CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Stock inventory control, also known as stock control, is regulating and maximizing company”s warehouse inventory. The goal of inventory control procedures is to maximize profits with minimum inventory investment, without impacting customer satisfaction levels (Azadivar, and Rangarajan, 2016). Inventory control or stock control can be broadly defined as "the activity of checking a shop”s stock." However, a more focused definition takes into account the more science-based, methodical practice of not only verifying a business” inventory but also focusing on the many related facets of inventory management (such as forecasting future demand) "within an organisation to meet the demand placed upon that business economically(Dopson, and Hayes, 2015).Other facets of inventory control include supply chain management, production control, financial flexibility, and customer satisfaction. At the root of inventory control, however, is the inventory control problem, which involves determining when to order, how much to order, and the logistics (where) of those decisions.
Historically, inventory management has been referred to as excess inventory and inadequate management or shortage of inventory and adequate management practice. Several penalties could be apportioned to excesses in either direction. Inventory problem has escalated as progress in technology increases the ability of organizations to produce goods faster in multiple design variation and greater quality (Letinkaya and Lee, 2000). Since the mid-1980”s inventory management, production planning and scheduling has become the obvious strategic benefit (Larrson et al., 2015). In recent years, many of the firms have raised the bar yet again by coordinating with other firms in their supply chains. For instance, instead of responding to unknown and variable demand, they share information so that the variability of the demand they observe is significantly lower (Jainand Render, 2006).
For many organizations, there is no doubt that inventory management enhances their operations. Organizations with high levels of inventories such as raw material, work in process and finished good; can sustain production, ensure free flow of materials and offer a wide range of products, which makes easy the delivery of goods to the customers. Inventories therefore, need to be controlled in such a manner, as to leverage on organizational productivity and overall performance. Inventory control involves procurement, utilization, controlling and co-ordination of available materials. Inventory control is the direction of activities with the purpose of getting the right materials, at the right quality and quantity, in the right place at the right time and it is directly linked to production function of any organization which implies that, the inventory management system operated, will affect the profitability of an organization, directly or indirectly (Ahn, 2005). Inventories are the stock of raw materials, work in progress and finished goods held by a business organization to facilitate operations in the production process (Pandey, 2005).
Therefore, if a company fails to manage its inventory efficiently, it is likely to face profitability problems (Block and Hirt, 2007). The goal of inventory management is to provide the inventories required to sustain operations at minimum costs (Dickson 2005). Inventory control helps organization to establish the proper inventory levels through the economic order quantity and to keep track of this level through inventory control system, of which many are manual such as Two Bin Method and Red Line Method, or computerized inventory control systems.
Proper inventory control requires an organization to undertake stocking and use appropriate method to value stock, so as to avoid under or over estimation of profits (Kotabo, 2002). Companies experience substantial costs in the procurement and maintenance of inventories, which cost form a large portion of production costs. Inventory costs include carrying costs such as storage and insurance, ordering costs like transportation and store placement, as well as stock
out costs like redundancy and loss of sales. A company cannot achieve an outstanding performance without proper and efficient control. Any theft, wastage and excessive use of materials are of immediate financial loss and leads to poor performance of a company (Katobo, 2002).
1.2 STATEMENT OF THE PROBLEM
Most Organization has failed and have run deficiency as a result of poor inventory control and management. The inventory Department and personnel in most cases lack the necessary skill and technical know-how to effective implement Inventory Control in their organization.
Inventory problem has proliferated, as technological progress has increased the organization
ability to produce goods in greater quantities, faster and with multiple designs. The public has compounded the problem by its receptiveness to varieties and frequency design changes, (Godana and Ngugi 2014). There is no doubt that since the mid80s, the strategic benefits of inventory management, production planning and scheduling have become obvious.
