INVENTORY MANAGEMENT AND CONTROL POLICIES IN NIGERIAN ENTERPRISES
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INVENTORY MANAGEMENT AND CONTROL POLICIES IN NIGERIAN ENTERPRISES
Chapter one
Introduction 1.0: Background Information
Inventory management is essential in any organisation. A growing number of medium-sized businesses engage in medium-sized production and marketing activities that require a relatively large amount of factor input and output.
As with any other business unit, medium-sized businesses require materials to conduct their operations. We use the term “material” to refer to everything that can be stored, stocked, or filed. It comprises all materials utilised during the production process.
Essentially, business materials are classified based on their consumption, which can be associated with a certain production unit and becomes part of the finished product. Direct materials comprise not only the commencement of manufacturing, but all of the following:
Any material utilised in the production process but completely consumed or lost in the process, such as fertiliser needed to produce plants.
Any partially or fully finished component assembled into a financial product, such as a radio and car batteries assembled into a complete car.
Any material that enters manufacturing after the original step, such as glazing in the creation of food.
Indirect materials are ones that cannot be readily identified with an individual cost unit.
These materials are often expensive and do not physically become part of the completed product, such as will and grease for lubricating machines, coal, and so on.
Inventory management/control can be described as the storage and use of commodities in such a way that production flows smoothly while avoiding excessive investment in inventories.
Efficient material control eliminates losses and waste of materials that might otherwise go unreported. Thus, an efficient inventory management system should be comprehensive enough to include the buying system, storage system, manufacturing issues, and establishing stock levels for each item of material.
Given that medium-scale enterprises such as Plasto Crown Nigeria Limited, Akwa Feeds Limited, Champion Breweries, Le Meriden Hotel and Golf Resort Limited, and Mr. Biggs Confectionery are traditionally faced with the onerous problem of inventory management
it then calls for the establishment of a sound cost accounting system to which the cost of material inflow and outflow would be kept within the confines of the budgeted plan towards the attainment of the organization’s goal.
This is because material is frequently the most expensive single component of cost, and as such, a good material and inventory control system should result in significant savings in material costs.
Business inventory control should result in significant material cost savings. Business inventory is as valuable as currency, and any theft, waste, or wasteful usage of material should result in an immediate and direct loss of corporate funds and profits.
The purpose of this study is to investigate how inventory may be efficiently handled in some selected organisations in Akwa Ibom State.
STATEMENT OF PROBLEM
Any company that wants to have complete control over its material resources is always confronted with the dilemma of imprecise stock valuation and accounting procedures. This does not imply a lack of precision when counting the number of things in stock.
In almost every medium-sized business, errors in checking the quality of material in stock are widespread. Human errors will occur unless everything is double-checked, which is typically not worth the effort for low-value products.
Even if the margin of error is relatively narrow, faults will exist in such quantity-checking tools as weighing machines or liquids measurements. The true lack of clarity is in assigning a single undeniable value to the overall quantity of stock.
Quite often, these common errors and lack of precision in material accounting influence the determination of an organization’s total material stock accessible and required for the manufacturing process.
In light of this, the study is being conducted to investigate the types of inventory management and control policies used by the surveyed medium-sized enterprises to facilitate effective material resource management in order to achieve organisational goals and objectives.
GOALS OF THE STUDY
The goal of this study includes the following:
To evaluate the fundamental inventory management techniques and control procedures used in the state’s manufacturing establishments.
To investigate how effective the measures implemented by these companies were in assuring optimal inventory cost.
To identify the issues that prevent proper inventory management and control in medium-sized businesses in the state.
To offer advice for successful inventory management and control in medium-sized businesses.
RESEARCH QUESTIONS:
What inventory management strategies and control policies do you utilise at your establishment?
To what extent can you conclude that the procedures adopted by your establishments were cost-effective or optimal?
What are the inventory management and control policy issues that your organisation is facing?
What recommendations are available for improving effective inventory management and control in medium-sized businesses?
1.4 Statement of Hypotheses
HO: Inventory management and control regulations have no major effect on the performance of the state’s medium-scale manufacturing businesses.
HI: Inventory and control rules have a considerable effect on the performance of medium-sized manufacturing establishments in the state.
HO: The policies or approaches used by these establishments have not been cost-effective in fulfilling organisational objectives.
Hello: The technique used by these businesses has proven cost effective in reaching organisational goals.
1.5 Significance of the Study
It is hoped that the research would serve as a benchmark for evaluating the firm’s performance, productivity, and effectiveness. This will be possible if the firm values the level of inventory that minimises excessive tying up of working capital in the form of inventory and balances this expense with the possibility of stock outs.
Furthermore, this study will contribute to the current body of knowledge in this topic. Furthermore, this study will be valuable for students in territorial institutions who wish to conduct future research on a relevant topic.
Furthermore, it will serve as a guide for management practitioners in both the private and public sectors of the economy as they seek to implement proper inventory management and control policies that will improve effective and efficient material and non-material management in order to achieve predetermined goals and objectives.
Scope and Limitations of the Study
This paper is intended to evaluate inventory management and control policies in Nigerian enterprises. A case study of chosen medium-sized firms in Uyo.
Plasto Crown Nigeria Limited, Akwa Feeds Limited, and Champion Breweries are among the medium-sized firms in Uyo being considered. Le Meridian Hotel and Golf Resort and Mr. Biggs.
The scope of this investigation may have been expanded but for funding and time constraints. It is not worth mentioning that the breadth of inventory management cannot be thoroughly explained in a hurry.
As a result, this study makes no claims to have addressed every detail of the issue. Similarly, there is no assurance that this work featured one hundred percent (100%) quality presentations on inventory management and policies in medium-sized firms.
This is due to the probability of identifying clear data gathering issues, which may have an impact on the quality of this job, either positively or adversely.
Definition of Terms
Leader Procurement Time: This is the number of days, weeks, or months between purchase and replenishment, when the items are ready for usage.
Economic order amount: This is a computed ordering quantity that minimises the balance of costs between inventory holding costs and reordering expenses.
Physical stock refers to the number of products that are physically in stock at any given time.
Free Stock is the physical stock plus outstanding replenishment orders minus unfulfilled requirements.
Buffer Stock, also known as minimum stock, is the quantity of inventory or stock maintained on hand to account for potential delays in delivery or higher demand during the lead period.
Maximum Stock: A stock level chosen as the most ideal, which is used as an indicator to show when stocks have increased too far.
Re-Order Level: The level of stock at which another replenishment order should be placed. The reorder is independent of the lead time and demand during the lead time.
Re-Order Quantity: The quantity of the replenishment order, or the level of inventory for the number of products ordered at one time.
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