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INVENTORY CONTROL TECHNIQUES AND ITS IMPACT ON THE PROFITABILITY OF MANUFACTURING INDUSTRY IN NIGERIA

ABSTRACT

The purpose and objective of this work is to examine the inventory control techniques in an organization, and its impact on the profitability of the manufacturing Industry in Nigeria. Asaba Aluminum and GBC Murphy Limited were used as case study. Inventory control is essential not only to manufacturing firms but also marketing and service firm: Data were obtained from primary. The primary data were collected through the questionnaires personal interviews administered on the respondents who are basically the staff of department relating to inventory control which are store department, purchasing/supplier department. The primary data were subjected to analysis with use of simple percentage frequency distribution. The key finding of this research work are inventory control techniques contribute substantially to the profitability of a firm. The researcher also discovered that finance is a limiting factor to the level of inventory control in an organization. The researcher concluded that well planned and effectively controlled inventory techniques can contribute substantially to a firms’ profit. It should also be noted that an efficient and effective inventory control techniques make possible smooth and efficient operations of an organization. The researcher recommends that inventory control techniques should upgrade from manual styles into computerized forms, rotation of inventory control staff to ensure integrity and appropriate guidelines should be put in place to avoid, excess stock, when to order and quantity to be ordered should be stated also.

 

CHAPTER ONE

1.1...

1.2     STATEMENT OF PROBLEM

Most companies, especially manufacturing companies now operate at lower capacity, hence they find it extremely difficult to control stock. Quite often management is faced with stock problem such as inadequate raw materials, obsolete materials, high storage cost etc. Each individual within a management group will answer the questions from his own point of view, what he thinks about inventory in isolation from other operation forgetting that inventory is not an end in itself but only a means to an end. From the above, it is apparent to management of manufacturing companies that efficient management of inventory is an important move in ascertaining profitability in the chain of business operations requiring exercise of considerable commercial and managerial skills and judgement. 

1.3     OBJECTIVE OF THE STUDY

The main objective of this study is to ascertain the relevance of an effective inventory control technique to the manufacturing industry and also its impact to the profit of the manufacturing industry.

The aims of the study are to:

  1. To find out whether the inventory control system of the manufacturing industry affects their performance in terms of profit.
  2. To determine whether the inventory control system adopted by the industry has helped to deal with inventory problem like stock out, production stoppage, stock pilferage, low sales.
  3. To help management of firms with information and suggesting ways to help management to control inventory efficiently and effectively.

1.4     RESEARCH QUESTIONS

The study was guided by the following research questions:

  1. Is there need for management inventory level?
  2. Does cost of transportation, storage and delivery charges include the purchase price to be used in stock valuation?
  3. Does rapidly changing prices for bought in stock affects stock valuation method adopted?
  4. Does high stock cost reduce profits?
  5. Is proper checking of goods purchases order done in terms of quantity, price and description?
  6. Are there inadequacies in the stock control system?.

1.5     RESEARCH HYPOTHESES

For the purpose of analyzing the data, the following hypotheses were tested:

Ho1:   Proper checking of goods purchased ensure conformity with purchase order in terms of quality, quantity, price and description is important even though suppliers are known with certainty.

Ho2:   High stock cost will bring about a reduction in the profit of manufacturing companies.

Ho3:  Stock out does not affect profit.

1.6     SCOPE OF THE STUDY

         Inventory control varies from industry to industry because of the nature of the industry and it is the nature of the business to determine the size and types of inventory control techniques to adopt. Therefore, it is practically impossible for the study to discuss inventory control of all firms.

         Consequently, the study is limited to the appraisal of inventory control techniques in the manufacturing industry (Asaba Aluminum manufacturing firm in Asaba and GBC Murphy Limited Asaba. This research work will use primary data (Quantative data) which was carried out on questionnaire that is administered to employee of Aluminium company plc and GBC Murphy limited. The research work will use qualitative data (Secondary data) which were collected from companies financial statement and business journals.

1.7     SIGNIFICANCE OF THE STUDY

         This study will be of great significance to Nigeria firms especially Asaba Aluminum Plc in Asaba and GBC Murphy Limited in Asaba and the general society.

  1. Asaba Aluminum and GBC Murphy Limited: This study will assist the management of these manufacturing industries in adopting ways of efficient inventory control.
  2. Organization: It makes suggestion on the improvement of inventory control techniques in organizations. This will no doubt enhance performance among these organizations.
  3. General Economy: The general economy is expected to benefit of the measure recommended. It is a basis to unearth certain  problem related to material management and inventory control and go a long way to enhance interest in new concepts approaches and philosophies aimed at better cost control over inventories.
  4. Students: This study will also be of immense benefit to students who are carrying out research in inventory control techniques in corporate organizations especially Asaba Aluminum Industry and GBC Murphy Limited.
  5. Consequently this study derives its significant from the attempt top added to existing literature on the subject.

1.8     LIMITATIONS OF THE STUDY 

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