ABSTRACT
This research was to
examine The Effect of Materials Management on the Profitability of the Manufacturing
Company with special reference to Cadbury Nigeria Plc. This study show with
statistical evidences that materials management significantly increase the
profitability, wellbeing and productivity of the organization. The research
methodology adopted has the limitations peculiar to the use of questionnaire
like, the uncooperative attitude of respondents, slow pace of instrument
retrieval, etc. Although the study adopted the use of simple languages, but
some respondents still found it difficult to understand some concepts and they
had to be put through, so much time is wasted in the course of doing this.
Finally, the opinions of the respondents form the basis of this research, but
this did not in any way affect the quality of the study. Simple percentage distribution was used in
the presentation and interpretation of the data collected. To this end, the
data were tabulated in a frequency distribution form and the corresponding
percentage equivalent were calculated and recorded respectively. To test the
hypotheses earlier formulated, the chi-square statistical method was also
adopted. Materials management should be
handled through the act of directing and controlling the acquisition and usage
of materials in the organization and it should be seen as the most
important resources for any organizational production. Without the materials,
no one can do anything. In the light of field discoveries, the information
gathered will assist the management of any organization in general and Cadbury
Nigeria Plc in particular, in taking appropriate steps of inculcating means of
managing materials as parts of the prerequisite for improving organisational
productivity.
TABLE OF CONTENT
PAGE
Title Page i
Certificate ii
Dedication iii
Acknowledgement iv
Abstract v
Table Of Content vi
CHAPTER
ONE: INTRODUCTION
1.1 BACKGROUND TO THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 4
1.3
OBJECTIVE OF THE STUDY 5
1.4
RESEARCH QUESTIONS 5
1.5 SIGNIFICANCE OF THE STUDY 6
1.6
RESEARCH HYPOTHESES 6
1.7
SCOPE AND LIMITATIONS
OF THE STUDY 8
1.8
OPERATIONAL DEFINITION
OF TERMS 8
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction 10
2.1 Historical Background Of Nestle Nigeria Plc 10
2.2 Conceptual Framework 11
2.2
The Relationship
Between Materials Management
And
Profitability 15
2.3 Materials Requirements Planning and Capacity
Requirements 17
2.4 Theoretical
Framework 22
2.5 The Planning Decisions and Approach in
Materials
Management 25
2.6 Production Utilities in Materials Management 27
2.7 Customer Satisfaction as It Relates to Materials
Management 29
2.8 Material Availability in Materials
Management 30
2.9 Purchasing And Inventory Policy in Materials Management 35
2.10 Time of Purchasing In Materials Management 37
2.11 Source
of Purchases of Materials 38
2.12 Summary of Literature Review 42
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction 43
3.1 Research Design 43
3.2 Population of Study 43
3.3 Sample and Sampling Procedure 44
3.4 Data Collection Instruments 45
3.5 Data
Analysis 46
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATIONS
4.0
Introduction 47
4.1
Respondents’ Characteristics and
Classification 47
4.2 Presentation
and Analysis of Data According To Research Question 51
4.3 Presentation
and Analysis of Data According to
Test of Hypotheses 57
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction 64
5.1 Summary of Findings 64
5.2 Conclusion 68
5.3 Recommendations 69
References 71
Appendix
74
CHAPTER ONE
INTRODUCTION
1.2
BACKGROUND TO THE STUDY
Over the last decade, our world has changed
dramatically due to the growing phenomenon of globalization and revolution in
information technology. There is tremendous demand on companies to lower costs,
enlarge product assortment, improve product quality, and provide reliable
delivery dates through effective and efficient coordination of production and
distribution activities. To achieve these conflicting goals, companies must
constantly re-engineer or change their business practices and employ
information systems (Mahesh, 2006).
Materials Management has always been an area of
scrutiny for organizations. This has become a central focal point as trends
from the supply chain arena have indicated that substantial operating cash can
be freed with leaner and more efficient handling of inventory.
As organizations examine the state of their
inventory, they often find that visibility across locations and warehouses are
inadequate, stock levels are inconsistent, demand is uncertain, and
communication between stocking locations or warehouses may be minimal or
non-existent. Among other things, the lack of an integrated interaction between
peripheral systems and materials managers leads to unnecessary purchasing and
overstocking.
