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COST CONTROL AND MATERIAL MANAGEMENT

CHAPTER ONE

1.0 INTRODUCTION 

Material management cost control was chosen for this work, due to the prominent role played by the down stream oil industries in Port Harcourt (Nigeria) economic. Materials management is considered in the organization of product in the industries, it helps the organization to cut cost in their materials for effective usage of materials. For effective material management, the fire elements, viz, materials, machines, money man and management all of these are referred to the fire one. In this case, efficient combination of these elements enable an organization to cut down cost that ultimately benefit their numerous consumers and up lift the organization or form not only financially, but improve its image. In discussing about materials management we need to be abreast with the term management. Material management can be said to be an organizational concept in which a single manager has an authority and resporisibility for all activities, principally concerned with the flow of materials into an organization or firm.
Management of material ensures effective cost control in down stream of oil industry can affect petroleum products purchased by the public, it can also have effect on the native economic of the nation.

The study of material management and its effect on cost control in down stream sector of petroleum industry becomes imperative because of its strategic importance to various sectors of the economy. This study intends to look critically at therarious management techniques used in managing petroleum refining and petrochemical companies and their attendance effect on the cost control. It can be eleraly seen that material management calls for careful planning since it is said that failure to plan, means that one had to fail. In efficient materials management has much effect on production and consequence in the profit margin of an organization, selectional wrong vendors can also contribute to the problems of material management. Further commendation on cost Gairson said that cost control as the use of cost classification by their cost behaviour when business activities change.

1.1 GENERAL OVERVIEW OF THE STUDY

The study cost control and material management was gotten from refinery and petrochemical (NNPC) limited company. Refinery and petrochemical in Rivers state is located along Eleme Akujo Road. The company NNPC (Nigeria National Petroleum Company) and refinery are into production of chemicals and oil, they produce oil like fuel, diesel, kerosene, crude oil, paraffin wax.  These chemicals are some times used for the production of raw materials these crude oil are found in the ground where it is been extracted for the distribution of masses. In most cases pipes are laid and oil are gotten the company refinery distributes fuel, kerosene, diesel to different places in the states because it is their depot.  To show that the company has enough fuel, and the country will not experience fuel scarcity the burning fire will light very well loan extent that somebody standing 200km will see the fire.

The Port Harcourt refinery produce these fuel and tankers from different state come to get them and distribute them to the puling station in the states. The refinery is very close to the seaside because right inside the sea, the pipes are laidinside for these reason the study of material management and its effects on the cost control in down stream sectors of petroleum in dustry becomes imperative because of its strategic important to various section of the economy, management of material ensure effective cost control and it effect down stream of oil industry can affect petroleum products purchased by the public. It can also have effect on the entire economy of the nation. Finally, the study intends to look critically at various management techniques used in managing material in the down stream of Nigeria petroleum industry with a particular reference to petroleum refining and petrochemical companies.

1.2 STATEMENT OF PROBLEM OF THE STUDY

1. Inefficient material management has much effect production and fire consequence in the prefect marian of an organization, chooses a bad vendor can also contribute the problem of material management, it is also possible that using computer to monitor the stock situation and in expecting can also cause a problem. 2. There is also the problem of malpractice by personal in the warehouse, this involves deliberate distortion of material situation position so as to ensure that order is given to supplier to supply material when it is not necessary. 3. There are also problem of using statistical and other management technique such as re-order level, Economic Order Quantity (EOQ) minimum and maximum stock level, in most cases, therefore techniques are not existence to ensure efficient management of materials.
4. There was also the problem of delay in payment, which prevent competitive did, ding by various suppliers. As a result of this price of materials and suppliers.

1.3 OBJECTIVE OF THE STUDY

This study id restricted to the petroleum refining and petrochemical companies. However, for the purpose of charification of the study references will be made to other areas outside the country but will specifically emphasis on the area chosen for the analysis, knowing that research work has to do with human beings, the altitude of the respond in answering and retarring question naire cannot be over looked id need be.

1.4 SCOPE OF THE STUDY

The aim of objective of this study is to evaluate the system of procurement and warehousing of material in the down stream sector of petroleum industry.

To examine the modern technology applied in the industry and the management technique in practice.

To ascertain the effect of delay in payment, with the effect this has on the price of material and the control inplace to ensure security of material in the warehouse. And the proffer recommendation for policy decision.

1.5 SIGNIFICANCE OF THE STUDY

This study is a major effort in attempting research on the management of materials and cost control as it affects the down stream sections of petroleum industry. The finding will definilely prove. Useful to academics materials and business organization managers a like. The study if materials management and cost control is important because of its effect on the price of petroleum products and its role in economy of the nation. This study is necessary so as to examine he produce for procurement of materials. The present delay in payment of goods supplied can necessitate the ventor to increase the price of materials this increase leads to high price of finished products. Therefore, there is the need to ensure proper procedure of procurement of materials. There is also the need to ensure that modern technology and efficient management techniques are in use to enhance the performance of petroleum industry.  Modern technology like computer can help the warehousing there is a need in managing materials.

The success of managing material and its contribution to cost saying in the down stream section of petroleum industries depend on the abilities of materials manager to ensure using the proper techniques in processing receiving. Storing and issuing of materials. The study intends to contribute and report on the management of materials in the downstream sector and its effect on managers. It is therefore envisaged that this study will expose materials managers and top management team of enterprises in the down stream sector on the importance of effective and efficient materials management system.

1.6 LIMITATION OF THE STUDY

Since research work involves money. This is limited to the three referring companies and a petrochemical company so as to enable the researchers cope with financial involvement. Also the constraints of time and the necessity to complete the study within a reasonable time occasion the determinations of sample size. The research efforts will cover the selection of sample of the most senior personnel in the material management department of those selected companies. The research data is mainly based on primary data/field work. It is however expected that the man made problems stated above will not affect the over all result of this study an remarkable significant.

1.7 DEFINITIONS OF TERMS

1. MATERIAL MANAGEMENT: This is the single manager organization concept embracing planning, organizing. Motivating and controlling of all those activities and personal principally concerned with the flow of materials into an organization. 

2. PURCHASING: The purchasing department has the responsibility of buying the goods and quantities of materials authorized by the requisitions issued by production scheduling, inventory control, maintence and other departments or function requiring materials.

3. STORE AND RECEIVING: Stores physically control and maintains all inventory items.

4. Receiving involves the physical handling of in coming shipment identification of such materials, the verification of qualities and the routing of the materials to the place of use or storage.

5. MATERIAL PLANNING AND CONTROL: This is the aggregated planning of quantities of key and critical materials needed to produce the approximate number if end products needed in specific periods

6. SPECIFICATION: This is the detailed descriptions of the materials, parts and components used in making a product.

7. RECEIVING AND MATERILS HANDLING COST: This inched the cost associated with receiving the material and those costs that are incived in moving the materials in and around the organization.

8. TRANSPORTATION COST: In many companies transportation costs exceed is percent of total materials costs while in other they exceed 40 perient.

9. STOCK CONTROL: This is the clerical control of the movement of goods into and out of the stores and of the level of stocks in the stores.

10. COST CONTROL: This simply means price impose on goods and service which is control by the organization at the minimums.

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