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EFFECT OF INVENTORY PLANNING AND CONTROL ON A FIRM’S PROFITABILITY
1.2 STATEMENT OF PROBLEM
Empirical research has shown that the study of inventory control or administration started late, unlike the study of other fields of human endeavour. Every year firms prepare and implements one type of economic policies/budget or another whereby a large sum of money is spent on acquisition of materials without adequate planning and control. At the same time, the main objective of business is profit making. But the inability of a firm to achieve profit is a signal that something is wrong somewhere. The profit level of any firm depends on its level of cost, which cost of inventory is a part of. Increasing operation cost and low profit level derives from keeping excess inventory as well as shortages from under stocking. It is against this backdrop that the researcher attempts to examine the effects of inventory planning and control on firm’s profitability.
1.3 OBJECTIVE OF THE STUDY
The overall objective of this research project is to examine the effects of inventory planning and control on firm’s profitability. In other to achieve this objective, the researcher intends to:
- Determine the Economic Order Quantity of Nigerian Brewery Company.
- The effectiveness and efficiency of inventory control policy
- Examine the relationship between inventory level and its profitability
1.4 RESEARCH QUESTION
This study will answer the following research questions which form the basis of the study and provide information required to know the effects of inventory planning and control on a firm’s profitability. Thus:
- What is the relationship between economic Order Quantity of Brewery company in Nigeria and profit level?
- How effective and efficient are the inventory planning and control policy of Brewery company?
- What is the relationship between Nigeria Brewery company’s inventory level and sales level?
1.5 RESEARCH HYPOTHESIS
The following hypothesis will be tested in the study.
- Ho. Economic Order quantity is not positively related to the level of profit.
- Ho. There is no significant relationship between inventory and sales level.
1.6 SCOPE OF THE STUDY
This research project will specifically dwell on the effects of inventory planning and control on a firm’s profitability. It examines the effectiveness and efficiency of inventory planning and control as well as its effects on firm’s profitability. This study will be carried out based on the data from Nigeria Brewery Plc and Guinness Nigeria Plc. The study covers nine (9) years activities of Nigeria Brewery Plc and Guinness Nigeria Plc from 2005 – 2013.
It is hoped that the findings of this study will be able to provide insight into the effects of inventory planning and control policies of other firms in Nigeria as it relates to profitability.
1.7 SIGNIFICANCE OF THE STUDY
Inventory constitutes a bulk of the operating cost of any manufacturing company and consequently affects the growth and earning of shareholders. Keeping inventory of any kind requires a systematic handling, particularly in this era of economic instability.
The importance of inventory planning and control cannot be overemphasized because; effective inventory planning and control will greatly reduce operating cost. In the same direction production process of the company will flow smoothly and sufficient goods will be available to meet consumers demand.
The significance of this study lies in its usefulness to business owners and managers in formulating inventory plans and control policies.
It will also form part of the body of literature on inventory planning and control.
This study is the basis for the award of Bachelor of Science degree to the researcher.