The concepts of “materials management,” “physical
distribution management,” and “logistics management” are the primary materials
organizational tools which have been used successfully in the past and will be
used increasingly in the future to achieve closer coordination and control of a
firm various materials activities.
In general materials management is concerned with
bringing materials from outside of an organization to the point of production
and moving in processes.
If we distinguish between the operational function
of customer service and the resultant goal of customer value and satisfaction,
this discussion leads us to conclude the consequences of materials management
are lower costs and improved customer value and satisfaction to achieve
competitive advantage. Industry reports support this contention (Performance
Management Group, 2001).
The fast developing and technologically changing
environment has placed before the materials manager a tremendously challenging
task and responsibility. The task is really herculean when we recognize the
importance of materials, equipments and components per annum that go into the
production channels. The challenges become tough because the money tied up in
inventory or materials and equipment are enourmous.In fact, in many
organizations (big and small), materials form the largest single expenditure
item. According to Subramanian (1974) an analysis of the financial statements
of a large number of private and public sector organizations indicates that
materials account for nearly 60% of the total expenditure. Consequently, the importance
of materials management lies in the fact that any significant contribution made
by the materials manager in reducing materials cost will go a long way in
improving the profitability and rate of return on investment. Such increase in
profitability, no doubt, can be affected by increasing sales.
While
most of the writing and discussion on materials management is on acquisition
and standards, much of the day to day work conducted in materials management
deals with quality assurance issues. Parts and materials are tested, both
before purchase orders are placed and during use, to ensure there are no short
or long term issues that would disrupt the supply chain. This aspect of
material management is most important to the heavily automated industries,
since failure rates due to faulty parts can slow or even stop production lines,
throwing off timetables for production goals (Mentzer,
2001).
The
other major component of materials management is standards compliance. There
are standards that are followed in supply chain management that are critical to
a supply chain's function. For example, a supply chain that uses just-in-time
or lean replenishment requires absolute perfection in the shipping of parts and
materials from purchasing agent to warehouse to place of destination. Systems
reliant on vendor-managed inventories must have up-to-date computerized
inventories and robust ordering systems for outlying vendors to place orders on (Hax and Candea, 2004).
Effective
materials management according to Christine
(2002) is essential in order to provide the best service to customers, produce
at maximum efficiency, and manage inventories at predetermined levels to stabilize
investments in inventories. Successful materials management requires the
development of a highly integrated and coordinated system involving sales
forecasting, purchasing, receiving, storage, production, shipping, and actual
sales. Both the theory of costing
materials and inventories and the practical mechanics of cost
calculations and record keeping must be considered.
Costing materials
present some important, often complex, and sometime highly controversial
questions concerning the costing of materials used in production and the cost
of inventory remaining to be consumed in a future period. In financial accounting, the subject is
usually presented as a problem of inventory
valuation; in cost accounting,
the primary problem is the determination of the cost of various materials
consumed in production and a proper charge to cost of goods sold
(Freeman, 2006).
1.2 STATEMENT OF THE PROBLEM
Many
organizations seem to be failing in the realization of the corporate goals and
objectives. However, for most of these organizations (particularly
manufacturing organizations), materials are crucial aspect of the firm’s
prosperity and goal attainment (Burt,2003).
The
challenge is that some firms do not have genuine and efficient management of
the purchase, storage and usage of the materials. The importance of materials
management is evident in the amount of expenditure allotted to materials and
the significant contribution of materials to organizational performance.
Efficient materials management will reduce materials cost, improves
profitability and increase rate of return on investment. Such increase in
profitability, no doubt, can be influenced by increasing sales. In fact, as
market pressure intensifies, organizations will be forced to cut down the
costs. Material Management is all about purchasing mix. It involves the
procurement of materials in store and the ability to know the total number of
available goods that are to be issued out on request. All the functions are
primarily carried out by the store manager whose mission is to ensure that
goods are not below average as to satisfy the demands of customers. The general
importance of materials management is to ensure that the demand and sales of
the company are streamlined as to enable it to be aware when the management or
the organization is short of goods and will not go to the extent of making use
of their buffer stock.(Maloni,1997).
1.3 OBJECTIVE OF THE STUDY
This
study will show with statistical evidences that materials management will
significantly increase the profitability, wellbeing and productivity of the
organization. However, the specific objectives of the study are:
1. To
examine the impact of materials management on the productivity of the
organization.
