THE IMPACT OF INVENTORY CONTROL SYSTEM ON ORGANIZATIONAL PERFORMANCE (A CASE OF INTERCONTINENTAL DISTILLERS LIMITED)


Content

 

 

ABSTRACT

This research embarked upon in writing of this project topic: the Impact of inventory Control System on Organizational Performance in private and public corporation, a case study of intercontinental Distillers Limited (IDL) is the Central Gospel of the truth contain herein.

 

Inventory control system is an organizational adopted ways of controlling the business stock activities in the aim of meeting customer’s expectation and exceeding them operationally in the aim of reducing errors, waste, and scraps in order to maximize organizational profit. The problem encountered during investigation was time wasted seeking for an appointment with the company top strategists, stressful walking going from one library to another in the course of searching for materials for the project as books on inventory are said not to be common around.  There was some financial constraint along the line due to lots of money spent on transportation.

 

 

TABLE OF CONTENTS

                                                                                                PAGE(S)

Title Page                                                                                i

Certification                                                                            ii

Dedication                                                                              iii

Acknowledgement                                                                  iv

Abstract                                                                                  v

Table of Contents                                                                   vi

 

CHAPTER ONE

Introduction                                                                           1

1.1       Background of the Study                                             2

1.2       Statement of Problem(s)                                               3

1.3       Purpose of the study                                                    4

1.4       Research Questions                                                     5

1.5       Statement of Research Hypothesis                              5

1.6       Scope of the Study                                                       6

1.7       The significance of study                                              6

1.8       Limitation of the study                                                 7

1.9       Definition of Terms                                                       9

 

CHAPTER TWO

Literature Review                                                                   11

2.1       Historical Background                                                11

2.1.1  Historical Background of Intercontinental                

          Distillers Limited (IDL)                                                 12

2.1.2  Corporate mission                                                       13

2.1.3  Organizational Structure of Intercontinental            

          Distiller Limited                                                            14

2.2       Relevant variables of the model of theory                   14

2.2.1  Inventory Management                                                14

2.2.2  Economic Order Quantity (EOQ)                                16

2.2.3  Assumption of EOQ                                                     17

2.2.4  Functions of Inventory Control                                   18

2.2.5  Movement of stock and Records Keeping                   18

2.2.6  Issue of materials                                                         19

2.2.7  Materials Return Note (MRN)                                      19

2.2.8  Materials Transfer Note (MTN)                                    20

2.2.9  Organization of Stores                                                 20

 

CHAPTER THREE

Research Methodology                                                          22

3.0    Brief outline of the chapter                                          22

3.1    Research Design                                                           22

3.2    Area of Study                                                                23

3.3    Population of study                                                      23

3.4    Sample of Study                                                           23

3.5    Sampling Technique                                                     23

3.6    Instrumentation                                                           24

3.6.1 Design of Questionnaire                                              24

3.6.2 Administration of Questionnaire                                 25

3.6.3 Problem Encountered on Questionnaire Administration 25

3.6.4 Statistical Tools Applied                                              25

3.6.5 Validity of Research Instrument                                  27

3.7    Procedure for Data Collection                                     28

3.8    Procedure for Data Analysis                                       28

 

CHAPTER FOUR

DATA ANALYSIS (HYPOTHESIS TESTING) AND INTERPRETATION     29

4.0    Brief Introduction of the chapter                                29

4.1    Respondents characteristics and classification         29

4.2    Analysis of Questionnaire                                            32

4.3    Analysis of Research Questions                                  45

4.4    Decision Rule of Result                                                47

 

CHAPTER FIVE

5.1       Summary of Study                                                       49

5.2       Summary of Findings                                                   49

5.3       Conclusion                                                                   51

5.4       Recommendation                                                         52

5.5       Suggestion for further studies                                     53

Bibliography                                                                 54

          Questionnaire

          Appendix


CHAPTER ONE

 

INTRODUCTION

          In the past years in Nigeria, business system were usually a wasted and installed with the objective of getting work done by the cheapest, quickest and unscientific method available.

