THE IMPACT OF QUALITY CONTROL ON THE ORGANIZATION PERFORMANCE (A CASE STUDY OF GUINNESS NIGERIA PLC)
ABSTRACT
This research tends to examine the impact of quality control on the organization performance with reference to Guinness Nigeria Plc.
Survey research design was adopted and simple random sampling technique was employed in the selection of respondents.
Twenty four respondents were drawn from the population of staff of Guinness Nigeria Plc. the data collected from the respondents were presented on table in percentile. Two hypotheses were formulated and tested with the use of Chi-square analysis. The analysis resulted to rejecting the two null hypotheses and accepting the alternate hypotheses thereby concluding that an Increase in the level of inventory maintained by a firm will increase its operating cost. Also in Increase in the level of inventory will impair the liquidity of the firm.
Recommendations were proffered to Guinness Nigeria Plc.
TABLE OF CONTENT
Title Page
Certification
Dedication
Acknowledgment
Table of content
Abstract
CHAPTER ONE
INTRODUCTION
1.0 Background of the Study
1.1 Statement of the Problem
1.2 Purpose of the study
1.3 Relevant Research Question
1.4 Testable Hypothesis
1.5 Significance of the Study
1.6 Scope and Limitations of the Study
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
2.1.1 Sole Proprietorship
2.1.2 Partnership
2.1.3 The Joint Stock Company
2.1.4 Public Enterprise
2.1.5 Co-operating Society
2.2 Models and Theories Relevant to the Study
2.3 Current Literature Based on such of the
Relevant Variable of the Model/Theory
2.3.1 Strategic Environment Analysis
2.3.2 Handling Different Environment Condition
2.3.3 Historical Background of the Organization
Downstream Oil and Gas and Refining in Nigeria
2.4 Summary of Literature
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Restatement of Research Question and Hypotheses
3.4 Sample of Data
3.5 Methods of Data Collection
3.6 Sample and Data Use
3.7 Validity of Research
3.8 Analytical Procedure
CHAPTER FOUR
DATA PRESENTATION ANALYSIS AND INTERPRETATION
4.1 Introduction
4.2 Respondents Characteristics and Classification
4.3 Presentation and Analysis of Data According
To Research Hypothesis
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Summary of Findings
5.2 Conclusion Drawn from the Findings
5.3 Suggestions for Further Studying
Bibliography
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In manufacturing companies such as in the brewery industry, inventories constitutes over sixty percent of the cost of production, showing the impact of quality control of these companies. Inventories constitute the most significant part of current assets of a large majority of companies.
Guinness Nigeria is a member of Diageo plc, the worlds leading premium drinks business with an outstanding collection of beverages and alcohols brands across spirits, wine and beer categories such as Johnnie Walker, Smirn off, JYB Baileys, Diageo is a global company, trading in over 180 markets around the world.
Guinness Nigeria Plc is a foremost brewery and leader in the manufacturing sector of the economy. From little beginnings through trade importation and distribution in the 1940s and 1950s, the company built its brewery in Ikeja in 1962 to satisfy the astronomical demand for the product. Significantly, the brewery was the very first out of the British Isles and, indeed, the third Guinness brewery in the world.
Today, their portfolio includes acclaimed market leaders such as our flagship brand, Guinness Stout; Malta Guinness, the preferred Malt drink, Harp Larger Beer, noted for its distinct taste and value; Satzenbrau, the final word and Gordon's Park, an exotics ready to drink product.
In the discharge of its corporate responsibilities, Guinness Nigeria over the years has consistently focused on major support for the provision of good health care, water for rural communities, and support for sporting activities, education and philanthropy. Our eye Hospitals in Lagos, Kaduna and Onitsha, for instance, remain the bedrock of our commitment to the well being of Nigerians. The facilities enjoy annual subventions from the company in addition to new maintenance for the structures.
Similarly, the company through its brands supports various sporting activities throughout the country, such as the annual Malta Guinness National Handball Competition, the Premium Handball Tourney in Nigeria, the Kaduna Polo and the very popular Lagos State Principals Cup Football Competition. Guinness Stout supports the Intra-Club Table Tennis Tournament while the company suppo several Golf competitions, such as Ewekoro Blue Elephant and the Benin Club's Annual Tourneys.
