The purpose of the study was to establish the relationship between inventory management and its impact on the performance of construction companies in Nigeria basing on the following objectives; to determine approaches to inventory management used by Niger pet construction, to find out the Inventory costs incurred in procurement process in Niger pet construction, and to find out the relationship between approaches of inventory management and financial performance of Niger pet construction The descriptive aspect of the research design was used in establishing the company performance and the analytical research design was used to establish relationship between inventory management and performance. The sample size of 30 was determined by formulae of Krejcie Morgan (1970). Data was both primary and secondary. Primary data was collected by the use of questionnaires and secondary data was got from reports, journals, and internet. Frequency tables, and graphs were worked out basing on the data entered into excel. In these frequency tables, and graphs analysis was done with a corresponding percentage. However statistical packages for social sciences (SPSS) were used to determine the relationship between the two variables. Findings revealed that Goods are not inspected on receipt, staff members of Niger pet construction do not pay maximum attention to those inventories whose value is highest, all store staffs of Niger pet construction are not highly skilled, it experiences under stocks situations, and gets damaged goods from its stored. Besides that Niger pet construction is faced with costs of checking on orders and m maintaining records of the entire process, handling costs. Nevertheless, there is a strong positive relationship between approaches of Inventory management and Financial Performance at Pearson correlation coefficient r= 0.794. It was recommended that Niger pet construction should forecast market for its products so that it stocks enough inventories to avoid under stocks and reduce on damaged inventory.
TABLE OF CONTENTS
TABLE OF CONTENT
Title page
Approval page
Dedication
Acknowledgment
Abstract
Table of content
CHAPETR ONE
1.0 INTRODUCTION
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research Hypotheses
1.5 Significance of the study
1.6 Scope and limitation of the study
1.7 Definition of terms
1.8 Organization of the study
CHAPETR TWO
2.0 LITERATURE REVIEW
CHAPETR THREE
3.0 Research methodology
3.1 sources of data collection
3.3 Population of the study
3.4 Sampling and sampling distribution
3.5 Validation of research instrument
3.6 Method of data analysis
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS AND INTERPRETATION
4.1 Introductions
4.2 Data analysis
CHAPTER FIVE
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendation
Appendixes
INTRODUCTION
1.1 Background to the Study
Inventory management involves the coordinating of materials availability, controlling, utilization and procuring of materials. Inventory management is the direction of activities with the purpose of getting the right inventory in the right place at the right time and in the right quantity and it’s directly linked to production function of any organization which implies that the inventory management system operated will affect the profitability of an organization directly and indirectly (Alm, 2000).
Inventories are the stock of raw materials, work in progress, finished goods and supplies held by a business organization to facilitate operations in the production process, (Pandey, 1995). Also if the company fails to manage its inventory efficiently, it is likely to face profitability problems (Block and Hirt, 1987). The goal of inventory management therefore is to provide the inventories required to sustain operations at minimum costs (Dickerson 1995).
Inventory management helps organization to establish the proper inventory levels through the economic order quantity; and to keep track of this level through inventory management system which many be manual such as two bin method and red line method, or computerized inventory management systems. Proper inventory managements also require an organization to undertake stocking and use appropriate method to value stock so as not to under or over state profits (Kotabo, 2002).
Companies incur substantial costs in the procurement and maintenance of inventories, which costs form a large portion of production costs. Inventory costs include: carrying costs such as storage and insurance; ordering costs like transporting and store placement; and stock out costs like redundancy and loss of sales. A company cannot achieve an outstanding performance without proper and efficient control of materials. Materials are as much as cash itself and any theft, wastage and excessive use of materials are of immediate financial loss and leads to poor performance of a company (Kotabo, 2002).
Laugero (2002) noted that Material control involved a systematic control and regulation of purchase, storage and usage of materials in such a way to maintain an even flow. In recent years, the construction industry has been facing a number of challenges especially in inventory management or material control, thus affecting the performance of most construction companies. There have been cases of materials overstocking which eventually get expired or out dated, under stocking lack of stock-taking theft of materials by workers and delays in deliveries of materials at the sites, among others
Inventory management can be done through introduction of different measures so as to prevent the company from incurring unnecessary losses made by different departments. Measures which can be put in place for example stock-taking which is the accounting of stock at every end of the month, so as to record the lost and available stock. Making proper supervisions on sites during construction of buildings so to avoid theft of materials by workers. The company should set up strict rules to procurement officers and store managers which they should follow during purchasing and storing of material so as to avoid loss of inventory in the Niger pet construction company Ltd, medium size firm of building and civil engineering contractors as the case study.
Niger pet construction has existed for over 10 years with the objective of maximizing profits and providing better services to customers at the right time. To date the company does not focus on how much of each inventory item a firm should hold in stock, how much should be ordered at a given time and at what point inventory should be ordered. This has greatly affected its production, sales and hence reducing on its financial performance (Audit Report 3rd October 2010). It’s therefore important for an organization to have a sound, effective and well-coordinated inventory management system because the business environment is rapidly changing, highly competitive and it drastically affects the performance of the organization.
1.2 STATEMENT OF THE PROBLEM
The over past years, construction industry has experienced a lot of challenges in Nigeria while trying to carry out its inventory management and material control processes, and As seen from Table 1 Niger pet construction lost a number of inventory during construction . This could be partly attributed to poor inventory management. The researcher therefore wants to investigate the relationship between inventory management and performance of Construction Company.