          The prime objective of every business is to achieve result whether means justifies the end or not.

          Today, whilst these objectives have not been lost sight of it has been realized, the establishment of a system whish tends to affect and automatically corrected the system is imperative. It has revealed that the establishment by piece meal methods of uncoordinated work processes ultimately neither efficient nor cheap.

          Inventory control is vital element in the successful operation of any business enterprise whether the form is just beginning or is already producing and distributing goods to its customers, a planned and controlled approach to the problem involved is essential.

          Therefore, inventory control is an element of management tasks which involves the measurement and regulatory of stock activities performance of the enterprise (both raw materials and finished goods) to make sure that the objectives of the enterprise and the plans devised to attain them are accomplished efficiently and economically.

 

1.1       BACKGROUND OF THE STUDY

            Inventories refer to stock of items used within the production system or in the operation of business among which are: raw materials, work in progress and finished goods.

          Also, inventories are current assets and relate to a specific accounting period in which their use should be much as possible be regulated to the period to which they relate.

          It is common to loose some of them by way of obsolescence, theft, physical deterioration and damage. Owing to all, these assets must be well managed to ensure that only the required quantities are in hand and that they are well stored and safety transferred into and within the organization.

          Therefore, control and management of inventories is a crucial factor in the success or failure of both manufacturing and non-manufacturing organizations. For example, insufficient inventory can seriously disrupt the production distribution circle that is so crucial to survival of all manufacturing organizations. On the other hand, excessive stocks can cripple a firm cash flow and thus endanger its liquidity positions. As such the idea of a business organization is therefore to strike a balance between carrying too much stock and carrying too little. This is the essence of inventory control.

          Therefore, it is in recognition of this fact that the researcher chooses this topic THE IMPACT OF INVENTORY CONTROL SYSTEM ON ORGANIZATIONAL PERFORMANCE.

 

1.2       STATEMENT OF PROBLEM(S)

The success or failure of any manufacturing organization is a function of the management and control of resources available for it under normal production circumstances.

          The frequent management review programme pervading the whole sectors of Nigerian economy has seriously affected the manufacturing industry.

          The problems posed by these incessant review programmes tend to inhibit continuity in the corporate policies of such organizations.

          Therefore research has shown that the causes of these review programmes can be traced to the under listed as the statement of problem of the study:

i)             Lack of the needed expertise within the industry

ii)           Inability of policy makers to establish and facilitate and inventory management and control system.

 

1.3   PURPOSE OF THE STUDY

          The main purpose of this study includes:

i)             To appraise the various sources of supply available to a firm so as to select the best or right source(s)

ii)           To evaluate the necessary skills for stores staff and to consider various opinions on the location and layout of stores

iii)          To examine various stores and to evaluate the skills required of the operators

iv)          To examine various stock level, evaluate how to derive these levels and the principle underlie each level

v)            To appraise the various principles connected with the movement of stock within an organization

vi)          To highlight the disparities in stock taking and how to bridge the gap

vii)        To examine various limitation to effective stock control and how to minimize the limitation.

For the above purpose to be achieve, the researcher hopes to determine the Constituents of the cost applied to goods sold and goods on hand at the end of inventory measurement procedure of deteriorating goods whose values are less than their cost and to use the matching principle of cost with revenue to determine the periodic profitability of the firms under study.

1.4       RESEARCH QUESTIONS

Some of the relevant research questions applicable to the effectiveness of Inventory control system includes the following:

1)          Does your organization place a great emphasis on store management?

2)          Does your organization experience stock out of materials or products?

3)          Does an effective inventory control system contribute to mass production?

4)          What factor enhances stock control policy in your organization?

5)      Does inventory control and continuous or constant production have a relationship in your organization?

 

1.5       STATEMENT OF RESEARCH HYPOTHESIS

a)           Effective inventory control has no relationship whatsoever with constant production in an organization.

