EFFICIENT MANAGEMENT OF STOCKS OF MANUFACTURING COMPANIES
ABSTRACT
Stocks, also known as inventories by businesses, typically consist of raw materials, supplies used in production work-in-progress, and finished goods. Stocks also include livestock that is waiting for safe supplies to be consumed in the production of goods or the provision of services.
The goal of the researcher project is to learn about the role of efficient stock management in a manufacturing company. The management of various companies is faced with the problem of determining what level should be held in order to have an optimally healthy operation that will minimize the cost of stocks (ordering and holding costs).
As a result, the problems of stock management revolve around the selection of an optional company. The optimal stock level differs from one company to the next based on the company’s volume of operation. Anambra Motor Manufacturing Company Limited (ANAMMCO) Emene is used as a case study to achieve the research’s goal.
CHAPTER ONE
INTRODUCTION
1.1 The Study’s Background
Inventories are the stocks of resources with economic value held by an organization or company at any given time. These resource stocks can be manpower, machines, capital goods, or various stages of materials.
Stocks are made up of raw materials, work in progress, and finished goods. Raw materials are the basic input materials and components that are planned for use in the production of a product. Work in progress refers to materials that have begun the process of being transformed into finished goods; they represent a product for sale. Finished goods are items that are ready for sale to customers.
Raw material and work-in-progress inventories aid in production, while finished goods inventories are required for a smooth marketing operation. All three types of inventory will be present in significant quantities in the manufacturing form. While finished goods will be very high in the wholesale and retail forms.
Inventory is also known as “Inventory supplies.” These include fuel, light bulbs, and cleaning materials, which do not directly enter the manufacturing process but are required for production. Because there were not enough funds invested in it, a sophisticated inventory system was not maintained.
Given the large sums of money invested in these stocks, care must be taken to manage them efficiently in order to avoid jeopardizing their long-term profitability and failure. To avoid this risk, the company must implement an effective stock management system.
Anambra Motor Manufacturing Company Limited was established in 1978 as a joint venture between the federal government of Nigeria and Dailmer Benz AG of Germany to establish a manufacturing plant for the assembly of Mercedes vehicles using completely knocked Down parts
(CKPs) with its factory located in Emene, Enugu State. The federal government of Nigeria held 35% of the shares, Damiler Benz AG held 40%, and other Nigerian investors, primarily the state government of the former East Central State and a few other investors, held the remaining 25% of the company’s equity.
On May 12, 1978, the military Governor of Anambra State, Col. John Atomkpera, laid the foundation stone for Anammco. On April 26, 1982, the federal minister of education, Hon. Sylvester Ugoh, commissioned the ANAMMCO Training Centre.
The ANAMMCO central spare parts depot first opened its doors in October 1985. In January 1986, the company began full production. The installed production capacity on shift per year was 7,500 commercial vehicles.
This multi-million dollar plant in Emene, near Enugu, was built through a joint partnership agreement between the federal government of Nigeria and Daimler-Benz AG of Germany to produce Mercedes trusts to meet Nigeria’s increasing demand for commercial vehicles. Anammco is thus a logical extension of the long pioneering tradition of Mercedes-Benz sales and services in Nigeria.
Anammco was established as a limited liability company on January 17, 1997, and the federal government of Nigeria sold 24 percent of its shares to G.U. Okeke & Sons Limited in 2007. While DAMILER – BENZ AG sold 40 percent of its shares to
AFFREECAL LIMITED, the company’s major shareholders are ATFREECAL LTD (40-45 percent) and G.U. Okeke and Sons Limited (27-45 percent). The Federal Government of Nigeria, through the B.P.E., held 11 percent of the shares, while several state governments and a few private investors held the remaining shares.
Chief G.U. Okeke, Mr. Onken, Mr. Uche Okeke, Igwe Onyia, and Obi Charles C. Olutala C. were members of the ANAMMCO Board of Directors, along with over 1200 workers, including Nigerians and foreign experts and technicians who made up less than 3% of the total workforce.
1.2 STATEMENT OF THE PROBLEM
1. The most serious stocking issue at ANAMMCO is understocking. Because of the importation of spare parts from Germany.
2. No proper record of stock taking and stock valuation exists. Without proper authorization, parts are removed and returned to shore.
3. If stock is not handled properly through proper authorization and management, the value of the company’s current asset will not be properly documented.
4. To ensure that the form does not run out of stock, which will affect their profit, stock must be well managed, which leads to proper information on when to order new parts and how the parts were used.
1.3 THE PURPOSE OF THE STUDY
The primary goals of this research project are as follows:
1. Identifying and resolving the issue of managing and controlling stock in the manufacturing company.
2. Determination of the effects of inefficient stock management on the company’s profit.
3. Whether there is a gap between policy and practice in ANAMMCO’s stock management.
1.4 HYPOTHESIS OF RESEARCH
1. Hypothesis number one:
Ho: The problem of understocking at ANAMMCO prevents the factory from operating at full capacity and results in a loss of profit.
