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INVENTORY MANAGEMENT ON PRODUCTIVITY IN AN ORGANIZATION

CHAPTER ONE

Introduction

1.1  Background to the Study

It is a fact in materials management that continuity in production or provision of services on constant flow of required inventory. However, the question confronting the materials management remain, how much shall be ordered when the quality available is less than required to meet production demand or the quantity is less than order point and how best to plan and control the quantity of inventory needed at a given time. The focus of the materials manager is to reduce the two extreme ends of the spectrum, that is excessive (surplus) stock and adequate stock (stockout). The level of stock or inventory to be purchased or carried by an organization will depend on a number of issue, such as level of consumption, bulk purchase, discount, reliable, delivery dates, difficulty in matching supply with demand, speculation (availability or scarcity) and the company’s policy it is this prevailing dynamic circumstance that gives rise to the need for inventory planning for product availability. Inventory planning however, an enormous task that requires an astute combination of intelligence of what is actually happening to demand and that of what we expect to happen (forecasting).

A closer look at organization annual balance sheet, it shows that assets account for between 60-70% of materials held in stock; yet proper attention, is hardly given to this aspect of management stacks and left at the mercy of the unqualified individuals. Inventory planning is itself has been explained as the determination of the quantity and quality required of a material, components, points and services ordering, control receiving, inspection and storage of the right material and the efficiency utilization of these materials to achieve organization’s objective. In this study a general understanding of inventory planning shall be considered as well as issue such as inventory control its importance to the organization, stock maintenance, material handling quality control and product availability among others.

1.2     Statement of the Problems

Organizations in their effort to satisfy consumers demand for their product needs always to keep stocks of inventory at all times, since no organization can survive without keeping stock and ensuring constant flow. The problem that emerges from this is that of how best to ensure optimum supply without overstocking and understocking. Inventory planning and control is argued to be an effective way of overcoming these two extremes. Kaduna Refinery and Petrochemical Company however has been using these approaches in its effort of maintain stock and constant flow of their products, yet it has continuously experienced acute shortage of supplies. The question that arises here is that, what techniques are employed by the organization’s expediting network in ensuring that products needed arrives on time, and how effective is the inspection techniques of the organizations it is an obvious hat most of the problems that associated with inventory planning is lack of professionalism and misapplication store responsibility that is shortcoming has a big challenges to the entire organization. Above all the study is an to find solution to those problem as it arise.

1.3     Objective of Study

i)   To determine the needs for inventory planning and control.

ii)   To determine the techniques used in inventory planning.

iii)  To determine how to establish constant flow of material in an organization.

iv) To determine who is responsibility for inventory planning in the organization.

v) To determine the significance of inventory planning in material availability.

1.4     Significance of the Study

The research is significant in many aspects, first the researcher will benefit immensely as it is a basic requirement in partial fulfillment for the award of Higher National Diploma (HND) in the department of Purchasing and Supply, Kaduna Polytechnic. It will contribute to existing knowledge as student can use it as a reference and understanding of inventory planning of serve as a consultation by other researchers who may likely carry out the same research or part of it work. It is also of the significance to the to the industry under study whom may likely want to carried out similar research.

1.5     Scope of the Study

The work will be limited to inventory planning and it effect on products availability, the researcher did not intend to go beyond the department under study, the research will be conducted at KRPC within the following departments, Material Management Department (MMD) operation departments and maintenance department. These are traditional department that usually in needs of material at KRPC located at Kachia Road, Kaduna. The researcher will use 10% of 200 populations across three department to justify her work.

1.6   Research Questions

i)   What are the importance of inventory planning and control?

ii)  What are the techniques use in inventory planning?

iii)  What procedures are followed to ensure constant flow of inventory?

iv)  Who is responsible for inventory planning?

vi)  What are the significances of material handling in inventory planning?

1.7     Limitation of the Study

The research is likely to be limited by a number of factors which may combine to negatively affect the outcome. These limitations may be due to weakness of the instruments use for data collection, here the respondents are limited by the structure questionnaires. Again the attitude of the respondents may constitute a limitation as they may feel reluctant to give information they consider sensitive.

The research design as well as the statistical tools used also have limitation that may affect the outcome of the study.

1.8     Definition of Terms

This aspect were design to explain all the languages and terminology that were use during the exercise.

Inventory – is defined as a list of all physical materials, stock items and equipment that kept in the store.

Planning: It can be explain as a futurist activity that bridges that gap between initiating of an idea and the occurrence of the even itself. It means deciding in advance what to do when, how and by whom, it is therefore form relation of future course of action.

Control: In its simplest form, control is about making sure the objectives of the firm are achieved.

Management: It is the judicious use of personal or organizational resources of the achievement of predetermined goals.

Product: Bundle of an items that provide satisfaction manufacturing output or performed services.

Economic Order Quantity (EOQ): This is a calculated ordering quantity than organization should order at any point in time.

Buffer Stock: Is a situation where stock (safety) is held to meet unexpected demand.

Store: It can be defined as an isolated place where all kind of working and non working types of material such as equipment, spare parts are kept for safety and onward usage.

Stock Control: Is defined as the means by which material of the correct quantity is made available as at when required with the regards to the economy in storage and ordering cost, purchases price and working capital.

ABC Analysis: Is a system of stock control which basically analyze the stock by their important and value where a smaller volume of material cost and can result into production stoppages.

Receipt of Stock: This is a document or stock receipt which involve all the material and item supplied to the store whether from internal or external supplies.

Replacement Issues: These are issues from replacement items/equipment and suppliers which has been broken or how warned out or gone obsolete.

Stock Discrepancies: This is defined as the disagreement between the physical and stock records.

Pre-Production Stock: This comprise or part and material purchased from outside the organization to be manufactured into products.

Post Production Stock: They can also be described as finished products held either at the factory or at warehouses and distribution centre elsewhere.

Inventory Control: This is the presentation of an adequate and balance inventory of material supplied within a minimum invest, so as tor educe storage and handling cost.

Provisioning: It can be seen as the process of determining in advance requirement of material taking into consideration, the amount of stock in hand at any time will be in accordance with the stock control policy.

Cyclical Provisioning: These involve examining either physical stock or stock records for a particular class by commodity at a regular interval and taking simultaneous action or call the items required replacement.

Discrepancies: Discrepancies refers to the difference between physical stock/items and the document records either as a result of surplus or shortage usually after stocktaking.

Redundancy: This is when quantity of an item in stock is more than reasonably necessary to provide an adequate services to production or operations activities in which the excuse is said to be redundant.

Obsolete: This refers to when an item is going out of use but not yet completely unusable.

Obsolescence: When an item is no longer usable by the business concerned because of the change in operational practice or method of production.

Material: These are component spare, raw material are kept in store.

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