Appraisal Of Inventory Management And Control In The Manufacturing Industries
(A Case Study Of Kp Beverage Nigeria Limited, Ogidi)
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The need for efficient management and control of inventory in manufacturing industry cannot be growing realization of the importance of stock control and management in manufacturing industry due to the material cost element of product involved. The objectives of the study is to evaluate the inventory management and control system using KP Beverage Nigeria Limited, Ogidi as a case study, to ascertain the optimal stock level to hold so as to meet up with the customers demand without being overstocked or understocked. The method employed in valuation of its materials at the end of each accounting period was also examined matching the cost of goods sold or used for services by the firm. The personal interview and administrative of questionnaire as her primary source of data and review of literature and records of the firm as her secondary source of data were used by the researchers and the sampling size of the study were thirty staffs of KP Beverage. In the information fathered, it was found that inventories are maintained to reduce uncertainties in business environment and holding the optimal quantity of inventory reduces the total cost as well as meeting customer’s requirement. It was concluded that proper management and control of inventory aids management of the organization in achieving its set of objectives effectively. It was recommended that the firm should tights up its security in order to reduce pilferages on part of staff and adopt computers.
Title page – – – – – – – – – i
Approval page – – – – – – – – ii
Certification – – – – – – – – iii
Dedication – – – – – – – – iv
Acknowledgement – – – – – – – v
Table of content – – – – – – – vi
Abstract – – – – – – – – – viii
CHAPTER I:
INTRODUCTION
Background of the Study – – – – – – 1
Statement of the problem – – – – – – 3
Purpose of the study – – – – – – – 4
Significance of the Study – – – – – – 5
Assumption of the study — – – – – – 5
Research question – – – – – – – 6
Definition of terms – – – – – – – 6
CHAPTER II:
LITERATURE REVIEW
Nature of Stock/Inventory – – – – – – 8
Definition of Stock – – – – – – – 8
Classes of Stock – – – – – – 9
Inventory Management Control – – – – – 12
Reasons for Holding Inventories – – – – 13
Optimal Cost of Order – – – – – – 17
Stock Cost – – – – – – – – 17
Stock out Cost – – – – – – – – 18
The Ordering Cost – – – – – – – 19
Cost of Staring Stock/Holding Cost/Carrying Cost – 20
Optimal Quantity to Order – – – – – 22
Assumption of Economic Order Quantity (ECQ) – 25
Stock Valuation – – – – – – – 29
Features of Sound System of Material Control – – 32
Summary of Review – – – – – – – 33
CHAPTER III:
RESEARCH METHODS
Design of the Study – – – – – – – 35
Area of the Study – – – – – – – 36
Population of the study – – – – – – 36
Sample of the study and sampling techniques – – 36
Instrument for data collection – – – – – 37
Validation and reliability of the instrument – – 37
Distribution and Retrieval of instrument – – – 38
Method of Data Analysis – – – – – – 38
CHAPTER IV
Data Presentation and Analysis – – – – – 39-47
CHAPTER V:
SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
Summary of Findings – – – — – – 48
Conclusion – – – – – – – – 49
Recommendation – – – — – – – 50
Limitation of the Study – – – – – – 52
Suggestion for further Research – – – – 52
References – – – – – – – – 54
Appendix – – – – – – – – – 55-58
INTRODUCTION
Background of the Study
One of the major assets of any business is inventory and it represent a large proportion of total investment in any business including manufacturing, retailing, wholesaling, import, export, extraction and mining business.
Inventories constitute the largest controllable (current) assets of must business. It usually represents the direct material employed in production and as a result. Constitute more than fifty percent of the total production cost in most industries. The large amounts of capital are normally locked up in stock of raw material instead of being invested in other sectors of the business. A lot of attention is therefore required to be paid to the companies inventory in order to avoid, management of such fund.
Inventory changes or, are revealed at the end of every year and because of this renewable nature of inventory executives especially those in account section should therefore try as much as possible to manage account for and control inventory be paying continuous and careful attention to it. Unlike fixed asset which last for years in a company and are transformed into products within days, weeks or month. Because of this, inventories re-assed weekly or monthly depending on the nature of the company concerned. The stock taking exercised is carried out to ascertain the level of stock of each particular time.
Many companies do not realize that material or stock represent on equivalent mount of money and careless handling pilferage and deterioration of such materials in stores result substantial losses to the company. Stores should therefore be well managed and most economically equipped. This can be done by maintaining an efficient and effective inventory management and control polices adopting good and efficient inventory management techniques in order to realize the maximum advantage of the costly benefit system. If the activities of the stores department were neglected, mismanagement of such stock result substantial loss of the company and even up in liquidation of the long run.
A well managed inventory and control system ensure the company does not find itself in such problems as understocked were it has less stock as demanded and this will result in loss of customers, loss of sales, loss of goodwill and loss of profit in the long run, overstocking on the other hand occur when the firm has more goods than demanded by customers.
This will result to additional cost as regard to were housing cost, insurance cost, cost of capital tied down, pilferage, deterioration and obsolesce.
Statement of Problem
There has been a growing realization of the needs of importance of stock control and management in industries due to the material cost element in industries involved. In many industries these days, about fifty percent of the total production cost of product is traced to be represented by direct material. Large amount of capital invested in the company are mostly locked up in stock of raw material and if such stock is not properly managed, result to the determent of the company as the cost of maintaining these stock of material are usually high. This research intends to appraise the extent of inventory management and control in the manufacturing industries.
Purpose of the Study
The purposes of this research work are:
(i) To determine how inventories are managed in manufacturing industries with special regard to KP beverage Ogidi Anambra State.
(ii) To find out how the firm management determines its buffer zone, re-order quantity or economic order quantity.
(iii) To find out the method employed by the firm in valuation of its material goods at the end of the period will be examined.
(iv) To recommend possible solutions.
Significance of the Study
The need for proper inventory management needs not to be overemphasized. The study will bring to light such needs.
This research work will enable the management of KP Beverages Nigeria Limited as well as other industries to house and control the optimal level of over stock and understocking. It will also enable them to replenish, whenever the arises, the optimal order size at the optimal cost or minimum total cost.
In addition, this research work is also beneficial to the student of Accountancy as a whole.
Assumption of the Study
This research has been undertaken in other to emphasis on the benefit arising from or how inventories are maintained to reduce uncertainties in business environment and holding the optimal quantity of inventory reduces the total cost as well as meeting customer’s requirement.
This work also intend to investigate whether proper management and control of inventory aids management of the organization in achieving its set of objectives efficiently and effectively.
Research Question
These research works stand to answer a number of questions in order to confirm or disconfirm the hypothesis on the work. These question centers on the importance of stock control and management in industries due to the material cost element of product involved:
(i) What Caused Mismanagement of Stock?
(ii) Is there any problem of holding less stock than required?
Definition of Terms
(i) Inventories: According to Stafford L.W, (1983:100) described inventories as stock of a company’s product made up of raw material stock, work-in progress stock and finished goods.
(ii) Management: According to Igboeli (1995:85) involves “planning, organizing, staffing the activities of the firm, directing them towards the desired direction in order to elicit contributions that will accomplish the objective of the organization”.
(iii) Control: In the word of Igboeli (1995:86) Control is a process that measures performance against standard and ensure that the organizational objectives are accomplished.
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