The technique of
inventory control is indispensable going by their impact in contributing,
promoting and ensuring efficiency and effectiveness in any organization. In
actual practice the vast majority of manufacturing companies suffer excessive
inventories than are necessary. Therefore, inventory control process is much
more complex than the uninitiated understand. In fact, inventory control is
perceived as little more than a clerical function. This has resulted into lots
of material shortages, high costs and loss of profit. This study provides a
basis for implementing inventory control policies by service companies, professional
managers, especially manufacturers.
The aim of these research
works is to critically assess the impact inventory control has on the profits
of manufacturing companies. Relevant literature on inventory management and
control by various authors were reviewed.
Both primary and
secondary sources of data were used in the course of study. Primary source of
data used was questionnaire while the secondary sources used are, text books
and journals. The chi-square formulae, person product moment correlation
co-efficient, test of significance were employed for effective analysis of data
collected. Data was collected through the distribution of 50 questionnaires to
the staffs of Tower Aluminum Nigerian Plc.
The two hypothesis
formulated were subject to thorough tests and all two hypothesis tested were
accepted. The respondents agreed that inventory control is a contributory
factor to the profitability of manufacturing companies and as such proper
control of inventory of manufacturing companies and as such proper control of
inventory reduces the overall cost. Conclusion and recommendation were also
made as to the acceptance of the alternative hypothesis such as putting in
place all necessary features that inventory control needs to effectively
achieve its purpose in a manufacturing organization.
TABLE OF CONTENTS
of the Study
of the Problem
of the Study
of the Study
of the Study
of the Study
Background of Tower Alumium Nigeria Plc
for Holding Stock
Movement and Documentation
Issued in Excess of Requirement
of Stock Valuation
Associated with Stock/Stock levels
or Carrying Cost
of Stock Control
184.108.40.206 Periodic Review System
220.127.116.11 Perpetual Inventory System
18.104.22.168 ABC Principle or Selective
22.214.171.124 Economic Order Quantity (EOQ)
Lead Times to Increase Profitability
inventory to Meet Profit Goals
Future of Inventory Control System
of research Question
of research Hypotheses
Population of the Study
Design and Procedure
for validity and Reliability of the Study Instrument Validity
of the Methodology
Data Presentation and
Analysis and Interpretation of Respondents Biodata
Analysis and Interpretation of research Questions
and Interpretation of the Hypothesis
of Hypothesis I
Test of Hypothesis II
1.1 BACKGROUND OF THE STUDY
There is a growing emphasis on the
importance of inventory management in the attainment of organizational goal. In
manufacturing companies where stock of raw materials and other component parts
consists of many different items, the task of maintaining a stock management on
every individual item is obviously difficult if not impossible.
The focus of this project is
therefore the impact of effective inventory management in Tower Aluminum
Nigeria Plc. This study is aimed at identifying the overall impact of proper
and accurate management of stock items together with the recording and
monitoring of stock level, forecasting future demand or production run and
deciding when and how to place the order and how many inventory to carry per
unit of item in other to satisfy the needs and wants of potential customers in essence
of maximizing profit for the organisation.
Inventory refers to the stock of
resources that possess economic value, held by an organization at any point of
time. These resources stocks can be manpower, machines, capital goods or
materials at various stages.
According to wise Greek, inventory is
total amount of goods and /or materials contained in a store or factory at any
given time. It’s necessary for business manager of an organization to know the
precise number of items on their shelves and storage area in order to place
orders or control losses.
The word inventory “can refer to both
the total amount of goods the act of counting them. Many companies take an
inventory of their suppliers on a regular basis in order to avoid running out
of popular items. Others take an inventory of to insure the number of items or
ordered matches the actual number of items counted physically. Shortages or
overages after an inventory can indicate a problem with theft (called shrinkage
in retail circle) or inaccurate accounting practices in an organization.