Null Hypothesis (Ho)

 

b)           Effective inventory control has a relationship with constant production in an organization.

Alternative Hypothesis (Hi)

1.6       SCOPE OF THE STUDY

An attempt has been made to objectively touch those key areas considered important in stock control. To this end, many establishment that keep materials for one purpose or the other will find the work useful.

          The scope of the study then covers:

i)             delivery of stock to stores and proceeds logically up to stock taking at the end of the year

ii)           The stores planning and layout are also considered.

Usually a project or research suppose to cover a wider scope than this and most especially the topic chose which suppose to include more functions especially purchasing functions.

          However, due to insufficient time, coupled with financial constraint and look warm attitude on the part of respondent, this research scope will be limited to the listed above.

 

1.7       THE SIGNIFICANCE OF STUDY

The significance of this study includes the following:

a)           To bring into focus of management (both the potentials and substantial) the relevance of stock control for any successful manufacturing company

b)           To reveal the technicalities involve in keeping of stocks and therefore the need to employ the service of an experience store-keeper

c)            To make a recommendation as to the appropriate tools to apply to have effective stock control. More so, this will provide a penance to the issues of poor store-keeping which lead to:

i)             Much capital tied down, lead to liquidity problems

ii)           Stock-out cost lead to loss of scale and goodwill.

d)           To review the implication of:

i)             Capital tied down

ii)           Under or over stocking of materials

iii)          Stock-out cost

e)            To review the risk of loss due to:

i)             Falling prices

ii)           Spillage, theft, breakages etc

iii)          Deterioration and obsolescence

f)             Provide solution for the location stores

g)            To provide other information and explanation as may be necessary for management to plan and maintain effective stock control in order to achieve an uninterrupted production in the company.

 

1.8       LIMITATIONS OF THE STUDY

          Certain limitations that were encountered in the course of this study include the following:

 

1.8.1 COST IN TERM OF:

1)           TIME: - A lot of time was spent seeking for appointment with the company to management managers for the case study in dealing with the given study work to be submitted.

2)           MONEY: - Fund was not enough for certain requirements of the study such as transportation to the head office at Ikeja, Lagos. Purchase of stationeries, printing and binding of materials for the research work. The reason for this is evident in the ever increasing general price of goods and services in the economy.

 

1.8.2 AVAILABILITY OF DATA

Enough data was not made available for the case study due to policy of confidentiality maintained in keeping some of the data needed. More so, it was difficult to gain the attention of the personnel concerned as they had to give priority to their finding duty.     

1.9       DEFINITION OF TERMS

Inventory control is the utilization of stock of items used within the production system or the operations of business in an orderly and efficient manner, ensure adherence to management policies, safeguarding the assets and secure as far as possible the completeness and accuracy of the inventory records among which are:

a)      RAW MATERIALS: - Materials of the appropriate quantity and specification required for the production of goods.

 

b)      WORK-IN-PROGRESS: - Materials which are still under processing.

 

c)      FINISHED GOODS: - Materials that has been processed and is in conformity with the set standard.

 

INVENTORY CONTROL LEVELS    

d)           MINIMUM STOCK LEVEL: - Level below which stocks should not be normally allowed to fall.

 

e)           MAXIMUM STOCK LEVEL: - Level above which stocks should not normally be allowed to rise beyond or above.

 

f)             RE-ORDER LEVEL: - Level at which to initiate the purchase order for fresh supplies of materials.

 

g)           RE-ORDER QUANTITY: - Quantity of the replenishment order.

 

h)           LEAD OR PROCUREMENT TIME: - Period of time between ordering and replenishment.

 

i)             DORMANT STOCK: - Materials which presently are in no demand.

 

j)             OBSOLETE STOCK: - Materials for which are no longer in demand.

 

k)           STOCK TURN OVER: - Ratio of cost of materials consumed to the average stock held during the period.

 

 

 

 

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