The fundamental problem of most organizations is poor or inadequate inventory control (Osuagwu,2001). Most organizations do not even see any need for proper inventory control that helps to control maximum stock levels, minimum stock levels, re-order stock levels, carrying costs and ordering costs (Lynch, 2005)
It is even heart-disturbing that some of these organizations desire to meet and surpass organizational performance, customers” needs and expectations, enjoy customers” brand loyalty, good organizational image or goodwill, customers” confidence and management efficiency and effectiveness, but, do not take cognizance of proper and timely inventory control (Newbery,2007)
In the view of Nyanga (2000), inventory control problems arise as a result of the absence of in-depth knowledge of stock valuation, poor management know-how, poor orientation in relation to stock re-order levels. The existence of these problems negatively affects the customers” satisfaction, customers” retention and loyalty, organizational performance, productivity, profitability, growth, goodwill and achievement of organizational goals.
1.3 OBJECTIVE OF THE STUDY
The Broad Objective of this research work is to evaluate the concept of Inventory Control and organizational performance.
This research work seeks to achieve the following under-listed specific objectives:
1. To examine the impacts of inventory control on workers effectiveness in PZ .
2. To examine the roles inventory control plays on organizational growth.
3. To examine the effects of inventory control on organizational productivity.
4. To examine the factors that are militating against effective implementation of inventory control and management in an organization.
1.4 RESEARCH QUESTIONS
1) Does inventory control have any impacts on workers effectiveness in PZ?
2) Does inventory control play any roles on organizational growth?
3) Does inventory control affect organizational productivity?
4) What are the factors militating against effective implementation of inventory control in PZ Lagos State?
5) In what ways can the problems Identify can be resolved and solved?
1.5 RESEARCH HYPOTHESES
The following tentative statements were tested in this study.
1) Ho: Inventory control does not have any impact on workers effectiveness.
Hi: Inventory control has impacts on workers effectiveness.
2) Ho: Inventory control does not have any impact on Organizational Growth.
Hi: Inventory control has impacts on workers on Organizational Growth
3) Ho: Inventory control has no significant impact organizational productivity
Hi: Inventory control has impacts on impact of organizational productivity
4) H0: The Factors Militating against inventory control is not detrimental to Profitability
Hi: The Factors Militating against inventory control is detrimental to Profitability
1.6 SIGNIFICANCE OF THE STUDY
The research will be of great significance to firms, owners and potential owners of small-scale business, Nigerian policy makers, government and researcher in related fields as follows:
1) It will educate management of organizations on the place of inventory control and organizational performance, productivity and profitability.
2) It will familiarize firms with the relevance of inventory control.
3) It will educate small-scale firm owners about the consequences of the poor inventory control on organization performance.
1.7 SCOPE OF THE STUDY
This research work evaluates the impacts of inventory control and organizational performance using PZ as a case study. The respondents of this study are majorly members of staff of PZ, Ilupeju, Lagos, though the findings of this research work can vividly and validly be applied to all private and public enterprises in Nigeria.
1.8 LIMITATIONS OF THE STUDY
The following factors were the limitation of the study.
(i) Corona Virus Pandemic: The Corona Virus Pandemic postulated great challenges for this research as there were lockdown everywhere which made it very difficult for the researcher to engage in vast research. The Corona Virus Pandemic really constituted great challenge and difficulties for the researcher.
(ii) Lack of finance: The main factor that can disorganize the effort was lack of finance. To take a wider study on inventory control and organization performance will requires a huge sum of money which will enable the researcher travel far and wide, searching for valuable materials and information to work with.
(iii) Inadequate research materials: The materials relating to this project were scarce and difficult to lay hands on. However, best use was made of what was available
1.9 DEFINITION OF TERMS
Inventories: The stock of raw materials, work in progress, finished goods and supplies held by a business organization to facilitate operations in the production process.
Inventory control is the supervision of the storage, supply and accessibility of items to ensure an adequate supply without excessive oversupply.
Inventory management involves planning organizing and controlling the flow of materials from their initial purchase unit through internal operations to the service point through distribution.
Reorder Stock Level: The stock level at which replenishment should be made again.
Maximum Stock Level: The stock level beyond which stock should not exceed to prevent overstocking.
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