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THE INVENTORY MANAGEMENT AND CORPORATE PROFITABILITY OF A MANUFACTURING COMPANY

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Inventory covers the greatest part of the assets of any firm; therefore the need for inventory control cannot be overemphasized as it is a means for improving the performance of manufacturing companies. Inventory can be defined as a record a business current assets including property owned, the value of raw materials, work-in-progress and finished goods. Since it can be turned into Liquid cash within a short period of time, it is therefore classified as a current asset.  Inventory management aims at efficient purchasing storage and use of the material (Nair, 2013). Inventory management involve ensuring a constant supply of stock to avoid stock out and have uninterrupted sales and efficient customer services, maintaining sufficient stock, controlling investment in inventories by keeping at an optimum level of production while minimizing carrying costs and time. Poor or inadequate inventory management can present a serious challenge to the productive capacity of a manufacturing company. The objective of inventory management is to ensure sufficient level of stock which maintains an acceptable level of available demand while minimizing the related holding, administrative and stock out cost (Foulks, 2014). Inventory has created a great impact on the profitability of the manufacturing company which resulted to the deep research of this topic. Inventory management and corporate profitability of manufacturing companies.

1.2. STATEMENT OF THE PROBLEMS

In recent time especially in a developing economic, inventory management andcorporate profitability of a manufacturing company has ceased to be in fashion. The management of many modern establishment tends to ignore the need for effective inventory management measures in their firm. Lose of sales or business of the company as a result of insufficient inventories of finished goods. This is mostly due to the fact that managers are not enlightened on the effect of inventory management and corporate profitability of the company. And as such, they subjected themselves to greater liabilities than could have been otherwise obtained. Also a great number of fraud cases arises as a result of lack of good and sound inventory management system in the firm. If there is no effective inventory management, the employee can easily manipulate and steal the funds meant for the business thereby causing low profit in the organization without the management’s knowledge. Another problem is ineffective management of inventory in the manufacturing company. These are problems which makes a study of this nature a necessity.

1.3   OBJECTIVE OF THE STUDY

The major objective of this study is to determine the effectiveness of inventory management in a manufacturing company. The specific objective of this study are as follow:-

. To determine the extent ineffective management of inventory in Siba group of companies affect its operations.

. To examine the extent insufficient inventory of finished goods can cause loss of sales to the company.

. To ascertain whether the company has suffered from poor management of inventory and control.

. To find out the extent inventory management correlate with Organizational profitability.

. To examine the inventory management system used in Siba Group of Companies.

1.4   RESEARCH QUESTIONS

For the purpose of this research study, the following research question were formulated.

. Does ineffective management of inventory in Siba Group of Companies affect its operations?

. How does insufficient inventory of finished goods cause loss of sales to the company?

. Does Siba Groups of Company suffered from poor management of inventory and control?

. What is the relationship between inventory management and profitability of manufacturing company? (Siba Group of Companies).

. What is the inventory management system used in siba group of companies.

1.5       STATEMENT OF HYPOTHESIS

Based on the problems and objectives of this study, the following hypotheses are formulated for this research.

Ho: There is no significant relationship between profitability and poor inventories management.

H1: There is significant relationship between profitability and poor inventories management.

Ho : There is no significant relationship between proper inventories policies and profitability in manufacturing company.

H2: There is no significant relationship between proper inventories policies and profitability in manufacturing company.

Are you referring to profitability or productivity? See your topic.

1.6   SIGNIFICANCE OF THE STUDY

The significance of this study lies on the fact that with improved inventory control and management in manufacturing companies, the following persons  may benefit from it. It will be significant to  manufacturing companies, firms and business as it will enable them keep an adequate inventory control and ensure that they do not run  out  of stock or have excess stock which endanger their highly  position. It will also help to meet consumer’s demands or guest. It is also important the government as it will help to reduce waste investment inventory. It will help lecturers to really know the importance of inventory control so that they will be able to impact it on their students. This study will also reveal the relevant methods to be used in preventing mismanagement, it will also improve stock control which has led to the mismanagement and unproductively of materials.

1.7   SCOPE OF THE STUDY

This research work  on the inventory management and corporate profitability of a manufacturing company is focused on Siba Group of company Ikot Ekpene Akwa Ibom State.

1.8   LIMITATION OF THE STUDY

Some limitations in this research study are as follow:-

i  time factor of combining class work and running round in terms of material collection.

ii  Absence of comprehensive information system due to unsuccessful  visit.

iii there was a general reluctant by the staff to release all the information required

iv finance which is due most important resource  for this work was not readily available.

1.9    DEFINITION OF TERMS

To make this study very clear to all classes of readers, there is need to defined certain technical term and expression these includes:

Inventory: this is defined as the quantity of materials in used or held in stock at a particular time. It is a detailed last of articles and asset in possession of a person or organization and sometimes with the statement of nature of each. It ranges from raw material, work-in- progress to finished goods. Combing and utilizing inputs (men, materials and money by planning, organization, directing and controlling for the purpose of producing output, goods and services or what  the objectives are) desired by customers so that the organization’s objectives are accomplished.

Internal control: this could be defined as a whole system of control financial and other established by the management in order to carry on the business of the enterprise in an orderly and effective manner, ensure adherence to management policy safeguarding the asset and securer as far as possible the completen

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