership
development among youths has been a more recent initiative, on the platform of
Cadbury’s flagship brand, Bournvita.
Cadbury Nigeria has a portfolio of brands that are
market leaders in the confectionary, food drinks and foods categories. It
involved as a robust and vertically and maintains a better control of the
supply chain. The Industrial Material Unit Manufacturers key inputs (glucose
syrup and sorghum extracted) to feed the located in Ondo, supplies excellent
quality cocoa powder. Stanmark enjoys Export Processing Factory Status, and has
a singular mission to be the preferred supplier of cocoa butter and cocoa
liquor to select customers around the world. In addition, the Ikeja factory
runs on a self-owned 8.7MW capacity power plant and in-house water supply
facilities. The factory operates to very high standards of product quality as
well as emission control.
Cadbury Schweppes emerged the best Business Unit in
the then Africa, India, Middle-East (AIM) region in 2001.
Advancement of our distribution and
availability network, with strong support for our advantaged and highly differentiated
Renewed focus on the Managing for
Value (MFV) agenda to galvanize the collective competence of our people in the
achievement of performance target.
Extensive modernization of our
production plants and corporate Headquarter in the relentless pursuit of higher
productivity and superior performance.
Progressed integration of the West
Africa operation of Cadbury Schweppes and significant inroads into the ECOWAS
Market of 250 million people.
The Cadbury Nigeria Board is made up of high calibre
technocrats widely acknowledge being among the best in Nigeria. The Managing
Director and Chief Executive, Mr. Bunmi Oni is a high profile within the
Nigerian business environment and also Chairman of the Cadbury Ghana.
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