2. To
examine the impact of materials management on profitability.
3. To
examine the effect of materials management on the organizational efficiency and
performance.
4. To
examine the impact of materials management on customers’ satisfaction.
5. To
examine the effect of materials management on the organizational coordination.
1.4 RESEARCH QUESTIONS
In
this study, attempt will be made to provide answers to the following questions
1. What
is the impact of materials management on the productivity of the organization?
2. What
is the impact of materials management on profitability?
3. What
is the effect of materials management on the organizational efficiency and
performance?
4. What
is the impact of materials management on customers’ satisfaction?
5. What
is the effect of materials management on the organizational coordination?
1.5 SIGNIFICANCE OF THE STUDY
The
research work was taken up to show the significance of materials management to
aggregate performances of the organization. Apparently, all organizations,
whether service oriented or good oriented need to pay attention to the essence
of materials and materials management in their organizations. Consequently, it
is clear that the contribution and importance of this study cannot be over
emphasized.
The
results of this study should also assist in defining new methods/ strategies of
materials management for manufacturing sector in particular and management
organisations in general.
Finally,
the results of this study should help scholars, students and upcoming
researchers in the conduct of future research.
1.9
RESEARCH
HYPOTHESES
This
study will be geared towards testing the following hypotheses.
Hypothesis One
Ho1 There is no significant relationship between
materials management and organizational productivity.
Ha1 There is significant relationship between
materials management and organizational productivity.
Hypothesis Two
Ho2 There is no significant relationship between
materials management and profitability.
Ha2 There is significant relationship between
materials management and profitability.
Hypothesis Three
Ho3 There is no significant relationship between
materials management and organizational efficiency and performance.
Ha3 There is significant relationship between
materials management and organizational efficiency and performance.
Hypothesis Four
Ho4 There is no significant relationship between
materials management and customer’s satisfaction.
Ha4 There is significant relationship between
materials management and customer’s satisfaction.
Hypothesis Five
Ho5 There
is no significant relationship between materials management and organizational
coordination?
Ha5 There is significant relationship between
materials management and organizational coordination?
1.10
SCOPE
AND LIMITATIONS OF THE STUDY
The
area of this study is on materials management in the organization, directed to
the case of Nestle Nigeria Plc, a reputable manufacturing organization.
1.11
OPERATIONAL
DEFINITION OF TERMS
In the course of study,
certain words and group of words were used to describe certain situations and
the meanings of these words are given below:
Economic order quantity: This is the level of inventory that minimizes the total
inventory holding costs and ordering costs. It is one of the oldest classical
production scheduling models.
Consumer
satisfaction: This implies that the organization
meets the wants of the consumers. It is a measure of how products and services
supplied by a company meet or surpass customer expectation.
Materials management: This is the act of directing and controlling the
acquisition and usage of materials in the organization. Planning and control of
the functions supporting the complete cycle (flow) of materials, and the
associated flow of information.
Supply chain: This is the linked set
of resources and processes that begins with the sourcing of raw material and
extends through the delivery of end items to the final customer.
Supply Chain
Management: This encompasses the planning and
management of all activities involved in sourcing, procurement, conversion, and
logistics management.
Logistics: The
management of business operations, such as the acquisition, storage,
transportation and delivery of goods along the supply.
Just-in-time
manufacturing: This can be defined as the elimination of all
waste and continuous improvement in productivity. This means there should be no safety stocks,
and lead times are minimal.
Safety stock: This is also referred to as buffer stock. It is
used to describe a level of extra stock that is maintained below the cycle
stock to buffer against stockouts.
Manufacturing:
This is the use of machines, tools and labour to make things for use or sale.
The term may refer to a range of human activity, from handicraft to high tech,
but is most commonly applied to industrial production, in which raw materials
are transformed into finished goods on a large scale.
Productions: These
are processes and methods employed in transformation of tangible inputs (raw materials,
semi-finished goods, or sub-assemblies) or intangible inputs such as ideas,
information, know-how into goods and services.
Profitability: This
is the act of making gains in
business activity and for the benefit of the owners of the business.
Efficiency:
This is concerned with the percentage resource actually used over the resources
that were planned to be used.
Performance:
This is described as the net wealth after subtracting the inputs and
throughputs (the activities of processing work) from the outputs or final
results.
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