THE IMPACT OF INVENTORY CONTROL ON THE PROFITABILITY OF MANUFACTURING COMPANIES (A CASE STUDY OF NIGERIAN BREWERIES PLC)


THE IMPACT OF INVENTORY CONTROL ON THE PROFITABILITY OF MANUFACTURING COMPANIES (A CASE STUDY OF NIGERIAN BREWERIES PLC)   

  ABSTRACT

This research examined the impact of inventory control on the profitability of manufacturing companies with reference to Nigerian Breweries Plc.

Survey design was adopted with the use of a well structured questionnaire. Respondents were selected based on simple random sampling technique. Fifty (50) staff of Nigerian Breweries were sampled.

Two hypotheses were formulated and tested with the use of Chi-Squre analysis. The analysis resulted to rejecting both null hypotheses and hence accepting the two alternate hypotheses.

Based on decisions of the tested hypotheses conclusions were reached that Inventory control contributes to the profitability of manufacturing companies, and Inventory control reduces cost  

Recommendations were proffered to the management of Nigerian Breweries Plc and manufacturing industries in large.

TABLE OF CONTENTS

Title Page

Certification

Dedication

Acknowledgment

Table of content

Abstract

CHAPTER ONE

1.0Introduction

1.1 Statement of the Problem

1.2 Aim and Objectives of the Study

1.3 The Research Questions

1.4 Statement of the Hypothesis

1.5 Significance of the Study

1.6 Scope and Limitations of the Study

1.7 Definition of Terms

CHAPTER TWO

LITERATURE REVIEW

2.0Introduction

2.1Historical Background of the Case Study

2.2Concept Clarification   

2.2.1Inventories

2.2.2 Type of Inventories

2.2.3 Reasons for Holding Stock 

2.3 Stock Movement and Documentation

2.3.1 Store Record

2.3.2Stock Movement Receipt

2.4 Materials Issued in Excess of Requirement 

2.5 Materials Purchase

2.6 Methods of Stock Valuation

2.7 Inventory Control

2.7.2 Objectives of Stock Control

2.8 Inventory Control Systems

2.9 Guide to Inventory Accuracy

2. 10 Shortened Lead Times to Increase Profitability 

2.11 Break-Even Analysis 

2.12 Manage Inventory to Meet Profit Goals

2.13 The Future of Inventory Control Systems

CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

3.1 Research Design

3.2 Population

3.3 Sample and Sampling

3.3.1 Probability Sampling Technique

3.3.2 Non Probability Sampling Techniques

3.4 Types ofData

3.5 Data Collection Instrument

3.6 Data AnalysisTechnique

3.7 Limitations of the Methodology

CHAPTER FOUR 

DATA PRESENTATION, ANALYSIS AND INTERPRETATION 

4.0Introduction

4.1 Presentation, Analysis and Interpretation of Respondents Bio Data

4.2 Presentation Analysis and Interpretation ofResearch Questions

4.3.1.2 Liquidity and Profitability Ratios

4.3.2 Testing Hypothesis II

CHAPTER FIVE

SUMMARY, RECOMMENDATIONS AND CONCLUSION

5.0 Introduction

5.1 Summary

5.2 Recommendation

5.3 Conclusion

Bibliography

Appendix

CHAPTER ONE

INTRODUCTION

1.0 BACKGROUND OF THE STUDY 

The environment, in which the organization finds itself, is dynamic, faced with competition from different sources. At the root of any firm's financial success is careful planning and control of its limited resources. 

The past several decades have witnessed marked and steadily increasing changes in management disciplines, numerous planning and control activities formerly performed in a routine manner by clerks have evolved into sophisticated and strategic functions with far reaching effects on profitability. 

An important decision in all organizations is the quantity of stock to hold on hand. Once the inventory levels are determined they become important components in the manufacturing system. 

Inventories are stock of materials of any kind stored for future use, mainly in the production process. Thus, today's inventory is tomorrow's production. However, semi -finished goods awaiting use in the next process or finished goods awaiting release for sale are also included in the broad category of inventories. For a manufacturing organization aiming at operating at an optimal level, such must be sensitive to the management and control of its inventory because it constitutes a large proportion (about 60%) of the liquid and current assets of such an organization, consequently, having a significant effect on profitability. 

