Impact of Inventory Management on Manufacturing Organisations: A Study of Cadbury Nigeria Plc, Lagos
Chapter One
OBJECTIVE OF THE STUDY
The objective of this study is to examine the impact of inventory management on the operational efficiency and performance of manufacturing organizations, using Cadbury Nigeria Plc, Lagos, as a case study.
The specific objectives are to:
- Examine the inventory management practices adopted by Cadbury Nigeria Plc.
- Evaluate the effect of inventory control systems on the production efficiency of Cadbury Nigeria Plc.
- Assess the relationship between inventory management and cost reduction in the company.
- Determine the impact of inventory management on customer satisfaction and timely product delivery.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INVENTORY MANAGEMENT
Inventory management is a critical component of supply chain operations, encompassing the systematic process of ordering, storing, tracking, and controlling inventory to ensure that the right quantity of products is available at the right time and place. Effective inventory management balances the costs associated with holding inventory against the need to meet customer demand, thereby optimizing operational efficiency and profitability.(Ivanov et al., 2023).
Fundamental Concepts
At its core, inventory management involves several key principles
Inventory Control: Maintaining optimal stock levels to prevent overstocking or stockouts.
Demand Forecasting: Predicting future customer demand to inform inventory decisions.
Reorder Point and Safety Stock: Determining when to reorder stock and how much buffer inventory to maintain to mitigate uncertainties.
Inventory Turnover Ratio: Measuring how often inventory is sold and replaced over a period, indicating the efficiency of inventory management.
These principles are applied through various models and systems, such as Economic Order Quantity (EOQ), Just-In-Time (JIT), and Material Requirements Planning (MRP), each tailored to specific operational contexts.(Chopra & Meindl, 2022).
Technological Advancements
Recent years have witnessed significant technological advancements in inventory management:
Automation and AI: The integration of automation and artificial intelligence (AI) has revolutionized inventory processes. AI-powered systems can analyze historical data to forecast demand, optimize stock levels, and automate replenishment, reducing manual errors and improving efficiency.(Disney et al., 2023).
Real-Time Data Analytics: The use of real-time data analytics enables businesses to monitor inventory levels continuously, respond swiftly to demand fluctuations, and make informed decisions.
Blockchain Technology: Blockchain offers enhanced transparency and security in inventory management by providing immutable records of transactions, improving traceability, and reducing fraud.
Internet of Things (IoT): IoT devices facilitate real-time tracking of inventory, providing detailed information on location, condition, and movement, thereby enhancing visibility across the supply chain.
Strategic Approaches
Modern inventory management also emphasizes strategic approaches to align inventory practices with broader business objectives:
Lean Inventory Management: Focusing on minimizing waste and maximizing value, lean inventory management involves streamlining processes and reducing excess stock. (Kshetri, 2022).
Sustainable Practices: Incorporating sustainability into inventory management includes optimizing resource usage, reducing packaging waste, and adopting eco-friendly procurement practices.
Vendor-Managed Inventory (VMI): VMI involves suppliers managing inventory levels for their customers, fostering collaboration, and improving supply chain efficiency.
Multi-Echelon Inventory Optimization (MEIO): MEIO considers inventory across multiple stages of the supply chain, optimizing stock levels at each point to balance service levels and costs.
Challenges and Considerations
Despite advancements, inventory management faces several challenges:
Data Quality and Integration: The effectiveness of technologies like AI and IoT depends on the quality and integration of data across systems. Poor data quality can lead to inaccurate forecasts and suboptimal decisions.(Zheng et al., 2023).
Supply Chain Disruptions: Events like the COVID-19 pandemic have highlighted the vulnerability of supply chains, emphasizing the need for resilient inventory management strategies.
Complexity in Implementation: Implementing advanced inventory management systems requires significant investment and change management, which can be challenging for organizations with limited resources.
CHAPTER THREE
METHODOLOGY
This chapter outlines the research design, population, sample size, data collection methods, and the statistical tools employed in the study to investigate the impact of inventory management on manufacturing organizations, specifically focusing on Cadbury Nigeria Plc, Lagos. The research questions driving this study are:
What inventory management practices are adopted by Cadbury Nigeria Plc?
What is the effect of inventory control systems on the production efficiency of Cadbury Nigeria Plc?
Research Design
This study adopts a descriptive research design to explore the inventory management practices at Cadbury Nigeria Plc and the effect of inventory control systems on its production efficiency. The descriptive design will enable the researcher to systematically describe and analyze the current practices and their impacts on production.
Population of the Study
The population for this study includes all employees of Cadbury Nigeria Plc who are directly involved in inventory management and production processes. This encompasses employees in the inventory management department, production department, and supply chain management team, as these units are integral to the management of inventory and production processes. According to company records, the total number of employees in these departments is approximately 120.
CHAPTER FOUR
DATA ANALYSIS AND RESULTS
This chapter presents the analysis of the data collected in the course of the study, focusing on the inventory management practices adopted by Cadbury Nigeria Plc and the impact of inventory control systems on production efficiency. The data was collected from 60 respondents, and the responses were analyzed using descriptive and inferential statistics.
CHAPTER FIVE
SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS
Summary of Findings
This study aimed to investigate the impact of inventory management on manufacturing organizations, using Cadbury Nigeria Plc as a case study. The following key findings were obtained:
Inventory Management Practices: Cadbury Nigeria Plc adopts a mix of inventory control systems, including JIT, EOQ, MRP, and Safety Stock. These practices help the company optimize inventory levels, reduce costs, and enhance production efficiency.
Effect on Production Efficiency: Inventory control systems have a significant positive impact on production efficiency, as evidenced by improvements in production output, reduction in lead times, and cost savings. JIT and EOQ were identified as the most effective systems in improving production efficiency.
Conclusions
Based on the findings of the study, it can be concluded that:
Inventory management practices, especially JIT and EOQ, play a critical role in improving production efficiency at Cadbury Nigeria Plc.
Proper inventory control systems help reduce production lead times, minimize stockouts, and lower inventory-related costs, contributing to overall organizational efficiency.
Recommendations
The following recommendations are made based on the findings of the study:
Enhance JIT Implementation: Cadbury Nigeria Plc should further strengthen its JIT system to ensure that materials are available just in time for production, reducing waste and excess inventory.
Optimize EOQ Calculations: The company should continuously refine its EOQ model to ensure that order quantities remain optimal as market conditions and demand patterns change.
Leverage MRP Systems: Cadbury Nigeria Plc should make better use of MRP systems to manage material requirements efficiently and minimize delays in production.
Review Safety Stock Levels: The company should regularly review and adjust safety stock levels to align with fluctuations in demand and supply chain risks.
REFERENCES
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