Accounting Project Topics

The Effects of Inventory Management in Manufacturing Company

The Effects of Inventory Management in Manufacturing Company

The Effects of Inventory Management in Manufacturing Company

Chapter One


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.

 Production Inventories

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.





In this chapter, we would describe how the study was carried out.

Research design

The study employs quantitative descriptive research design to examine The effects of Inventory Management in Manufacturing company.

Research settings

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..



Background information of the respondents.

Table1: Showing the Age of the respondents.





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.


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:

  1. The company should establish a central data base for archiving the inventory records to enable easy monitoring, decision making and proper inventory management.
  2. Inventory management procedures should be put in place to allow Proper management of inventory in a cost effective manner.
  3. 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.
  4. 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.


  • Dobler & Burt (2000) production and inventory control hand book,3rd  edition
  • Fuller & Johnson (2000) The rise and fall of management accounting, Harvard Business School Press,
  • Gerald Hobson (2003), Beyond Partnership: Strategies for Innovation and Lean Supply, 1st edition Prentice-Hall, London.
  • Lonergan , M. (2001), Strategic Purchasing and Supply Chain Management, 2nd edition. Pitman, London.
  • Lysons et al, Handbook of Quantitative Supply Chain Analysis Vol. 1 Pitman, London
  • Morrison & Jessop (2000), inventory management, 2nd edition Irwin
  • Saxena. (2003), “Inventory control: models and problems”, European Journal of Operational Research, Vol. 14 pp. 1-12.