The impact of inventory management and control on performance

Project Abstract

Inventory management and control play a critical role in the overall performance of businesses across various industries. Efficient inventory management practices can lead to improved operational performance, increased profitability, and customer satisfaction. This research aims to explore the impact of inventory management and control on performance in the context of both manufacturing and service sectors. The study will investigate the relationship between inventory management practices such as demand forecasting, ordering policies, inventory turnover, and performance metrics including on-time delivery, cost efficiency, and revenue generation. By analyzing these factors, the research seeks to provide insights into how effective inventory management can enhance organizational performance. Through a comprehensive literature review, this research will examine the existing theories and empirical evidence on inventory management strategies and their impact on business performance. Various inventory control models and techniques will be evaluated to determine their effectiveness in optimizing inventory levels and meeting customer demand while minimizing costs. Additionally, this study will utilize quantitative research methods to collect and analyze data from a sample of companies operating in different sectors. By conducting surveys and interviews with managers and employees involved in inventory management, the research aims to identify best practices and challenges faced in managing inventory effectively. The findings of this research are expected to contribute to the existing body of knowledge on inventory management and its implications for organizational performance. Practical recommendations will be provided to help businesses improve their inventory control processes and ultimately enhance their competitiveness in the market. Overall, this research seeks to highlight the importance of effective inventory management and control in driving overall business performance. By identifying key factors that influence inventory management success and performance outcomes, organizations can develop strategies to optimize their inventory practices and achieve sustainable growth and success in today's dynamic business environment.