Inventory simply means a quantity of
goods and materials in the control of an organization held for a time in a
relatively idle or unproductive stage “GREAT MAN”. Management is concerned with
the process of achieving objectives through efficient use of resources and the
planning, organization, coordination, direction, and control of the activities
of people. It is the sum total of all the activities involved in the organizing
men, machines, materials, and money and the maintaining, directing,
coordinating, supervising, and controlling them to produce or provide for a
profit, goods and services which benefit members of the society. “Dr. ADE Oyedijo
2009, Essential of Mgt”
Other functions of management are;
Leading here means influencing people so that they can contribute
positively towards achieving the goal
of maintaining stock at minimum cost.
here means each department contributing towards the organization goal of
keeping the inventory at minimum cost
Directing here means harmonization of individual objectives with that of the
organization so that the goal of the organization to maintaining stock at
minimum cost is achieved.
INVENTORY MANAGEMENT: is very important having direct relationship with production, marketing,
purchasing, maintenance, and financial policies. In view of this, many firm attempt
to control stock in scientific basis by considering the financial effect of all
relevant cost of inventory. Scientific control of inventory is the use of
economic order quantity (EOQ) model.
The overall objective of inventory
management is to maintain stock level so that
combined cost of inventory will be
minimal. The optimum level of the stock depends upon a variety of factor
arising from the interest of the different department involved and the
management should establish an overall policy for stock after considering the interest
of the organization as a whole. Whether as a result of deliberate policy or
not, stock represents an investment to the organization and as with other
investment, cost of holding stock must be released to the benefit to be gained
from holding the stock.
Inventory having the greater' part of
the working capital of most organization, should be managed effectively,
failure to do so will lead to high carrying cost, lost of goodwill high rate of
obsolescence, excess tied up capital, interruption of work schedule in production,
idleness of machine and personnel which leads to low profit and consequently
leads to winding up.
Though the objective of inventory
management is to ensure that stock is kept at optimal level. Nevertheless
departmental managers view this from different
Perspectives From financial point of
view, the aim is to minimize stock holding cost, while adequate stock level
that will facilitate continuous production run is of interest to the production
To purchasing, the aim is to take
advantage of special buying offer, but this will lead to increase average level
of stock and sales department will want to be able to satisfy all customer
order which will mean high stock of finished goods to provide a buffer against uncertainty
It can be seen from the above that
departmental manager's perspective of viewing inventory management are
different but they are all channeled towards organization efficiency.
As aspect of inventory management
that cannot be overlooked is the number of
aluminum manufacturing company should
have and how they should keep the product to maintain these aluminum products.
In this country today where every big manufacturing company rely almost or more
than 70% of its source of power on generator, since generators are expensive to
buy and production run and efficiency in production process. The decision to
buy wholly or jointly remain the decision of the top management of each
1.2 STATEMENT OF THE PROBLEM
Inventory management is very
essential in any organization setting, because holding stock is just like
holding cash, and cash is life blood of the firm. Also in the context of
inventory management, the organization is faced with the problem of reconciling
two conflicting need; to maintain a large inventory for smooth production run
and to maintain a minimum inventory to maximize profitability by having the
lowest carrying cost.
And the problem associated with the
decision on when and how to order materials for smooth run of the (business)
1.3 OBJECTIVES OF THE STUDY
The primary aim of this project is to
examine the effect a well managed inventory has in a manufacturing company.
Other objectives of the study are as stated below:
(a) To determine the effect of inventory
management in the manufacturing company especially Tower Aluminum Nigeria Plc.
enhance the performance of inventory management in an organization.
(c) To reduce risk that are facing inventory
(d) To determine whether there is a problem facing
the inventory management in Tower Aluminum Nigeria Plc.
(e) To map out strategies to train good store
keepers who will manage the stock.
1.4 RESEARCH QUESTIONS
These are the research questions:
(i) Could effective inventory management help to
meet variation in product demand?
(ii) Could effective inventory management enhance
uninterrupted flow of production?
Could the stock be controlled in a way
that it will not tie down the capital in an unprofitable venture?
Could effective inventory management has impact in manufacturing companies?
(v). Is there anything to be done so as to ensure
judicious use of company's resources?