Therefore, inventories are materials or resources of any kind having some economic value either awaiting conversion or use in the future. 

Apart from these, there are also many indirect materials such as maintenance materials, fuel lubricants etc which are used in manufacturing organization. They are also classified as inventories of materials for future use, but they differ only in their use and classification from raw and other direct materials. All of then earn nothing, yet they are badly required to be stocked and used as and when the need arises.  

Inventory control is the method of ensuring that the right quantity and quality of the relevant stock is available at the right time and at the right place. It is also the system used in a firm to control the firm’s investment in stock is available at the time and at the right place. It is also the used in a firm investment in stock this includes the recording and monitoring of stock levels, forecasting future needs and deciding when and how many to order. It involves those activities to be carried out to ensure effective receipts, holding and issue of stock. 

Profitability on the other hand is the ability to sell goods and services above cost and earn reasonable returns on capital employed. It should be noteworthy that production does not need to be geared directly to sales. Large inventories allow efficient services of customer demands. 

If a product is temporarily out of stock, present as well as future sales may be lost. Thus, there is an incentive to maintain large stocks of all three types of inventories. 

The advantages of increased inventory then are several. The firm can affect economies of production and purchasing can fill orders more quickly. In short, the firm is more flexible. 

The obvious disadvantages are the total cost of holding the inventory including storage and holding costs and the required return on capital tied up in inventory. 

An additional disadvantage is the danger of obsolescence, because of the benefits. However, the sales manager and production manager are biased towards relatively large orders. It falls on the financial the temptation for large inventories. This is done by forcing consideration of the cost of funds necessary to carry inventories as well as perhaps the handling and storage costs. 

Like accounts receivables, inventories should be increased as long as the resulting savings exceeds the total cost of holding the added inventory. The balance finally reached depends on the estimates of actual savings, the cost of carrying additional inventory ands the efficiency of inventory control. Obviously, this balance requires coordination of the production, marketing and finance areas of the firms in keeping with the overall objectives. We will explore the various principles of inventory control by which the various principles of inventory control by which an appropriate balance might be achieved inn this research work. 

Conclusively, the study of the impact of inventory control on the profitability of manufacturing companies is worth pursuing that the results of this study will provide empirical evidence for the effective guidance of manufacturing companies.

1.1 STATEMENT OF THE PROBLEM

Inventory control involves putting in place every necessary requisite feature to impact favorably on manufacturing companies and to make it more effective and efficient. 

In this context, a manufacturing company will be faced with the following problems: 

What quantity should the company re-order at what time? 

What level of work-in-progress should they have in order to keep the production smooth? 

 What level of finished goods should they keep to meet customers demand? 

What level of stock is capable of safeguarding against damages" deterioration, pilferage, evaporation etc? 

These problems could be summed up into two conflicting needs of the company that must be attended to. These are as follows:

To sustain a minimum investment III inventories to maximize profitability, which might lead to under trading? 

To sustain a large size of inventory for efficient and smooth production operation, which might lead to overtrading? 

For this research work, the main problems are; 

Ineffective stock management can lead to inadequate holding of stock, resulting in the inability to meet customers demand as at when due and loss of goodwill. 

Improper stock control can lead to drain in the resources of the company 

 Determination of the stock level capable of guarding against Obsolescence of goods. 

Unqualified staff in the store department can affect the production • 

1.2 AIM AND OBJECTIVES OF THE STUDY 

The broad aim of this study is to critically assess the impact inventory control has on the profits of manufacturing companies. 

Supportive objectives that will foster the achievement of the above aim are: 

To examine how material purchase procedures affects the rate of usage

To analyze the relationship between inventory and profitability. 

To examine the effect inventory cost minimization has on profit maximization To examine various principles of inventory control by which an appropriate balance between carrying cost and ordering cost can be achieved 

1.3 THE RESEARCH QUESTIONS

Research questions are interrogative statements 'that arise from the course of study. Such questions are meant to information to the study.

In order to arrive at a logical conclusion, questions relevant to this research will be asked, among which are the following:- 

Does inventory control reduce cost?

Does inventory control increase tock available for sale? 

Is there any relationship between material purchase procedure and  rate of usage

 Does inventory management and control contribute to the profitability of manufacturing companies? 

