EFFECT OF MATERIALS MANAGEMENT ON THE PROFITABILITY OF THE MANUFACTURING COMPANY
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EFFECT OF MATERIALS MANAGEMENT ON THE PROFITABILITY OF THE MANUFACTURING COMPANY
ABSTRACT
The purpose of this study was to look into the impact of materials management on the profitability of manufacturing companies, with a focus on Cadbury Nigeria plc. This study provides statistical evidence that materials management considerably increases the organization’s profitability, wellbeing, and productivity.
The research approach used has disadvantages inherent in the use of questionnaires, such as respondents’ uncooperative attitudes, sluggish instrument retrieval, and so on.
Despite the fact that the survey used simple terminology, some respondents found it difficult to understand several topics and had to go through them, wasting a lot of time in the process.
Finally, the respondents’ opinions served as the foundation for this research, although this had no bearing on the study’s quality. A simple percentage distribution was employed to illustrate and explain the acquired data.
To do this, the data were tabulated in a frequency distribution format, and the percentage equivalents were calculated and recorded accordingly.
To test the previously specified hypotheses, the chi-square statistical approach was also used.Materials management should be defined as the process of coordinating and supervising the acquisition and use of materials inside an organisation, and it should be regarded as the most significant resource for any organisational production.
Nobody can do anything unless they have the necessary materials. In light of field discoveries, the information acquired will aid the management of any organisation in general,
and Cadbury Nigeria Plc in particular, in taking suitable steps to instill material management methods as part of the requirement for enhancing organisational productivity.Chapter one
INTRODUCTION
1.2 Background of the Study
Our world has changed tremendously over the last decade as a result of globalisation and the information technology revolution. Companies are under immense pressure to reduce costs,
expand product offerings, improve product quality, and ensure dependable delivery dates by effectively and efficiently coordinating manufacturing and distribution processes.
To fulfil these competing objectives, businesses must constantly re-engineer or modify their business methods and use information technology (Mahesh, 2006).
Materials Management has always been a source of concern for organisations. This has become a primary focus as supply chain trends show that leaner and more effective inventory management can free up significant operating cash.
When organisations review the health of their inventory, they frequently discover that visibility across sites and warehouses is limited, stock levels are inconsistent, demand is unpredictable,
and communication between stocking locations or warehouses is minimal or non-existent. Among other reasons, the absence of an integrated interaction between peripheral systems and materials management results in needless purchases and overstocking.
The concepts of “materials management,” “physical distribution management,” and “logistics management” are the primary materials organisational tools that have been used successfully in the past and will be used more frequently in the future to achieve closer coordination and control of a company’s various materials activities.
In general, materials management is concerned with transporting materials from outside the organisation to the site of production and transferring them through processes.
If we distinguish between the operational function of customer service and the end goal of customer value and satisfaction, we can conclude that materials management results in lower costs and improved customer value and satisfaction in order to gain a competitive advantage. Industry reports back up this claim (Performance Management Group, 2001).
The rapidly evolving and technologically changing environment has given the materials management an extremely difficult work and responsibility. The effort is truly titanic when we consider the amount of materials, equipment, and components that enter the production channels each year.
The issues become difficult since the money invested in inventory, supplies, and equipment is enormous.In reality, in many organisations (large and small), materials are the single highest expense.
According to Subramanian (1974), a review of the financial statements of numerous corporate and public sector organisations reveals that materials account for about 60% of overall spending.
As a result, the importance of materials management stems from the notion that any meaningful contribution made by the materials manager to reduce material costs will go a long way towards boosting profitability and rate of return on investment. Increased sales can undoubtedly contribute to such an increase in profitability.
While the majority of the writing and discussion on materials management focuses on acquisition and standards, much of the day-to-day work in materials management involves quality assurance difficulties.
Parts and materials are examined before purchase orders are issued and while in use to verify that there are no short or long-term concerns that would disrupt the supply chain.
This feature of material management is especially significant in extensively automated sectors, where failure rates due to faulty parts can slow or even stop production lines, disrupting production schedules (Mentzer, 2001).
Compliance with standards is another important aspect of materials management. In supply chain management, there are standards that must be followed in order for the supply chain to function properly.
For example, a supply chain that employs just-in-time or lean replenishment necessitates absolute perfection in the transportation of parts and supplies from purchasing agent to warehouse to final destination.
methods that rely on vendor-managed inventories must have up-to-date computerised inventories and reliable ordering methods allowing outlying suppliers to place orders (Hax and Candea, 2004).
Christine (2002) believes that effective materials management is crucial for providing the best service to clients, producing at optimum efficiency, and managing inventories at predefined levels to stabilise inventory investments.
Successful materials management necessitates the creation of a highly integrated and coordinated system that includes sales forecasting, purchasing, receiving, storage, manufacturing, shipping, and real sales. Costing materials and inventories must be examined both theoretically and practically.
Costing materials raises several crucial, often complex, and sometimes contentious considerations about the cost of production materials and the cost of inventories that will be consumed in the future.