1.5 STATEMENT OF HYPOTHESIS
For the purpose of this study, the
following hypotheses are formulated:
Ho: Inventory control does not contribute to the
profitability of manufacturing companies.
HI: Inventory control contributes to the
profitability of manufacturing companies.
Ho: Inventory control does not reduce cost
HI: Inventory control reduces cost
1.6 SCOPE OF THE STUDY
This study will be concerned with
Tower Aluminum Nigeria Plc. - And will cover people in production, purchasing,
marketing, store, maintenance, and account departments. The study will cover
various kinds inventory such as raw materials, work in progress, finished
goods, maintenance and repair, it will also find out the reasons for holding
1.7 LIMITATION OF THE STUDY
In carrying out this study, these
limitations were encountered by the researcher:
(i) Time: Time will limit the conduct of this
study and this has impact on the sample study and the questionnaire. If enough
time is on the side of the researcher, this study would have chosen more
companies in different sectors of the economy for study.
(ii) Financial Constraints: The researcher was
faced with financial constraints which had far reaching effect on the running
around for questionnaire, obtain necessary information and cost typing and
binding the project since only the researcher will bear the cost of getting the
Lastly some of the respondent will not
give the right information.
1.8 SIGNIFICANCE OF THE STUDY
This project study at examining the
impact of effective inventory management in Tower Aluminum Nigeria Plc. It is
therefore believed to be of great benefit to manufacturing companies that deal
with large inventories.
The study will also enable the
researcher to know more about inventory control. The management of Tower
Aluminum Nigeria Plc. will benefit immensely from the study in the sense that
it will give them insight into knowing more about effective inventory
1.9 RESEARCH METHODOLOGY
The essence of research methodology
is to explain the framework under which this project will be carried out. Both
primary and secondary data are to be used in this study. The primary data would
be based on the opinion sought by questionnaire, which will be administered on
the sample selected for the purpose.
The secondary data will include facts
to be extracted from the published works and the history of the organization to
be obtained from the company (textbook, journals, annual reports and articles
relevant to the field of study).
In analyzing and evaluating data
collected, hypothesis will be tested based on the information gathered from the
questionnaire that will be administered.
ECONOMIC ORDER QUANTITY (EOQ) METHOD
shall be implored in determining the
most advantageous order quantity from the analysis of all relevant cost
associated with quantity.
1.10 DEFINITION OF TERMS
Stock: The extra
stock that should be kept to allow for the possibility that demand may increase
or supply may be delayed
(ii). Carrying Cost: These are cost incurred in storage space and physical handling and
protection of inventory.
This is the management and utilization of resource in such a way that the
objective is attained under the condition laid down.
(iv). Inventory: This includes all the stock of goods and materials which a company owns
and uses in the process of manufacturing
Time: The period
between the time an order is made and the time the order is received.
Cost: These are the
cost incurred in the process of obtaining or ordering raw materials component
or part from the suppliers. The ordering decrease as the order size increases
(vii). Optimal Level: This is the keeping of stock at the most favourable level. (viii). Raw Materials: These are goods
or materials for sale or later use or item yet to be manufactured or refined.
These are goods or material stored for sale or later use.
out Cost: These are
the cost of running out of cost
1.11 HISTORICAL BACKGROUND OF
Tower Aluminum Nigeria Plc. Began its
operation in Nigeria
in 1959 and has today grow into a leading aluminum manufacturing industry,
which is second to none. The company was incorporated as Tower Aluminum Nigeria
Limited and later to a public limited company in 1991 due to being privatized,
it was quoted on the Nigeria
stock exchange and has division and subsidiaries in more than ten states of the
federation among which are Tower extrusion Aluminums industries Pl. In Imo
state, and Nigeria Association Battery manufacturing company in Ikeja Lagos
state to mention a few. The company registered office is located at Oba Akran Avenue,
Ikeja Lagos state.
CORPORATE SOCIAL RESPONSIBIILITY AND
As a good and responsible corporate
institution, the company contributes to development of youths by supplying
kitchen utensils to various motherless babies home to improve their standard of
living, making donation to its various social organization school and colleges
in areas of sports and educational development.