THE IMPACT OF INVENTORY MANAGEMENT AND CONTROL ON THE OPERATIONAL EFFICACY OF MANUFACTURING ENTERPRISES

CHAPTER ONE

INTRODUCTION

Background of the Study: Inventories are crucial for the efficient operation of manufacturing and retail organisations. Inventory typically comprises of unprocessed materials, partially completed items, essential components, and finalised products. It is not obligatory for an organisation to possess all of these inventory categories. Regardless of the specific inventory goods, efficient administration is necessary due to the significant amount of an organization's finances often invested in them. Varying departments within the same organisation have divergent attitudes regarding inventory. This is mostly due to the fact that the specific tasks carried out by a department have a significant impact on the department's level of motivation. For instance, the sales department may require a substantial inventory to fulfil nearly every customer demand. The manufacturing department also requests stockpiles of supplies to ensure continued operation of the production system (Anichebe and Agu, 2013).

Inventory is a crucial factor in decision-making throughout the entire process of product creation, distribution, and sales. It also constitutes a significant component of the total current assets of many organisations. Given that inventory represents a significant portion of overall investment, it is imperative to implement effective inventory management in order to guarantee the growth and profitability of the organisation. Temeng et al (2010) argue that historically, organisations have disregarded the potential cost savings that may be achieved via effective inventory management. Instead, they have viewed inventory as a necessary burden rather than a valuable asset that requires careful management. Consequently, numerous inventory systems rely on capricious regulations. Regrettably, it is not uncommon for certain organisations to allocate excessive cash towards inventory, resulting in an inability to fulfil consumer requests due to inadequate distribution of investment across inventory goods (Temeng, Eshun, & Essey, 2010). This research work aims to assess the impact of inventory management and control on the performance of manufacturing firms in the Ikot Ekpene Local Government Area, based on the analogy provided above.

1.2 Statement of the Problem

The challenges associated with inventory management and control have persisted for an extensive duration. The fundamental issue of stock holding, which has been addressed by humans since ancient times, involves the acquisition and storage of products during periods of abundance to ensure availability during times of scarcity. In contemporary times, it is commonly perceived that organisations hold stocks in order to facilitate smooth and uninterrupted operations (Temeng, Eshun, & Essey, 2010). Managers recognise the crucial significance of inventory in the operations of organisations. Direct materials typically account for up to 50% of the overall product cost in most organisations. This is due to the significant amount of money invested in inventory, which in turn impacts the organization's profitability. Organisations can lack control over their inventory management, leading to insufficient stock and causing production delays, ultimately resulting in reduced organisational performance for industrial firms. Consequently, this gives rise to relationship issues between inventory management and organisational efficiency, profitability, and effectiveness.

1.3 Objectives of the Study

The broad objective of this study is to evaluate the effects of inventory management on the performance of manufacturing enterprises, while the specific objectives are:-

1. To determine the effect of inventory management and control on the performance of manufacturing enterprises

2. To determine the various inventory systems in manufacturing enterprises.

3. To examine the challenges of inventory management in manufacturing enterprises.

4. To reveal the strategies that can be used to overcome the challenges of inventory management in manufacturing enterprises.

1.4 Research Questions

The following research questions were formulated based on the objectives of the study:

1. What are the effect of inventory management and control on the performance of manufacturing enterprises?

2. What are the types of inventory system used by manufacturing enterprises?

3. What are the challenges of inventory management in manufacturing enterprises?

4. What are the strategies that can be used to overcome the challenges of inventory management in manufacturing enterprises?

1.5 Significance of the Study

This study is significant in the following ways:

1. It will help in revealing the impact of inventory management on the performance of manufacturing enterprises.

2. It will reveal how inventory management affects organizational effectiveness.

3. The study will also show how seriously inventory management is practiced by enterprises in Ikot Ekpene.

4. The study will also serve as a useful reference material to other researchers seeking similar information.

1.6 Scope of the study

This study covers the effect of inventory management and control on the performance of manufacturing enterprise. A case study of Arsan water company.

1.7 Limitations of the Study

The study was limited by the following factors:

Financial Factor: Inadequate funds affected the way data were collected since the researcher had to travel long distances for the distribution of the research questionnaire forms.

Time Factor: This affected the reduction in the size of the sample used for the study because the researcher had less than two months to complete the study.

Material Factor: Shortage of relevant materials for literature review posed a great difficulty.

The study was also limited to the information gathered from primary and secondary records.

1.8 Organization of the Study

In this research study, the researcher took a critical look on the effect of inventory management and control on the performance of manufacturing enterprise. The research work was divided into five chapters.

Chapter one was on the background of the study, as well as statement of the problem, objectives of the study, research questions, statement of hypothesis, significance of the study scope and limitation of the study, organization of the study and definition of terms.

Chapter two reviewed the related literature on the subject matter and contributions of different authors.

Chapter four takes care of the data presentation, analysis and interpretation as well as discussion of findings.

Chapter five (5) encapsulates the summary, findings, conclusion and recommendations made by the researcher.

1.9 Definition of Terms

Management: The organizing and controlling of the affairs of a business or a sector of a business.

Inventory: A record of a business’s current assets, including property owned, merchandise on hand and the value of work in progress and work completed but not sold. It also means aggregate of those items of tangible personal property which are held for sale in ordinary course of business, are in process of production for such sales, are to be currently consumed in the production of goods or services to be available for sale.

Finished Goods: Goods being manufactured for sale by an enterprise.

Materials: Articles such as raw materials, semi-finished goods or finished parts, which the business plans to incorporate physically into the finished production.

Supplies: Article, which will be consumed by the business in its operation but will not physically as they are a part of the production.

Control: A means of monitoring for, triggering intervention in activities that are not going according to plan.

Performance: The amount of useful work accomplished compared to the time and resources used.