In financial accounting, the issue is typically presented as an inventory valuation problem; in cost accounting, the fundamental problem is determining the cost of various materials utilised in manufacturing and properly charging them to the cost of products sold (Freeman, 2006).
1.2 Statement of the Problem
Many organisations appear to be failing to meet their corporate goals and objectives. However, for the majority of these organisations (particularly manufacturing organisations), materials are critical to the firm’s success and achievement of its goals (Burt, 2003).
The issue is that some businesses do not have true and efficient material procurement, storage, and utilisation management. The amount of money spent on materials demonstrates the importance of materials management, as does the considerable contribution materials make to organisational performance.
Efficient materials management reduces material costs, enhances profitability, and increases the rate of return on investment. Undoubtedly, increased sales can have an impact on such an improvement in profitability. In fact, as market pressure increases, organisations will be obliged to reduce expenses.
Material management is all about the purchase mix. It entails the acquisition of materials in stock as well as the ability to determine the total amount of accessible commodities that will be distributed upon request.
All activities are primarily performed by the store manager, whose aim is to ensure that goods are not below average in order to meet the demands of clients.
The overall relevance of materials management is to ensure that the company’s demand and sales are streamlined so that management or the organisation is aware when items are running low and will not go so far as to use their buffer stock.(Maloni,1997).
1.3 PURPOSE OF THE STUDY
This study will demonstrate, using statistical proof, that materials management will considerably improve the organization’s profitability, well-being, and productivity. However, the study’s precise aims include:
1. To investigate the effect of materials management on organisational productivity.
2. Investigate the effect of materials management on profitability.
3. Determine the impact of materials management on organisational efficiency and performance.
4. Determine the influence of materials management on customer satisfaction.
5. To investigate the impact of material management on organisational coordination.
1.4 RESEARCH QUESTIONS.
This study will seek to answer the following questions:
1. How does materials management affect the organization’s productivity?
2. How does materials management affect profitability?
3. How does materials management affect organisational efficiency and performance?
4. What impact does material management have on customer satisfaction?
5. How does materials management affect organisational coordination?
1.5 Significance of the Study
The research was conducted to demonstrate the importance of materials management in terms of overall organisational effectiveness. Clearly, all organisations,
whether service or good oriented, must pay attention to the importance of materials and materials management in their organisations. As a result, it is evident that the contribution and significance of this study cannot be overstated.
The findings of this study should also help to define new materials management methods/strategies for the manufacturing industry in particular, as well as management organisations in general.
Finally, the findings of this study should assist scholars, students, and aspiring researchers in the conduct of future research.
1.9 Research Hypotheses
This study will be designed to evaluate the following hypothesis.
Hypothesis One.
Ho1 There is no clear link between materials management and organisational productivity.
Ha1 There is a considerable link between materials management and organisational productivity.
Hypothesis Two
Ho2 There is no substantial correlation between materials management and profitability.
Ha2 There is a strong correlation between materials management and profitability.
Hypothesis Three
Ho3 There is no significant link between materials management and organisational efficiency or performance.
Ha3 There is a strong link between materials management and organisational efficiency and performance.
Hypothesis Four
Ho4 There is no substantial correlation between material management and customer happiness.
Ha4 There is a strong association between materials management and customer happiness.
Hypothesis Five
Ho5 Is there no major relationship between materials management and organisational coordination?
Ha5 Is there a strong link between materials management and organisational coordination?
1.10 Scope and Limitations of the Study
This study focuses on materials management in organisations, specifically Nestle Nigeria Plc, a reputable manufacturing organisation.
1.11 Operational Definition of Terms
During the course of the study, several terms and groups of words were used to describe specific scenarios, and their definitions are listed below:
Economic order quantity: This is the amount of inventory that minimises both total inventory holding and ordering costs. It is one of the earliest classical production scheduling models.
Consumer satisfaction: This means that the organisation fulfils the needs of the customers. It is a measure of a company’s ability to meet or exceed consumer expectations with its products and services.
Materials management is the process of directing and supervising the acquisition and use of materials within an organisation. Planning and control of the functions that support the entire material cycle (flow) as well as the information flow.
The supply chain is a linked network of resources and operations that begins with the sourcing of raw materials and concludes with the delivery of finished goods to the final client.
Supply Chain Management: This includes the planning and execution of all activities related to sourcing, procurement, conversion, and logistics management.
Logistics is the management of commercial processes such as the procurement, storage, transportation, and delivery of commodities within the supply chain.
Just-in-time manufacturing: This is described as the removal of all waste while continuously increasing productivity. This means there should be no safety stocks, and lead times are kept to a minimum.
Safety stock: This is also known as buffer stock. It refers to a level of excess stock that is kept below the cycle stock to protect against stockouts.
Manufacturing is the use of machines, equipment, and labour to create products for use or sale. The term can relate to a variety of human activities, ranging from handcraft to high technology,
but it is most usually used to describe industrial production, which involves the large-scale transformation of raw materials into completed commodities.
Productions are the processes and methods used in the transformation of tangible inputs (raw materials, semi-finished goods, or sub-assemb
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