Any company, which neglects the management of inventories will be jeopardizing its long-term profitability and may not succeed eventually. Therefore, there is every need for an effective quality control that involves the minimizations of a setof costs that increases with larger inventory holdings with a set of coststhat decreases larger order size. Statement of Accounting Standard (SAS 4) defined stock (otherwise referred to as Inventories) as items of values held for use or sale by enterprises and usually comprise of raw materials and supplies used in production, work-in-progress and finished goods.
Inventories could also be defined as an idle stock that awaits usage, consumption or sale. It is called idle because it is not yet consumed or used for the purposes in which it was held. The various forms in which -inventories exists in manufacturing company are:
Raw Materials: These are those primary materials purchased or produced in natural or manufactured condition. They could be those units that purchased and stored for future production.
Work-In-Progress: (W-I-P): These are partly finished goods and materials, subassemblies etc, held between manufacturing stages.
Finished goods: These are completed products ready for sale or distribution.
For the purpose of this study, another category of Inventory will be recognized. BULK materials, terms often used to describe materials not in limits from material not measurable expect to weight of volume e.g. sorghum.
1.2 STATEMENT OF THE PROBLEM
We carry out inventory analysis to know the optimum stock of items to be held per/time, to avoid the problems of over or under stocking and consequently minimize the total the impact of quality control organization performance.
Despite the marvels of computers, automation and scientific management, the manufacturing process does not still function quickly enough to avoid the need for inventories. Inventories must be maintained so that the customers are serviced immediately or attest quickly enough so that he does not turn to another source of supply. In addition, production cannot flow smoothly without having inventories.
Inventories are the most volatile current assets. This makes it the most difficult task to Auditors to verify. When they are not well accounted for, the whole Financial Statement for that period would not show true and fairview of the operations of that company. Inventories are subject to perish, due to evaporation, deterioration, obsolesce etc and thinking of excessive stock-in-store, they could be stolen and wasted by workers erroneous.
In summary, the firm is faced with two conflicting:
1. To maintain a large size of inventory for efficient and smooth production and sales operations.
2. To maintain a minimum investment in inventories to maximize profitability. Therefore, the major problem is to obtain an optimum level that lie between excessive and inadequate inventories.
1.3 OBJECTIVE OF THE STUDY
According to Pandey, I.M. [1993], the aim of inventory management is to avoid excessive and inadequate levels of inventories and to maintain sufficient inventory for the smooth production and sales operation. More so, the objective of material management is to avoid the economic consequence of over stocking and under stocking.
The study will attempt to achieve the following:
a. To investigateand know whether the various techniques adopted in Inventory Management and how it help in minimizing the total cost of production involved in holding inventories and the production process as a whole with respect to Guinness Nigeria Plc.
b. To ascertain whether the company (Guinness Nig. Plc) operates a sound accounting system inventory control system.
c. To know, if this records can be relied upon to get detailed information as to the size of inventories (including inventories in transit) maintained by Guinness Nigeria Plc.
d. To discover the techniques adopted in the recording and documentation process and if there are loopholes in order to suggest possible corrective measures.
e. To know if there are cases of scrap materials defective and obsolete stocks and how these are dealt with in valuation, recording, sales and in relation to the total cost of production.
f. To know if there is maintenance -of an effective link between various departments associated with each class of materials or storage of production, industry lapse and suggest corrective measures.
g. To know if standards are set for materials acquisition, valuation and pricing. Identify any variance from actual and the implication of such variance.
1.4 SIGNIFICANCE OF THE STUDY
As a result of the time and cost constraints, of this study will be limited to the impact of quality control on organization performance in Guinness Nigeria Plc only as well as information gathered from secondary source of data.
The Financial report of five years will be used fro the purpose of this study i.e. 2000 - 2009. More so, it will cover all section of departments in the company witha particular attention to its accounts section, stores, production department, and issuing department.
1.5 RESEARCH QUESTIONS
In order to ascertain the extent to which Guinness Nigeria Plc has fully employed the tools of inventory management the following questions were asked.
1 How much shortage should be allowed?
2. What is the optimum quantity of items to order each time?
3. When should order be made?
4. What level should stock get down to [safety stock] before requisitions is placed?
These questions and more were answered on the course of conducting a research on quality control organizational. success in Guinness Nigeria Plc.
