The Impact of Material Handling Cost Reduction Effort In Public Institution (A Case Study of PHCN, kaduna)

The Impact of Material Handling Cost Reduction Effort In Public Institution (A Case Study of PHCN, kaduna)

Chapter one

Introduction

1.1 Background of the Study

Following the industrial revolution, hundreds of industries arose on a daily basis during WWII. As industry expanded, raw materials grew scarce.

This made manufacture more complex. Accounts needed to be prepared, and consumers needed to be served quickly. Alternative sources were required, and the new product needed to be improved and developed.

With this difficulty in mind, the material management concept was established with the goal of solving it scientifically in order to achieve maximum success while lowering production costs.

By the 1950s and 1960s, an uneven transition had occurred from the previous concept of material management as a clerical function to a newer function or concept of material management that included inventory control, distribution, and purchasing functions.

By the late 1960s, material management was recognised as an important function within an organisation. Thus, the relevance of material management stems from the fact that any significant contribution made by the materials manager in lowering material costs would help to lower production costs while also boosting profitability and rate of return on investment.

Today, materials are the lifeblood of any company; no industry can function without them; they must be supplied at the correct time, in the proper quality, at the proper location, and at the proper price.

Material handling is an important part of material management that deals with how materials flow from one step of processing to the next in order to improve processing, safe mobility, and space utilisation.

As a result, it is also a vital aspect of a production process that does not add much value to what is being processed, but does add a lot to the processing cost. As a result, this research focusses on the importance of material handling and its impact on production costs.

1.2 Statement of the Problems

As previously said, the research is based on the impact of material handling on an organization’s production costs, specifically in the PHCN business.

This is not just because materials account for 65% of the total cost of running any organisation, according to some material management study, but also because materials must be transferred from one processing stage to the next.

Thus, there is always a need to carefully manage materials in order to reduce waste while still providing maximum service in such organisations. This requires good material handling as well as maintaining a standard in manufacturing costs.

Another issue is the hiring of unqualified employees to oversee retail operations. This problem frequently leads to improper material handling, degradation, pilferage, theft, and redundancy.

Now that store operations are gaining the attention of individuals in positions of power, the importance of actively coordinating these efforts for greater performance, creating more impact and, as a result, more recognition, cannot be overstated.

Effective material handling, and its primary duty, is to guarantee that sufficient materials are retained in the store to meet all requirements without carrying excessively large or insufficient stock to ensure efficiency and profitability in PHCN.

The researcher also discovers that the retail department has been negligent and sometimes assigned to an unrelated department, resulting in poor performance.

This scenario demonstrates material handling inadequacies in the areas of planning, replenishment, recording, and inventory management, all of which have an impact on the organization’s profitability.

1.3 Objectives of the Study

The purpose of this study is to critically examine the application and understand the impact of effective material handling, which deals with the inflow and outflow of materials into and through the consumer of the products in terms of operational performance and economics.

This study has been specifically developed to

i. Investigate the current pattern of material availability in the organisation being studied.

ii. Determine the efficacy of the material handling system at PHCN.

iii. Determine how faults in the material handling system affect profitability.

iv. Investigate the root causes of poor material handling performance.

v. Suggest ideas for better coordination and management of material handling systems that can improve and provide a steady and uninterrupted flow of materials, hence contributing to the profitability level of the organisation under consideration.

1.4 Significance of the Study

The research is carried out for the benefit of individuals, organisations, and society as a whole. Thus, the study’s significance is that the project work will be useful to future researchers who wish to conduct research in comparable or related fields of study because it will offer them with important information on the issue.

The study will also give the public with firsthand information and understanding on how PHCN-related stores or materials are managed and controlled in public establishments.

Similarly, research has been conducted to improve the researcher’s and society’s understanding of how efficient material handling can contribute to an organization’s survival and profitability, with a focus on PHCN.

As a result, the project will show the benefits that PHCN and other organisations can achieve by employing and implementing the appropriate material handling system staffed by competent and trained people.

1.5 Limitation of the Study

The scope of this study is limited to the material handling system in public institutions from 2007 to 2009, with a population of 250 employees chosen from manufacturing, materials management, power plants, and utility units, and a sample size of 50, representing 20% of the population.

The study aims to determine the effects of an effective way of material handling on the profitability of PHCN, taking into account the massive materials that serve as input for the organisation.

1.6 Research Questions.

To assess the impact of material handling on the profitability of PHCN, the researcher has developed certain study questions, which are:

i. What is the rate of material availability in the organisation being studied?

ii. Why is the material handling mechanism in PHCN ineffective?

iii. How do inadequacies in the material handling system affect PHCN’s profitability level?

IV. What variables contribute to poor material handling performance?

v. What are the solutions for boosting the efficiency of PHCN’s material handling system?

1.7 Definition of Terms.

Stock refers to all of a company’s tangible assets other than fixed assets.

Control: A standard set for determining the outcome of an action.

Profitability is defined as adding to or increasing an organization’s profit.

Stock taking is the complete process of recording the quantity balance of all items held in stock.

Stock checking refers to any other physical quantity check that can be performed on a regular or intermittent basis.

Redundant: Having surplus stock over regular equipment.

Materials refer to components, spare parts, and semi-finished goods in an organisation.

Store: The location where all raw materials and component parts are stored for safekeeping.

Stock out is not having the necessary parts or supplies on hand when and where they are needed.

Stock level: A set amount of stock to be held.

Obsolete: When an item is no longer useable by an organisation as a result of a change in operational practice or manufacturing method.