Inventory Control and Profit Maximization in a Manufacturing Company

 – Inventory Control and Profit Maximization in a Manufacturing Company – 

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ABSTRACT

It has been generally accepted that for any organization to produce and satisfy its stakeholders, such organization must have good management team that manages the resources of the organization using some laid down rules. In manufacturing concerns, inventories constitute a greater proportion of assets.

The management of inventories usually involves a lot of problems which range from the right time to place order to maximization of profits for the stakeholders.

The objective of the study was to determine whether profit is maximized and cost minimized due to the application of the efficient inventory management.

To determine also whether manufacturing concerns in our country manage inventories effectively by using inventory management techniques e.g. Economic Lot Size, Just-in-Time etc.

Data were collected using questionnaire method, and were analyzed using chi-square (X2 ) Pearson product moment, correlation co-efficient (r) and regression analysis. The result shows that orders were placed at the right time and right quantity overcoming the setbacks of lead time.

The companies also minimize costs of holding inventories and maximize their profits. The findings also showed that manufacturing concerns in Nigeria meet the target requirement of their customers, stakeholders, and the society where they operate.

The research recommends that all staff of the manufacturing concerns should be made to have thorough knowledge of inventory management as this will enable them to work towards their stock protection and cost minimization.

The manufacturing concerns should also get the recent developed software on inventory management and use it to update their knowledge of inventory management on regular bases.

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TABLE OF CONTENTS

Title Page………i
Declaration……….ii
Certification ……iii
Dedication……………iv
Acknowledgements…….v
Abstract ….vi
Table of Contents……vii
List of tables………x

CHAPTER ONE: INTRODUCTION

1.1 Introduction……….1
1.2 Background to the study………2
1.3 Statement of the problem………4
1.4 Objectives of the study………….5
1.5 Research questions……..6
1.6 Statement of the hypotheses……..6
1.7 Significance of the study….7
1.8 Justification of the study…….8
1.9 Scope of the study……………8
1.10 Definitions of terms ………9

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction………11
2.1 Conceptual frame work……..11
2.2 Theoretical frame work….18
2.3 Literature on subject matter……21

CHAPTER THREE: METHODOLOGY

3.0 Introduction…….32
3.1 Area of study………32
3.2 Research design ………..32
3.3 Study population……..33
3.4 Sample size determination……….33
3.5 Instrument for data collection ………33
3.6 Procedure for data collection and data analysis………34
3.7 Limitations of the study……………..35

CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION

4.0 Introduction…….36
4.1 Data presentation…36
4.2 Data Analysis……..37
4.3 Findings of the study……………45
4.4 Discussion of the findings………48

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Summary of findings…..49
5.1 Conclusion..…………….50
5.2 Recommendations..……..50
5.3 Proposal for further studies…………51
References……………….52
Appendix…………………54

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INTRODUCTION

Every organization has its own purpose of operation and pre-determined goals and objectives to be accomplished in relation to the organization’s mission and vision statement.

The level at which goals or objectives can be actualized depends on the efficiency and effectiveness of operation and internal control Mgbonyebi and Umead (2008).

But for the goals of any organization to be achieved, such entity must observe some stipulated or laid down principles for its performance. When these rules are followed simultaneously, then the usefulness of such principle or concept will be achieved.

In general term, management has been recognized as the process of planning , organizing, direct and controlling business operation to ensure that states predetermined goals and objectives are accomplished Carter (2012).

Agagu (2009) defines management as a process which enables organizations to set and achieve their objectives by planning, organizing, and control their resources including giving the commitment of their employees (motivation).

According to Ama (2001) inventory is described as stock of goods a firm is producing for sales and the components that make up the goods.

Hilton (2004) defines inventory as an itemized list of goods (raw materials, finished goods and work in progress) which forms certain proportion of organizations’ investment. In recent years,

Inventory Management has attracted a great deal of attention from people both in academia and industries.

A lot of resources have been devoted into research in the inventory management practices of organizations. It represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company.

In the manufacturing companies, nearly 60% to 70% of the total funds employed are tied up in current 2 assets, of which inventory is the most significant component Carter (2002). Thus, it should be managed in order to avail the inventories at right time in right quantity.

Inventory can be also viewed as an idle resource which has an economic value. So, better management of the inventories would release capital productively.

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REFERENCES

Ahmed, J.A. (2014), Research methodology fundamentals: Titles publishers. Ibadan.

Ama, G.A.N. (2001), Management and cost Accounting current Theory and practice. Anambra

Copelan, R.M and Dascher, P.E. (2009), Management Accounting. 2nd ed., In: Nweze (2000), Profit
Planning: A Quantitative Approach. M’cal Communication International, Enugu. Current Theory and Practice, Aba: Amasoa Financial Perspective.

Eneje, C. Nweze, A. and Udeh, A. (2012), Effect of efficient inventory management on profitability: evidence from selected brewery firms in Nigeria,

Goddard, W.E. (2001). JIT/TQC—identifying and solving problems. Proceedings of the 20th
Electrical Electronics Insulation Conference, Boston.

Harris, F.W. (1913). How Many Parts to Make at Once, Factory. the Magazine of Management.
Hilton, R.W. (2004), Management Accounting: McGraw Hill Inc. USA

Horgren, T.C and Sundren, G. (2001). Introduction to Management Accounting. 8 Edition.

Johnston R (1993). Cases in Operation Management, London Pitman Publishing.

Joseph D. (2002). Just-in-time Inventory: A financial perspective, Theory and concept/Beyond JIT.

Koumanakos, D.P. (2008). The effect of inventory management on firm performance International Journal of productivity and performance Management.