Project Materials

ASSESSMENT OF COST REDUCTION TOOLS AS A MEANS OF IMPROVING ORGANIZATIONAL PROFITABILITY

ABSTRACT

This study looked into the current assessment of cost-cutting tools in use at Unilever Nigeria plc. Their usefulness as actual cost-cutting tools, and most importantly, how much or little they have contributed to the company’s cost-cutting operations/production. In conducting a case study, three methods of gathering information were used: a questionnaire, personal discussions and interviews, and observations in the firm. The data acquired through the questionnaire were analysed using the simple percentage technique. However, the study revealed that the company adopted and used the following cost-cutting tools, among others, staff training (to improve efficiency and skill), good inventory management through the economic order quantity (EOQ) model, low labour turnover rate, strict supervision of activities, responsibility accounting system, turnaround strategy, and periodic cost analysis and investigation of material variances. These strategies haven’t been without challenges. It was discovered that employees who have been denied certain welfare facilities and fringe perks as a result of cost-cutting measures in place have developed a negative attitude towards work and a deteriorating moral for productivity. Based on these findings, it was determined that the instruments used by Unilever Nig Plc are appropriate for modern-day operations/productions for a manufacturing firm of its caliba. Also, these tools have resulted in a significant difference in material costs of the integration strategies, contract reviews, the establishment of a separate purchasing department, and the approval of overtime allowances for workers on essential duties are areas to be investigated in order to improve worker preferences. These areas should be seriously encouraged, including the accounting system in operation.

Chapter One

INTRODUCTION

Background of the Study 

Every rational producer wants to spend as few resources as possible to attain a desired result. Thus, at all times, he or she should be thinking about ways to reduce the cost of attaining the targeted advantages. This issue applies to all types of organisations, whether for profit or not.

However, this has made it vital for all organisations, particularly profit-oriented ones, to continue managing the use of resources in order to meet established criteria. Furthermore, they should make concerted efforts to cut expenses without sacrificing product quality.

The following pursuits by manufacturing corporations have occurred during an age of surprise inflation, particularly a low exchange rate, and repeated reports of extremely low capacity utilisation.

Furthermore, the corporate environment has been adversely affected by the interaction of some powerful extraneous elements. Perhaps it was in this circumstance. Greater (1975) Page (1975:13) predicted “cost must be minimised, cost must be controlled, profitability must be improved” in his statement.

These are the crises of managers that reverberate through the streets of business and commerce. Coming home, Ogulana page (1983:010) (1983) titled “Nigeria is passing through a tough phase; all feasible must be done by everyone in position to do so, to support the economy in marketing a speedy recovery?

One approach for company managers to respond to these clear calls is to implement cost-cutting solutions aimed at increasing profitability.