 Is there a significant relationship between rate of usage, lead time and stock level?

1.4 STATEMENT OF THE HYPOTHESIS 

A hypothesis is an assumption, a tentative statement made about the value of a parameter or the observed fact of a distribution put forward to be tested and proven, so as to reject or accept the preconceived concept. To provide answers to the research questions, arising from the study, the following hypothesis are postulated:  

Ho: Inventory control does not contribute to the profitability of manufacturing companies. 

HI: Inventory control contributes to the profitability of manufacturing companies. 

Ho: Inventory control does not reduce cost 

HI: Inventory control reduces cost 

1.5 SIGNIFICANCE OF THE STUDY

In actual practice, the vast majority of manufacturing companies suffer excessive inventories than are necessary. The inventory control process is much more complex than the uninitiated understand. In fact, inventory control is perceived as little more than a clerical function. This has resulted into lots of material shortages, high costs and loss of profit. 

Manufacturers ignore the fact that inventories allows the company to be flexible. Raw materials inventory gives the firm flexibility in its purchasing. Without it, a company must exist on a hand to mouth basis, buying raw materials in keeping with its production schedule. 

Conversely, raw materials inventory may be bloated temporarily because the purchasing department has taken advantage of quantity discounts. Finished goods inventory allows the firm flexibility in its product scheduling and its marketing. 

The above situation has urged the carrying out of this research work in order to enlighten manufacturers, researchers, students and all other interested persons on the importance of inventory control so that it becomes easier to known when "Enough is Enough". 

1.6 SCOPE AND LIMITATIONS OF THE STUDY

The premise on which this study is based is that profitability of manufacturing companies is dependent upon effective and efficient inventory control systems.

This study will therefore cover the inventory management and control system adopted by Nigerian Breweries Plc over a period of 2003 to 2007.   

Nigerian breweries Plc is considered a fair representation of companies within the same industry carrying out similar activities or operations. Most of the information needed to carry out this research is from staffs of Nigerian Breweries Plc. 

In the course of conducting this research work, it is expected that the following will constitute impediment to the effective conduct of this study. 

Availability of relevant literatures and textbooks 

Time constrains

Financial constraints 

 Inaccessible and inadequate database

  Inadequate information given by the case study firm. 

1.7 DEFINITION OF TERMS

Economic Order Quantity (EOQ): This is the level of activity at which the cost of inventory control is minimized 

Inventory: It can be referred to as stock. By stock, we mean raw materials, work -in-progress and finished goods 

Inventory Control: This is a system used in a firm to control the firms 

Inventory turnover: This simply shows how quickly inventory is being 

Obsolete stock: a stock no longer in use i.e. outdated 

Ordering cost: the cost incurred in placing the order up to the point of receiving the goods into the warehouse

Overtrading: This is a situation whereby a company performs excessive business operations than its capital can cope with. 

Profitability: this is the ability to sell goods and services above costs and earn reasonable returns on capital employed. 

Raw Material: these are those inputs that are converted into finished goods through the manufacturing process.  

Re-Order Level: it is a fixed point between maximum and maximum stock levels where requisitions are raised for new purchases. 

Shortage Cost: these are costs incurred when customers demand cannot be met because the tock is exhausted. 

Under Trading: this is a situation whereby a company has much funds than necessary.    

.

THE IMPACT OF INVENTORY CONTROL ON THE PROFITABILITY OF MANUFACTURING COMPANIES (A CASE STUDY OF NIGERIAN BREWERIES PLC)



TYPE IN YOUR TOPIC AND CLICK SEARCH.






RESEARCHWAP.NET

Researchwap.net is an online repository for free project topics and research materials, articles and custom writing of research works. We’re an online resource centre that provides a vast database for students to access numerous research project topics and materials. Researchwap.net guides and assist Postgraduate, Undergraduate and Final Year Students with well researched and quality project topics, topic ideas, research guides and project materials. We’re reliable and trustworthy, and we really understand what is called “time factor”, that is why we’ve simplified the process so that students can get their research projects ready on time. Our platform provides more educational services, such as hiring a writer, research analysis, and software for computer science research and we also seriously adhere to a timely delivery.

TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.net is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.net" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.