The Effects of Inventory Management in Manufacturing Company
OBJECTIVES OF THE STUDY
The primary aim of this project is to examine the effect a well managed inventory has in a manufacturing company. Other objectives of the study are as stated below:
(a) To determine the effect of inventory management in the manufacturing company especially Tower Aluminum Nigeria Plc.
(b) To enhance the performance of inventory management in an organization.
(c) To reduce risk that are facing inventory management.
(d) To determine whether there is a problem facing the inventory management in Tower Aluminum Nigeria Plc.
(e) To map out strategies to train good store keepers who will manage the stock.
This Chapter covers the overview of the types on inventory kept, inventory control techniques, cost of keeping inventory and impact of inventory management on organizational operations as well as significance for holding inventory in organizations
Definition of Inventory
The Institute of Logistics and Transport of London defines inventory as all the goods and materials held by an organization for sale or use, or a list of items held in stock.
Types of Inventory Management
According to Saxena (2003), in a production unit, regular inventories are divided into categories for effective operations and control.
Lonergan (2001) classifies inventory as raw materials, components, assemblies, sub-assemblies, work in progress and finished goods. However, Morrison and Jessop (2000) agree with above authors. They classify inventory as stock in trade, raw materials, equipment, spares, tools, gauges, fixtures, work in progress, packing materials, scrap and residues.
These are raw materials, parts and components that enter the firm‟s product during the production process. They may be of two general types; special items manufactured to the company‟s specifications and standard industrial items purchased of f the shelf.
Saleem (2004) explains that in production inventories timely and right supply of materials spares is important etc cutting down the investment on inventories and their carrying cost, achievement of economy in purchasing and avoidances loss during the storage process are subsequent.
Maintenance, Repair and Operation Inventories
Maintenance, repairs and operating supplies which are consumed in the production process but do not become parts of the final product, for example lubricating oil, soap materials and machine spare parts Lonerggan (2001) agues that the urgency of modern requirement and time cost of machines requires inventory control Time is money is the Golden rule today .
Requirements cannot wait nor can the machines and staff be kept in waiting since the cost of keeping them in waiting is more ,compared to cost of materials in store.
Work-In-Progress Inventories, Finished goods inventory
Semi finished goods/products found at various places of production operation. Morrison and Jessop (2000), argue that keeping inventory adds value to the organization in many ways, for example breaking bulk and smoothening operations.
Saleemi (2004) adds that a well-planned inventory scheme helps an efficient smooth and effective service delivery to customers a la lesser cost with the help of lower investment through planned but reduced inventories. Inventories help in avoiding unnecessary high working capital and also act as an insurance against errors in demand forecasts.
Inventory Control Techniques
Inventory is essential in an organization for production activities, maintenance of plant and machinery and for other operational requirements (Jessop 2003).
The normal tendency is to have more inventories so that most of the items are available when needed. As seen earlier, this results in blocking of money which otherwise could have been used more productively.
Invntory is part of the company‟s assets in its balance sheet and is therefore always under close scrutiny of management. The management is very concerned about any shortage of items required for production. This is so because any increase in the down time of the down time of the machines due to shortage of raw materials leads to production loss.
The two aspects therefore call for inventory control not only looking at the physical balance of various materials but also looking into aspects of minimizing the inventory cost.
However Saxena (2003) advises that avoiding shortages, excessive stocking and increasing inventory turnover, are some of the main issues concerning inventory control. Further, methods of reducing the component of materials cost in the product cost, is an important consideration in cost reduction.
In this chapter, we would describe how the study was carried out.
The study employs quantitative descriptive research design to examine The effects of Inventory Management in Manufacturing company.
This study was carried out in Tower Aluminum Nigeria Plc.
Sources of Data
The data for this study were generated from two main sources; Primary sources and secondary sources. The primary sources include questionnaire, interviews and observation. The secondary sources include journals, bulletins, textbooks and the internet.
Population of the study
A study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description (Prince Udoyen: 2019). In this study the study population constitute of top and middle level managers, and the Operational involves top and middle level managers, and the operational level staff. The respondents were drawn from various sections of the firm like; Accounts/Finance, Administration, Marketing, and Sales and Operations with a total population of 80 staff, and operations with a total population of 60 staff..
DATA PRESENTATION AND ANALYSIS
Background information of the respondents.
Table1: Showing the Age of the respondents.
SUMMARY, CONCLUSIOM AND RECOMMENDATION
This study was carried out to examine the effects of inventory management in manufacturing companies. The study adopted the descriptive survey method and reviewed some related and related literatures.
The findings from the study reveals that proper inventory management contributes to the profitability of manufacturing firms. Furthermore, a good inventory management reduces cost and eliminates the challenge of stock out. Effective production also have a smooth course due to accurate inventory management.
CONCLUSION AND RECOMMENDATION
It was revealed that production inventory is the most inventory management system used at Tower company. Production Inventory plays a very big role in the performance of any organization in this age characterized by total quality management. Production inventory management effectiveness adds value to the organization by allowing decision to be made faster and allowing production without hindrances as much as possible.
The efficiency of any control technique ensures that resources of the organization are managed with the least cost. The performance of any organization therefore depends on the achieved production targets, how much capital is held in stocks which can be achieved by a well managed inventory technique used.
The company also experience high holding costs that lead to loss of production which leads to reduction customer good will, decline of profits and misplace of stock.
The following were the recommendations on how Tower Aluminum company could improve its productivity by managing its inventory properly:
- The company should establish a central data base for archiving the inventory records to enable easy monitoring, decision making and proper inventory management.
- Inventory management procedures should be put in place to allow Proper management of inventory in a cost effective manner.
- The company should have an inventory retention schedule; this would Help in retaining active and useful inventory and the disposal of an unwanted inventory and that of low or no value to the company.
- The company should establish a policy of asset disposal and management of low value or unwanted assets to reduce the amounts of capital held up in these un-used assets caused by the effect of technological advancement.\
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