Hi: The problem of understocking in ANAMMCO does not result in underutilization of installed capacity and profit production.
Hypothesis number two:
Ho: Improper stock management and valuation do not result in stock loss and an inaccurate balance sheet.
Hi: Improper stock management and valuation result in stock loss and an incorrect balance sheet.
Three hypotheses:
Ho: Improper stock management does not distort information flow in an organization or proper part ordering.
Hi: Improper stock management distorts information flow and proper part ordering in an organization.
1.5 THE STUDY’S SIGNIFICANCE
The significance of this study to manufacturing concerns in general, and Anambra Motor Manufacturing Company (ANAMMCO) in particular, is to find a solution. The nagging question of how much the company can afford to invest in stocks without negatively impacting the company’s profitability?
Because businesses require a variety of other operations. Too much money invested in stock means that there will be DC letters or no funds to meet these operations’ expenses. As a result, manufacturing companies must invest wisely in inventory.
The stock will also assist manufacturing companies in growing in the face of risk or loss by doing the following:
1. Determination and evaporation materials, which deteriorate quickly, should be properly stocked to avoid financial loss. The amount to be stored should be determined by the wage rate, and special containers to prevent deterioration should be used where necessary.
2. Changes in fashion taste should be applied to overstock items that can easily become obsolete due to fashion changes, as this will result in significant losses for the company.
3. Changes in stock prices can be used to determine price changes in stock holdings. Stocks are built when high prices are expected. Similarly, any anticipated full in price will be used by management to reduce stock.
4. The study’s successful completion will add to the body of knowledge on this subject. As a result, subsequent writers can contact you if they need any information about the subject.
1.6 THE STUDY’S SCOPE AND LIMITATIONS
The purpose of this research is to examine the need for efficient stock management in manufacturing companies in general, with a focus on ANAMMCO. This is to ascertain how the company has managed her stock in accordance with the achievement of her objectives.
The writer concentrated on the show’s investment in the analysis. The inventory consists of raw material, work in progress, and finished goods. Due to time constraints, supplier stock was not included in the study. This study did not compare other motor manufacturing companies
(such as Peugeot Assembly of Nigeria and Volkswagen Nig. Ltd) due to time and financial constraints, though information about the companies’ stock was gathered. Because the company’s management considers some information to be private and exclusive, the writer has derived these facts and figures.
As a result, the researcher was unable to conduct as in-depth an investigation into the company’s stock management as he would have liked.
1.7 TERMS AND CONDITIONS
The researcher employs some technical terms that are solely related to the topic. The following technical terms are defined:
Cost of ordering:
This cost includes both clerical and secretarial expenses associated with preparing an order and receiving relevant documents. When materials are ordered in small batches, the unit ordering cost is high; when orders are placed in large batches, the unit ordering cost is low.
Cost of transportation:
Carrying cost of a desired rate of return on inventory investment, as well as storage costs, breakage obsolescence, deterioration, insurance, and personal property taxes.
Minimum Requirements:
It represents the order point at which an order must be placed in order to increase the organization’s stock quantity to the maximum level. This is done to ensure that there is no “stock out” situation, as well as no waste situation or materials, and to keep costs to a minimum.
Level re-ordering system
This is a method in which a predetermined re-ordering level is set for each material item.
Method of the highest level
This is the maximum number of stocks that the organization should not exceed.
Quantity of Economic Orders
It is the quantity that minimizes the cost balance between inventory holding and ordering costs.
Time to complete:
The lead-time is the amount of time that elapses between the time an order is placed and the time the goods are delivered.
Stockpile of Safety Items
This is the stock set aside to meet customer demand in the case of raw materials, in case of unexpected usage beyond normal usage. The goal of safety stock is to ensure that the company never runs out of stock. project ideas for manufacturing companies, project ideas for the stock market
Stock
A quantity of something kept or stored for future use as work-in-progress, finished goods, or supplies. There is a requirement, particularly for a large quantity of raw materials.
Stock management
Stock management is the activity, process, or study of ensuring that the quantity of stocks (e.g., of materials supplies or finished goods) is such that a satisfactory level of service is maintained for all stock keeping units while holding costs are minimized.
Shareholder
A person’s firm that has a specific type of stock (for example, a whole seller who has stock of a specific manufacturer’s goods).
Analysis of Value
Consideration of the function of all parts of the design of one of a firm’s products to see if any changes in materials, manufacturing methods, or design will increase the firm’s product value.
The loss of an asset’s value as a result of external factors such as technological change or changes in demand.
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EFFICIENT MANAGEMENT OF STOCKS OF MANUFACTURING COMPANIES
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