1.6 RESEARCH HYPOTHESIS
This study will attempt to show that:
Ho: An increase in the level of inventory maintained by a firm will not increase its firm operating cost.
Hi: An Increase in the level of inventory maintained by a firm will increase its operating cost.
Ho: An increase in the level of inventory will not impair the liquidity position of the firm
Hi: An Increase in the level of inventory will impair the liquidity of the firm.
1.7 SCOPE AND LIMITATIONS OF THE STUDY
The research would focus on the activities of Guinness Nigeria Plc., towards the impact of quality control on organization performance. The research covers the office at Oba Akran, lagos.
In the course of conducting this research work it is expected that the following will constitute impediments to the effective conduct of the study
a) Time constraint within which the study must be completed.
b) Financial constraint
c) Inaccessible and inadequate data
Nevertheless, I believe the above limitations will in no way affect the reliability and validity of the research study.
1.8 DEFINITION OF TERMS
STOCKOUT: It is a situation where an organization or company has insufficient materials required for production.
OVERSTOCKING: Over stocking is a term used to describe a situation where a business organization maintains more that necessary materials at any given time.
INVENTORY COST: The various cost associated with inventory. They include,
a. Ordering Cost: This is used in case of raw materials (or supplies) and includes the entire costs of acquiring raw materials.
b. Holding Cost: There are cost incurred for maintaining a given level or inventory at a given level in store.
c. Shortage Cost: These are the costs incurred when management runs out of stock, when the items are demanded.
d. Economic Order Quantity (EOQ): This is the basic inventory mode. It is the quantities of materials an organization will purchase at a given time in order to enjoy economic of scale i.e. transaction cost, bulk discount, ordering cost, holding cost etc.It could also be defined as the quantity to order at any given in order to have a balance effect of the variation cost of associated with inventory.
e. Lead Time: Lead-time which is sometimes referred to as procurement time is the period between ordering of the materials components and goods and the time this arrived in the organization.
f. Reorder Level: This is the point at which it is essential to initiate purchase requisition for fresh supplies of the materials. This point will be higher than the minimum stock level but lower that the maximum stock level.
Minimum Stock Level: The minimum stock level is the level below which stock should not be normally, allowed to fall as established by management. It is arrived at after considering lead time and average usage. It leads to stock out. If not maintained.
Safety or Buffer Stock: Safety stocks are some minimum or buffer inventory held as cushion against unexpected increase in use and or delay in delivery time.
i. Maximum Stock Level: Maximum stock level is the level above which stock should not normally be allowed to rise or is the planned level of inventory above which management will consider it as overstocking.
j. Free Stock: This is the physical stock plus all outstanding replacement order less unfilled requirements.
k. Physical Inventory: A systematic count of all goods, on hand followed bythe application of unit prices to the quantities counted and development of a value for ending inventories.
I. Store: Is a place specifically maintained for the purpose of keeping items purchased to be used later and those manufactured for sales.
m: Hedging: Hedging is the process of entering into future contracts to sell the commodity or some product derived from the commodity at a certainprice or to engage in a transaction that partially/fully reduces prior risk exposure.
n. Internal Control: This is the whole system of controls, financial or otherwise established by management in order to carry on the business of an organization in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of the records. The individual components of internal control system are known as "Control" of Internal Controls.
o. Ratio: A ratio is defined as the indicated quotient of two mathematical expressions "and as "the relationship between two or more things". In Financial analysis a ratio is used as an order or yardstick for evaluating the financial position and performance of a firm.
REFERENCES
Okoye, A. E. (1997): Cost Accounting: Management Operational Application United Press, Benin City
Campsey, B. S. and Eugene, F. Brigham (1989) Introduction to Financial Management (2nd edition) Bryda Press, ORLANDO
Pandey, I. M (1993): Financial Management (6th edition) Vikas Publishing House PUT..... India
Owler, I. W. J. and Brown (1980): Wheldon's Cost Accounting and Cost Method (4th edition) Macdonald and Evans Limited London.
Consultative Council of Accounting Bodies (1996)
Statement of Accounting Standard on stock (SAS 4)
Lucey, T. (1996): Management Accounting Printed by Ashford by Colour Press (4th edition)
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