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INVENTORY MANAGEMENT TECHNIQUES AND ITS CONTRIBUTIONS ON BETTER MANAGEMENT OF MANUFACTURING COMPANIES IN NIGERIA (A CASE STUDY OF CHAMPION BREWERIES PLC)
1.1 Background to the Study
Today’s business environment is very challenging for all companies doing much with fewer resources while increasing quality is the main goal of modern management style. There are numerous ways to accomplish this, but the key and usually “hidden” method is to reduce company inventory. The Inventory Management means the overseeing and controlling of the ordering, storage and use of components that a company used in the production of the items it sold as well as the overseeing and controlling of quantities of finished products for sale. A business’s inventory is one of its major assets and represents an investment that is tied up until the item is sold or used in the production of an item that is sold. It also cost money to store, track and insure inventory. Inventories that are mismanaged can create significant financial problems for a business, whether the mismanagement results in an inventory glut or an inventory shortage.Successful inventory management involves creating a purchasing plan that was ensured that items are available when they are needed (but that neither too much nor too little is purchased) and keeping track of existing inventory and its use.
The inventories need not be viewed as idle assets rather these are an integral part of farmers operations big, they become strain on the resources; however if they are too small a firm may lose the sales. Therefore the firm must have an optimum level of inventories. There are numerous opportunities to reduce the company’s inventory costs while improving inventory customer service. This wasresulted in an enhanced and more efficient/effective(cost) manufacturing/merchandising/maintenance operation. Estimated inventory cost savings have the potential of being reduced by 25% over from current expenditure. A coordinated inventory reduction programme must be implemented in order for the company to realize these cost savings. Numerous companies have adapted and embraced these inventory cost savings initiatives and have realized major inventory cost savings. The word inventory simply means the goods and services that businesses hold in store. There are, however, several different categories or types of inventory. The first is called materials and components. This usually consists of the essential items needed to create or make a finished product, such as gears for a bicycle, microchips for a computer, or screens and tubes for a television set. The second type of inventory is called WIP, or work in progress inventory. This refers to items that are partially completed, but are not the entire finished product. They are on their way to becoming whole items but are not quite there yet. The third and most common form of inventory is called finished goods. These are the final products that are ready to be purchased by customers and consumers. Finished goods can range from cakes to furniture to vehicles. Most people think of the finished goods as being part of an inventory store, but the parts that create them are held accountable in inventory as well. The word ‘inventory’ can refer to both the total amount of goods and the act of counting them. Many companies take an inventory of their supplies on a regular basis in order to avoid running out of popular items. Others take an inventory to insure the number of items ordered matches the actual number of items counted physically. Shortages or overages after an inventory and indicate a problem with theft (called ‘shrinkage’ in retail circles) or inaccurate accounting practices.
1.2 Statement of the Problem
Manufacturing companies operating in Nigeria should contribute too much on Nigeria’s economic growth despite the problems encountered in inventory management. There is a problem of determining appropriate inventory level that should be kept to make sure that customer needs are met and production process is not interrupted. Striking a balance between overstocking and running out of store has been a challenging aspect in many manufacturing organizations. Inventory management has a direct impact on working capital management. Store out has its own disadvantages like over stocking has its own. Inventory management has a direct impact on working capital management. Store out has its own disadvantages like over stocking has its own. “Organizations that capitalize on inventory and procurement functions as means of achieving competitive advantages can direct enhance an organization competitiveness often resulting in increased profitability and increased market responsiveness. A lot of costs are incurred due to improper control of inventories and Nigeria geographical location. All these increase the prices of commodities manufactured in Akwa Ibom State compared to those manufactured elsewhere on the market.
Because of the large size of inventories maintained by the firm, a considerable amount of fund is committed to them. It is therefore imperative to manage inventories effectively and efficiently in order to avoid unnecessary investment. In the context of the inventory management, many organizations in Rwanda have not discovered the secret behind professional inventory management and it contributions to the performance of manufacturing companies and other organizations. Many companies in Nigeria are facing a very big dilemma, to maintain a large size of inventory for efficient, production and sales operations, to maintain a minimum investment in inventories and to maximize profitability. It should be noted that so many manufacturing companies in Rwanda fail due to mismanagement of inventories. It was on this reason that we decided to investigate the inventory management techniques on better management of manufacturing companies.