EFFECTIVE INVENTORY CONTROL AS A MEANS OF IMPROVING AN ORGANIZATION IS PERFORMANCE
ABSTRACT
This research project is on effective inventory control as a means of improving and organizations performance. A case study of NBC Plc. The research was prompted by the researchers believe of the indispensable role an inventory that is properly controlled can play in gearing up the profit of an organization in any given accounting period with the increasing highcost of production attributable to scarcity of raw-material. It has therefore become necessary that an examination be made on the classification of inventory and the proper way to control and stock raw-materials. A detailed analysis of how inventories are classified, controlled and the cost of keeping inventory were studies by the researcher.
CHAPTER ONE
INTRODUCTION
Inventory control refers to the management function concerned with the acquisition, storage, handling and usage of inventory so as to ensure the availability of inventory when needed, provide adequate cushion for contingencies and deriving maximum economic benefits and at the same time minimizing wastage and loses. Independently, inventory control can be defined as a quantity of goods or materials in the control of an enterprise and held for a time his relatively idle or unproductive state, awaiting its intended use or sale. It is equal identified as stock on hand at a given time. The type of inventory items consumed in the normal functioning of an organization that are not a part of the final product. They include toiletries and pencils:
(b) Raw materials – Inputs into the production –process that will be modified or transformed into finished goods.
(c) In process goods – Partially completed final product that are still in the production process
(d) Finished goods - Final products available for sale, distribution or storage, more over, in the administration of the inventory of an organization the following question should always be remembered:
(i) What is the optimum amount of inventory to carry?
(ii) What is the economic tool size for an order?
(iii) What is the record system for showing the status or inventory at hand?
Control is necessary so as to minimize cost and at the same time keep our services good enough so that we do not lose business. But the control and maintenance of inventory is a problem that is common to organizations in different sectors of the company. Inventory problem have proliferated as technological progress ahs increased the organization ability to produce goods in a greater quantities and at a taster rate. Cash invested in inventories could be used some where else for profit making, debt servicing or dividend distribution. Management is therefore becoming increasingly aware that the overall efficiency of company’s operation is directly related to inventory situation existing within the company. The real problem therefore has been in the determination of the inventory level at which money invested in inventory will produce a rate of return higher than it would it. It has been invested in some other areas of the business. It must not be overlooked that some problems associated with inventory management are created by lack of effective and efficient inventory management arising mainly from the management inability to identify the proper inventory control strategy to be adopted, or even where identified, the application is often inadequate.
1.1 BACKGROUND TO THE STUDY
Inventory control is a function that is very vital and of great significant to any king of organization. It is not peculiar to only the manufacturing organizations, but also necessary to service- oriented organization such as banks schools hospitals, each at these institutions still requires some amount of inventory to stock and control so as to minimize overhead costs and improve performance nevertheless, the primary focus in this protect will be on production cum marketing oriented organization. Raw materials inventory is the heart of any manufacturing company since no production could take place without them, so their effective control should be a significant factors in the management of materials.
1.2 PURPOSE OF THE STUDY
Different inventory control problems are being encountered by different organization effective inventory control can be achieved by the selection and adoption of an inventory control system that will result to the much needed improvement in the organizational performance. This research therefore aims at:
(a) Finding out the extent to which an efficient inventory control system can contribute in improving the general performance of an organization.
(b) Identifying some of the factors militating against a thorough adoption of an effective control system of inventories in an organization.
(c) Presenting ways through offering of suggestion and recommendation as to how best to go about ensuring that an effective inventory control system is a adopted and practiced in an organization like Nigeria Bottling company Plc. The research will however not lose sight of acquisition problems of raw materials and how best to solve it.
1.3 SIGNIFICANCE OF THE STUDY
Inventory control is a function that is very important and of great significant to any kind of organization. It is not peculiar to only the manufacturing organizations, but also necessary to service oriented organizations such as IMT Enugu, Union Bank Plc etc. The study will place the stock mange on a better rooting to actually know the cost of keeping inventory and how to avoid it. The study will also teach readers on how to control inventory for effective and efficient operation of organizations activity, and when this happens detective / obsolete products will not be passed into the society for consumption.
1.4 STATEMENT OF THE PROBLEM
The issue of failures, poor quality product out of stock, unnecessary delays and in extreme cases shut – downs in some organizations can be attributed to non-existence of effective inventory control system. Most managers are ignorant of inventory listed circumstances. A few of them who are aware of the usefulness of stock control excel in their various business. Inspite of these, effective inventory control has not been without a lot of problems as observed by the researcher as follows:
(1) Most firms have no clearly defined inventory control system.
(2) Most firms does not have enough money for keeping reasonable inventory.
(3) Most organizations have little or space for inventory. This affects the number of products to be produced and stocked.
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