Abstract

The purpose of the study was to establish the relationship between inventory management and its impact on the performance of quoted manufacturing companies in Nigeria basing on the following objectives; to determine approaches to inventory management used by manufacturing firm, to find out the Inventory costs incurred in procurement process in Manufacturing firm, and to find out the relationship between approaches of inventory management and financial performance of Manufacturing firm. 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 selected manufacturing firm do not pay maximum attention to those inventories whose value is highest, all store staffs of Manufacturing firm are not highly skilled, it experiences under stocks situations, and gets damaged goods from its stored.  Besides that Manufacturing firm 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 Manufacturing firm should forecast market for its products so that it stocks enough inventories to avoid under stocks and reduce on damaged inventory.

CHAPTER ONE

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 Manufacturing firm company Ltd, medium size firm of building and civil engineering contractors as the case study.

Manufacturing firm 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 3^rd 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,  Manufacturing firm lost a number of inventory during production process. This could be partly attributed to poor inventory management. The researcher therefore wants to investigate the relationship between inventory management and performance of manufacturing Company.

1.3 OBJECTIVES OF THE STUDY

The purpose of the study was to establish the relationship between inventory management and its impact on the performance of quoted manufacturing companies in Nigeria)

1. To determine approaches to inventory management used by manufacturing firm.
2. To find out the Inventory costs incurred in procurement process in manufacturing firm

iii. To find out the relationship between approaches of inventory management and financial performance of quoted manufacturing firm

1.4 RESEARCH QUESTIONS

1. What are the approaches to inventory management used by quoted manufacturing firm?
2. What are the inventory costs incurred in procurement process in manufacturing firm?

iii. What is the relationship between approaches to Inventory management and Financial Performance of Manufacturing firm?

1.5 Scope of the Study

The study  was carried  out at  selected manufacturing firm, at its manufacturing plant located. Uyo, Akwa Ibom State. Nigeria

The study mainly focused on materials control and performance of construction companies in Nigeria. It evaluated the procurement, handling, storage and stock taking processes. It    further  examined  the influence of lack  of  efficient  materials  control  techniques  on the collapse  of  infrastructures.
1.6 SIGNIFICANCE OF THE STUDY

(i) The study is to  help  staff members of Manufacturing firm reveal  the impact  of materials  control on the performance  of  construction  companies in Nigeria,  and the  researcher  hopes  that it will help  the  management  and Technical  personal  to  employ  effective materials control  techniques in order  to improve on their  construction  works.

(ii) The study is to add knowledge to the existing literature about material control and performance of construction companies in Nigeria.

(iii) It is to lead to the ward of a degree of Bachelor of commerce degree Makerere University, to the researcher.