INVENTORY MANAGEMENT AND CORPORATE PROFITABILITY OF A MANUFACTURING COMPANY
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INVENTORY MANAGEMENT AND CORPORATE PROFITABILITY OF A MANUFACTURING COMPANY
Chapter one
INTRODUCTION
Background of the study
Inventory accounts for the majority of a company’s assets; thus, the importance of inventory control cannot be overstated as a measure of boosting manufacturing enterprises’ performance. Inventory is a record of a company’s present assets, such as property owned, the worth of raw materials, work in progress, and finished goods.
As it can be converted into liquid cash in a short amount of time, it is classified as a current asset. Inventory management is concerned with the efficient purchase, storage, and use of materials.
Inventory management entails providing a steady supply of goods to minimise stock outs and ensure uninterrupted sales and efficient customer service, maintaining sufficient stock, and limiting investment in stocks by maintaining an optimal level of production while minimising carrying costs and times.
Poor or insufficient inventory management can severely limit a manufacturing company’s production capabilities. The goal of inventory management is to maintain a sufficient quantity of stock to meet available demand while minimising holding, administrative, and stock out costs (Foulks, 2014).
Inventory has had a significant impact on the profitability of industrial companies, prompting extensive research into the problem. Inventory management and company profitability in manufacturing enterprises.
1.2. Statement of the Problems
Inventory management and corporate profitability of a manufacturing company have fallen out of favour in recent years, particularly in developing economies. Many modern establishments’ management ignores the importance of proper inventory management procedures. The loss of a company’s sales or business due to insufficient completed products inventory.’
This is mostly because managers are unaware of the impact of inventory management on the company’s overall profitability. As a result, they took on more liabilities than they could have had otherwise.
A large number of fraud cases occur as a result of the firm’s absence of a solid and sound inventory management system. If there is no proper inventory management, employees can simply manipulate and steal funds intended for the business, resulting in low profits without the awareness of management.
Another issue is inadequate inventory management in the industrial industry. These are the challenges that necessitate a study of this sort.
1.3 PURPOSE OF THE STUDY
The primary goal of this study is to assess the efficacy of inventory management in a manufacturing organisation. The precise objectives of this investigation are the following:
To estimate the impact of ineffective inventory management on the Siba group of firms’ operations.
To investigate the extent to which an insufficient inventory of finished items can result in a loss of sales for the company.
To determine whether the company has had poor inventory management and control.
To determine the extent to which inventory management correlates with organisational profitability.
To analyse the inventory management system utilised by the Siba Group of Companies.
1.4 RESEARCH QUESTIONS.
The following research questions were developed for this study.
Is inadequate inventory management affecting Siba Group of Companies’ operations?
How does a company’s insufficient finished goods inventory lead to a loss of sales?
Does the Siba Group of Companies suffer from poor inventory management and control?
How can inventory management affect the profitability of a manufacturing company? (Siba Group of Companies).
What is the inventory management system utilised by the Siba Group of Companies?
1.5 Statement of Hypothesis
The following hypotheses for this research are developed based on the study’s difficulties and aims.
Ho i There is no substantial association between profitability and ineffective inventory management.
H1 i: There is a considerable association between profitability and inadequate inventory management.
Ho i There is no significant link between proper inventory policies and profitability in manufacturing companies.
H2: There is no substantial association between good inventory management and profitability in a manufacturing organisation.
Are you referring about profits or productivity? See your topic.
1.6 Significance of the Study
The significance of this study rests in the fact that enhanced inventory control and management in manufacturing organisations may help the following individuals.
It will be beneficial to manufacturing enterprises, firms, and businesses since it will allow them to maintain proper inventory control and ensure that they do not run out of goods or have extra stock, jeopardising their high position.
It will also help to suit the needs of customers or guests. It is also significant for the government because it will contribute to reducing waste investment inventory. It will assist professors in understanding the necessity of inventory control in order to have an impact on their pupils.
This investigation will also show the appropriate strategies for preventing mismanagement, as well as improve stock control, which has resulted in mismanagement and inefficient use of materials.
1.7 Scope of the Study
This research on inventory management and corporate profitability of a manufacturing company focuses on the Siba Group of Companies in Ikot Ekpene, Akwa Ibom State.
1.8 Limitations of the Study
The limitations of this research investigation are as follows:
The time factor of combining classwork and running around for material gathering.
ii The absence of a comprehensive information system is owing to an unsuccessful visit.
iv The staff was generally reluctant to release all of the requested information.
iv Finance, the most significant resource for our effort, was not easily available.
1.9 Definition of Terms
To make this study clear to all kinds of readers, certain technical terms and expressions must be specified, such include:
Inventory is defined as the number of materials consumed or in stock at a given time. It is a complete list of goods and assets in the hands of a person or organisation, frequently accompanied by a declaration of their nature.
It includes raw materials, works in progress, and finished commodities. Combining and utilising inputs (personnel, materials, and money) by planning, organising, directing, and managing for the purpose of generating output, goods, and services (or whatever the objectives are) desired by customers in order to achieve the organization’s goals.
Internal control: this could be defined as a whole system of control financial and other established by the management in order to carry on the business of the enterprise in an orderly and effective manner, ensure adherence to management policy, safeguard the asset, and secure the completen
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