Project Overview

<p> <b></b></p><p><b><b>INTRODUCTION</b></b></p><p><b><b></b></b></p><b><b><p><b>1.1 &nbsp; &nbsp; <br></b><b>Background<br>of the study</b></p><p><b></b></p><b><p>&nbsp;Inventories constitute the most significant part of<br>current events of a large majority of companies in Nigeria and indeed many<br>other part of the world. Because of the large size of inventories maintained by<br>firms, a considerable amount of fund is required to be committed to them.<br>Therefore, the efficient and effective management of inventories becomes<br>imperative in order to achieve unnecessary turnover or to minimize the cost<br>associated with keeping inventories. The neglect of inventory management and<br>control by a firm will amount to jeopardizing its long run profitability and<br>may even cause the firm to fail ultimately. Inventory is defined as the stock<br>of any item or material used in an organization. Therefore, an inventory<br>management is the set of policies and control that monitor levels of inventory<br>and determines the following:-</p><p>i. &nbsp; &nbsp; &nbsp;What level should be<br>maintain</p><p>ii. &nbsp; &nbsp; When stock should be<br>replenished.</p><p>iii. &nbsp; &nbsp;How large order should be</p><p>However, inventory can include input such as human<br>resources, financial, equipment e.t.c and output such as parts or component. It<br>is possible for a company to reduce its level of inventories to a considerable<br>degree without any adverse effect on production and sales by using inventory<br>planning and control techniques. The reduction in excessive inventory carries a<br>favorable impact on company profitability (Pandey 1999) in doing this however,<br>care should be taken to avoid under stocking which directly affect production<br>causing stoppage, loss of sales, loss of good will. etc. Inventory forms a link<br>between production and sales of a product. A manufacturing company must<br>maintain a certain level of inventory in the form of raw materials, work in<br>progress and finished goods. Raw materials inventory gives the firm flexibility<br>in its purchase, without it, a manufacturing company must exist on a hand-to-<br>mouth basis buying raw materials in keeping with its production schedule.<br>Work-in- progress are items of stock that are subjected to further processing<br>to produced the finished product. Finished goods inventory allows the firm<br>flexibility in its production scheduling and in its marketing thus there is on<br>incentive to maintain large stocks of all three types of inventory. In an<br>inflationary environment like Nigeria, there is the need to adopt a realistic<br>inventory valuation method in order to give correct value of inventory in the<br>profit and loss account and in the balance sheet which would have otherwise<br>show an appropriate financial position of the organization and thus negating<br>the purpose of accounting which is the provision of accurate financial<br>information to investors, shareholders, management, government and her agencies<br>and other related interested parties in order to assist them in taking decision<br>about the organization. It is in view of this that the need arises for an<br>appropriate management and control measure to maintain the most accurate level<br>of stock that will assist management of the organization carryout business in<br>such a way that it does not portray the organization in bad shape.</p><p><b>1.2 &nbsp; &nbsp; <br></b><b>STATEMENT<br>OF THE PROBLEM</b></p><p><b></b></p><b><p>The wide distance between the source of raw material and<br>factories in Nigeria today has posed a great problem to management. Thus the<br>management may not predict with certainty to delivery date of materials. How<br>then does the management ensure that there is no hitch and delay in the supply<br>of raw material to satisfy their day to day requirements without necessarily<br>keeping excessive stock of raw materials and finished goods which represent<br>investment from which no return is expected immediately? In line with this, the<br>major problem face by management is the determination of what stock to be kept,<br>when to reorder, of what cost to reorder, what the production level should be,<br>how work in process and stages involved should be controlled, movement of<br>finish goods from point of production into the market. The disadvantages<br>associated with huge investment in inventory (tying down of capital, increase<br>in holding/carrying cost etc) act as a detriment in management in committing<br>huge sum of funds in inventory. Conversely making little investment will be<br>disastrous as it will lead to frequent stock out and consequent disruption of<br>production system and incurring additional cost resulting from frequent<br>ordering. Since no company especially a<br>manufacturing company can operate without keeping stock, it is necessary to<br>check the occurrence of pilferage depletion, damages, breakages, obsolescence<br>etc. among other things.</p><p><b>1.3 OBJECTIVE OF THE STUDY</b><b></b></p><b><p><b></b></p><b><p>The primary objective of this research work is to consider<br>inventory control system as described and discussed by different authors. This<br>will be taken as a standard against which the inventory system of the company<br>under study will be appraised to determine its efficiency and suitability in<br>the peculiar environment it operates.</p><p>The objectives of this study include: &nbsp;</p><p>1. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;To<br>determine an optimum level of inventory to be maintain by the company under<br>study.</p><p>2. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;To<br>assess and highlight the different methods of inventory planning, control and<br>valuation and the most appropriate one for a manufacturing company.</p><p>3. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;To<br>highlight the need for and nature of inventory.</p><p>4. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;To<br>make viable recommendations on the basis of the outcome of the research.</p><p><b>1.4 RESSEARCH HYPOTHESES</b></p><p><b></b></p><b><p>For<br>the successful completion of the study, the following research hypotheses were<br>formulated by the researcher; </p><p><b>H0: </b>there<br>is no level of control to be maintain on various<br>types of stock</p><p><b>H1: </b>there<br>is level of control to be maintain on various<br>types of stock</p><p><b>H02: </b>there<br>are no different methods of inventory planning, control and valuation and the<br>most appropriate one for a manufacturing company<b></b></p><p><b></b></p><b><p><b>H2: </b>there<br>are different methods of inventory planning, control and valuation and the most<br>appropriate one for a manufacturing company</p><p><b>1.5 SIGNIFICANCE OF THE STUDY</b></p><p><b></b></p><b><p>The significance of a proper and efficient inventory<br>control and management cannot be over emphasized. Its effect is not only on the<br>individual company but on the economy as a whole.</p><p>This study is meant to find solutions to the itching<br>problems of Tower Galvanized Products (TGP) Nigeria limited Kaduna in inventory<br>management and control. The study will also be of immense benefit to the owners<br>and management of the company under study, their creditors and prospective<br>shareholders who might wish to invest in the company. This is so because<br>managing inventories efficiently and effectively will help the company to avoid<br>unnecessary investment. It helps the management in quick and accurate decision<br>making. It will also help to build-up the goodwill of the current asset of many<br>companies. Finally, the knowledge required from this study will broaden the<br>existing knowledge in this field and aid researcher in applying it to other<br>companies or organizations.</p><p><b>&nbsp;</b></p><p><b></b></p><b><p><b>1.6 SCOPE AND LIMITATION OF THE STUDY</b></p><p><b></b></p><b><p>This research work is focused on inventory<br>management and control in Tower Galvanize Product (TGP) Nigeria limited, Kaduna<br>during the year 2001-2006 as it affects the full implementation of the basic<br>concepts of inventory management. Associated issues like inventory<br>procurements, storage and physical distribution policy of the company will also<br>be examined. The researcher encounters some constrain which limited the scope of<br>the study;</p><p>&nbsp;<b>a)<br>AVAILABILITY OF RESEARCH MATERIAL:</b><br>The research material available to the researcher is insufficient, thereby<br>limiting the study</p><p><b>b) TIME:</b>&nbsp;The time frame allocated to the study does not<br>enhance wider coverage as the researcher has to combine other academic<br>activities and examinations with the study.</p><p><b>c) Organizational privacy</b>:<br>Limited Access to the selected auditing firm makes it difficult to get all the<br>necessary and required information concerning the activities.</p><p>&nbsp;<b>1.7<br>DEFINITION OF TERMS</b></p><p><b></b></p><b><p>– &nbsp; &nbsp; &nbsp; <strong>Inventory:</strong>&nbsp;This is<br>the list of items held in stock by a company at any particular time.</p><p>– &nbsp; &nbsp; &nbsp; <strong>Stock:</strong>&nbsp;This<br>consists of all goods and materials stored by an organization. It is a supply<br>of items which are kept for future used.</p><p>NB for the purpose of this research work, stock and<br>inventory are sometimes used interchangeably</p><p>– &nbsp; &nbsp; &nbsp; <strong>Lead time:</strong>&nbsp;This is<br>also known as reorder period or delivery. It is the period of time between<br>ordering and reception of goods ordered for.</p><p>– &nbsp; &nbsp; &nbsp; <strong>Re-order level:</strong>&nbsp;This<br>is the point at which it is necessary to initiate purchase requisition for new<br>supply of materials.</p><p>– &nbsp; &nbsp; &nbsp; <strong>Minimum stock level:</strong>&nbsp;This<br>is the level below which stocks should not normally be allowed to fall. It can<br>be said to be buffer or safety stock which makes allowances to cover for error<br>in forecasting the lead time or the demand during the lead time.</p><p>– &nbsp; &nbsp; &nbsp; <strong>Maximum stock level:</strong>&nbsp;This<br>is the level above which stock should not normally be allowed to rise.</p><p><b>1.8<br>ORGANIZATION OF THE STUDY</b></p><p><b></b></p><b><p>This<br>research work is organized in five chapters, for easy understanding, as follows</p><p>Chapter one is<br>concern with the introduction, which consist of the (overview, of the study),<br>historical background, statement of problem, objectives of the study, research<br>hypotheses, significance of the study, scope and limitation of the study,<br>definition of terms and historical background of the study. Chapter two<br>highlights the theoretical framework on which the study is based, thus the<br>review of related literature. Chapter three deals on the research design and<br>methodology adopted in the study. Chapter four concentrate on the data<br>collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and<br>recommendations made of the study</p></b></b></b></b></b></b></b></b></b></b></b></b></b><br> <br><p></p>