Introduction
1.1 Background Information
Inventory Management is indispensable in any organization. A greater number of medium scale enterprises engage themselves in medium production and marketing activities for which a relatively large quantity of factor input and outputs are involve like every other business units, a medium scale enterprises require materials for the conduct of its business activities. By material here, we refer to anything that can be stored stocked or stock filed. It includes all commodities that are consumed in the process of production.
Basically, business materials are classified whose consumption may be identified with specific production unit and which become a part of the fished product. Direct materials include not only the start of the production but also all of the following;
Any material used in production process but wholly consumed or lost in production process e.g. fertilizer used in growing plant.
Any partly or fully finished component assembled into financial product e.g. radio and car batteries assembled into the completed car.
Any material entering into production after the initial stage example glazing in the production of cookery.
Indirect materials are those materials, which cannot be conveniently identified with individual cost unit. These materials are generally in expensive and do not physically become a part the finished products e.g will and grease for lubricating machines coal etc.
Inventory management/control may be defined as storage and usage of materials in such a way as to maintain and even flow of production and at the same time avoiding excessive investment in inventories. Efficient material control cuts out losses and wastes of materials that otherwise pass unnoticed. Thus an efficient system of inventory management should be comprehensive enough to cover purchase system, storage system issue to production and determining stock level for each item of materials.
Given the fact 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 is traditionally faced with the onerous problem of inventory management, it then calls for the establishment of sound cost accounting system to which cost of material inflow and outflow would be kept within the confine of budgeted plan towards the attainment of organization goal and objective.
This is so because quite often material is the largest single element of cost and as such an effective system of material of inventory control should bring about significant economy in material cost expenditure. Business inventory control should bring about significant economy in material cost expenditure. Business inventory is as much as cash, and any theft, waste or excessive use of material should have an immediate and direct loss or corporate fund and profit. It is therefore, the focus of this study to examine how inventory can be managed effectively in some selected organization in Akwa Ibom State.
1.2 Statement Of Problem
Any enterprise wishing to exercise maximum control of its material recourses is always confronted with problem of lack of precision in stock valuation and accounting procedures. This does not mean a lack of precision in actually counting the number of items in stock.
In virtually all medium scale business, errors in checking the quality of material in stock is very common. There will be human errors unless everything is doubt checked and the cost of doing this is often not worthwhile for items of small value. Then there will be defects in such aids to checking quantities as weighing machine or liquids measures, even though the margin of error may be very small. The real lack of precision exists in giving one indisputable value to the total quantity of stock.
Quite often than not, these common errors and lack of precision in material accounting influences the ascertainment of total material stock available to an organization and require for production process. It is against the background therefore that the study is conducted to examine the type of inventory management and control policies that are adopted by the surveyed medium – scale enterprise to facilitate effective material resource management towards the attainment of organization goals and objectives.
1.3 Objectives Of The Study
The objective of this study embraces the following:
- To assess the fundamental techniques of inventory management and control policies in manufacturing establishment in the state.
- To examine how effective the techniques adopted by these establishments have been in ensuring optimal inventory cost
- To ascertain the problems that confronts proper inventory management and control in medium scale enterprises in the state.
- To proffer recommendations for effective inventory management and control in medium scale enterprises.
1.4 Research Questions
- What are the techniques of inventory management and control policies used by your establishment?
- To what extent can you say that the techniques used by your establishments have been cost effective / optimal?
- What are the problems of inventory management and control policies that confront your organization?
- What recommendation are available towards enhancing effective inventory management and control in medium scale enterprises?
1.5 Statement Of Hypotheses
- HO: There is no significant effect of inventory management and control policies on the performance of medium scale manufacturing establishments in the state.
HI: There is significant effect of inventory and control policies on the performance of medium scale manufacturing establishment in the state - HO: The policies or techniques adopted by these establishments have not been cost effective in meeting organizational goals.
HI: The technique adopted by these establishments have been cost effective in meeting organizational goals.
1.6 Significance Of The Study
It is hope that the research will provide a yardstick for measuring the firm’s performance, productivity and effectiveness. This will be possible when the firm will appreciate the level of inventory that will minimize excessive tying up of working capital in form of inventory and balance this cost with a possible stock out cost.
Also, this study will add to the existing stock of literature on this field. In addition, this study will be useful to students of territory institution wishing to carryout further research in related topic in the future.
Moreover, it will provide a guide to management practitioners in the private and public sectors of the economy in their drive to exercise proper inventory management and control policies that would enhance effective and efficient material and non-material management towards the attainment of predetermined goals and objectives.
1.7 Scope And Limitation Of The Study
This work is designed to assess inventory management and control policies in Nigeria enterprise. A case study of selected medium scale enterprises in Uyo. The medium scale enterprises in Uyo under reference include Plasto Crown Nigeria Limited, Akwa Feeds Limited, Champion Breweries. Le Meridian Hotel and Golf Resort and Mr. Biggs.
The scope of this study would have been extended but for financial and time constraints. It is not worthy that the scope of inventory management cannot be discussed exhaustively in a hurry. Hence this research does not claim to have covered all nitty gritty of the subject matter. In the same vein, there is no claim that this piece of work contained hundred percent (100%) quality presentations on inventory management and policies in medium scale enterprises. This is due to the possibility of noticing obvious data collection problem, which may affect the quality of this work positively or negatively.
1.8 Definition Of Terms
Leader Procurement Time:
This is the period expressed in days, weeks and months between orderly and replenishment, is when the goods and available for use.
Economic order Quantity:
This is a calculated ordering quantity which minimize the balance of costs between inventory holding costs and re-order costs
Physical Stock:
This is the number of items physically in stock at a given time.
Free Stock:
This is the physical stock plus outstanding replenishment order minus unfulfilled requirements.
Buffer Stock or minimum Stock:
This is the amount of inventory or stock kept to the any delay in delivery time or to satisfy any increased demand during lead-time.
Maximum Stock:
A stock level selected as the maximum desirable which is used as an indicator to show when stocks, have risen too high.
Re-Order Level:
This level of stock at which a further replenishment order should be placed. The reorder independent upon the lead time and the demand during the lead time.
Re-Order Quantity:
The quantity of the replenishment order or this is the level of inventory at the quantity of items ordered at a time.
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