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EVALUATION OF STOCK AND CONTROL SYSTEM.

EVALUATION OF STOCK AND CONTROL SYSTEM.

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EVALUATION OF STOCK AND CONTROL SYSTEM.

 

Chapter one

1.1INTRODUCTION

Stock refers to products that are available for sale, distribution, or use, as well as goods retained by a dealer or shopkeeper. There are various types of inventories in a manufacturing organisation. The inventory contains:

· Raw Materials

· Work in process.

· Finished items.

Omolehinwa (1985) defines raw materials as materials that have not been processed by the relevant manufacturing department but will be used later as inputs for the firm’s output.

According to John Nwafa (2005), what one company or organisation considers raw materials may be a finished product for another. Work-in-process, also known as work-in-progress, refers to things that have begun the manufacturing process but have not yet been completed for sale.

It is calculated by summing the cost of raw materials consumed thus far, labour costs, and other manufacturing costs incurred on semi-processed items (known as overhead expenses), up to the conclusion of the accounting period.

While finished goods are manufactured goods or manufacturing goods that have been completed and are being held for safekeeping, their worth is calculated by adding the direct material and direct labour consumed, as well as the overhead cost absorbed by the finished units that have yet to be sold.

Stock control, formally known as materials control, has a history dating back to the industrial revolution of the 18th century in Europe

. Because most sectors were still in their early stages of industrial development, the benefits of stock control and valuation methods were not well recognised.

As a result, as the manufacturing industry grows, so does the need for a stock control system. This was considerably boosted by an understanding of production costs, reduction, and profit maximisation.

However, beginning with the Second World War, the impact of raw materials and work-in-progress on the manufacturing process became apparent. This led to the discovery of several methods for improving the stock control and valuation system. As a result, production costs are reduced, allowing for an increase in goods production.

As a result, numerous stock evaluation methods and control systems are being applied to improve industry profit maximisation aims.

1.2 PURPOSE OF THE STUDY

Aside from investigating the practice and implementation of stock control, the goal of this study is to investigate the relationship that exists between Nigerian Breweries Plc’s profit planning targets and the current level of investment in stock. Furthermore, it will evaluate whether there is another level of stocks at which profit can be maximised.

1.3 Problem Analysis

It goes without saying that the majority of the country’s industrial concerns, including the brewing industry, are dealing with several issues. The issues range from a lack of suitable raw materials, a paucity of spare parts, inadequate stock management, and outmoded and obsolescence. These bottlenecks generally lead to production halts. In other situations, it often results in the temporary closure of plants.

Direct materials account for more than half of overall product costs in most companies. Stock maintenance costs might equal to around 25% of the stock’s worth. According to a business adage, “the customer is king.” He should be made to feel it. Employees should also be highly motivated. As a result, their needs must be taken into consideration.

1.4 Research Questions

The answers to the following questions are sought:

Is there a shortage of raw materials?

· Does the company operate at full capacity or below capacity?

If below, what capacity?

· How do shortages and overstocking affect Nigerian Breweries Plc profits?

· How does manufacturing volume effect selling prices?

1.5Justification for Study

The necessity of stock appraisal and control systems in any growing economy, including Nigeria, cannot be overstated. Stock, as the start of production operations in manufacturing organisations in general, and Nigeria Breweries Plc in particular, will be examined. Recommendations would also be made to help Nigerian Breweries Plc to increase profits. As a result, the country’s Gross National Product (GND) will increase.

1.6 Limitations of the Study

The investigation will focus on stock within Nigeria Breweries Plc, Iganmu. This would consist of the following departments:

· Purchasing Department

· Store Department

· Production Department

· Sales Department

1.7 Scope of the Study

There are several brewing enterprises in Nigeria. Most states in the country have at least two festering issues. Each organisation faces unique challenges. Regardless of the unique nature of some of the issues, the breaking companies confront comparable challenges.

However, extrapolating this research to all brewing enterprises in Nigeria is not advisable. The inhabitation is the cost (money), time, and scope of coverage of any project. As a result, the research is limited to a single case study of Nigerian Breweries Plc.

Nigerian Breweries Plc has an extensive collection of high-quality brands. Star Lager Beer (1949): Gulder Lager Beer (1970); Maltina (1976) now includes three varieties (Maltina Classic, Maltina Strawberry, and Maltina with Pineapple)

as well as Maltina sip-it, packaged in tetrapaks, which was introduced in 2005. Legent Extra Stout (1992), Amstel Malta (1994). Heineken Layer was re-introduced onto the Nigerian market in June 1998. Gulder Man and Fayrouz were introduced in 2006.

Nigerian Breweries Plc has increased its export business dating back to 1986. Currently, the company exports to the United Kingdom, Europe, and the West African subregion.

And the topic of this study is the evaluation of stocks and control systems from the perspectives of stories, stock taking, cost, and cost accounting.

1.8 Study Contribution

Shortages of raw resources and ineffective stock control can lead to production halts and company closures. Not only that, but it may also lead to employee layoffs. The subject of this study would undoubtedly contribute to the pool of ideas on stock evaluation and control systems for Nigeria Breweries Plc.

Again, the study will be valuable to other companies. They can compare the operations of their stores and purchasing departments to the (research) strategy, processes, and methodologies outlined in this study. As a result, the problem of raw material shortages, a lack of spare parts, and stock outs can be alleviated.

1.9 Definition of Terms

Stock refers to products that are available for sale, distribution, or use, as well as goods stored by a trader in a shop.

Stock control is the process of regulating the stocks of a functioning business. It is focused with keeping records and stocks within reasonable limitations.

Stock-out cost is the expense of not satisfying manufacturing demands. This can result in a loss of client goodwill and lost earnings.

Maximum Stock Level: This is the maximum stock level that management cannot allow to be exceeded. It is an indication to management that the stock is rising rapidly; any stock above the maximum level may effect production costs in the form of storage and security expenses.

Minimum Stock Level: This is the stock level that management must not allow the stock in the warehouses to fall below; if the stock level falls below this level, there is a risk of a supply shortfall, which could impair production.

Re-Order Level: At this level, new orders for material will be placed. The ordering falls between the minimum and maximum levels.

Re-order Quantity: This is also known as the economic order quantity (E.O.Q). It is the quantity for which management will aim to minimise reordering and storage/carrying costs.

Waste: Discarded resources with no recovery value.

Scrap: Discarded materials with some recoverable values.

Obsolescent: Materials that are becoming obsolete or out of use.

Full Capacity: This occurs when the level of activity or volume of production equals the whole installed capacity of the plant. A stage at which the manufacturer begins to explore the possibility of expanding the plant in response to other market variables.

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