NEED FOR EFFICIENT INVENTORY CONTROL SYSTEM IN SERVICE ORIENTED ORGANIZATION (A CASE STUDY OF ABC TRANSPORT COMPANY]
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Abstract
This study attempts finding out whether the company practice or applies the system of inventory control effectively. It also sees to the functions and systems applied in carrying out the inventory control work so as to maintain continuity of material inflow and outflow in the storehouse.
As generally known, inventory is an American language while stock is a British word but all mean the same.
From the review of related literature inventory control is the means by which materials of the correct quantity and quality is made available as and when required with due regard to economy in storage and ordering cost, purchase price and working capital.
The researcher review the related literature which centers on inventory control, the role of material management in business organization, types of inventory control system the stores managers responsibility in relation to materials storage, the stock record system, reasons for keeping stock record, method of stock record, material deterioration, stock discrepancy, obsolescence of material, inventory control techniques etc. information in the accomplishment of the research work are all expressed.
Table Of Content
Approval page
Dedication
Acknowledgement
Abstract
Table of contentCHAPTER ONE
INTRODUCTION
1.1 Overall/Background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Significance of the study
1.5 Research questions
1.6 Hypothesis
1.7 Scope of the study
1.8 Limitations of the study
19. Definitions of terms
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
2.2 The role of material management in business organization
2.3 The need for efficient inventory control systems and types
2.3.1 Types of inventory
2.4 The use of \”ABC\” pareto\’s analysis in efficient inventory control system
2.5 Stores managers responsibility in relation to material storage
2.6 Stock Record System
2.6.1 Reasons for keeping stock record
2.6.2 Method of stock recording
2.6.3 Hand posted method
2.6.4 Machine posted method
2.7 Ways of preventing deterioration
2.8 Discrepancy, obsolescence and redundancy of stock discrepancy
2.8.1 Discrepancy
2.8.2 Obsolescence
2.8.3 Redundancy
2.9 Inventory related cost
2.10 Inventory control techniques
2.10.1 Stock replenishment method
2.10.2 Materials requirement planning
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
3.1 The research design
3.2 The questionnaire design
3.3 Population and sample size selection
3.4 Sources of data
3.5 Data collection method/techniques
3.6 Data analysis techniques
3.7 Questionnaire Distribution /Return Table
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.0 Presentation of data
4.1 Analysis of data
4.2 Testing of hypothesis
4.3 Decision of rule
4.4 Discussion on major findings of the study
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendation
Bibliography
Appendix
Chapter One
1.1 OVERALL OF THE STUDY
Inventory control system is a very vital issue as long as business management is concerned, and must not be let down in any business venture. Any organization that does not apply the sense of inventory control in their business transaction will definitely face cost reduction that will affect the corporate aim of that organization.
With this, inventory control system in service oriented companies like ABC Transport requires proper attention so as to prevent running out of service. This is because shortage in inventory (stock will interrupt production and leads to customers disappointment and thereby reduce the organization prestige and dignity in labor market.
According to Uzor (2005:34) Inventory control is the clerical control of the movement of materials in and out of the stores. He further defined it by quoting Morrison (1982:34) as the means by which materials of the correct quantity and quality is made available as when required with due regard to economy in storage and ordering cost, purchase price and working capital.
Purchasing journal (2005:21) further explains that inventory simply means or refers to as the control of items used in the operations of the business. This means that inventory control involve some processes.
1. Assessing the items to be held in stock
2. Deciding the extend of stock holding of items individually
3. Regulating the input of stock into the store house.
4. Regulating the issues of stock from the store house
This means that through the above processes, it is possible to adjust continuously the quantity and value of stock held to conform to the circumstances at all times.1.2 STATEMENT OF PROBLEMS
The problems which inventory control management in ABC encountered is as follows
1. Logistics Problem: There is inadequate of mobility to transport materials to sub-units with this problem it affect the flow of materials.
2. Inadequate Space: Since the stores face the problem of space in store it will lead to deterioration of materials and also cause insufficient of materials in stores.
3. Inadequate Lighting and Ventilation: The stores face the problem of lighting and ventilation, depending on the type of materials stored, but in the case of ABC inadequate lighting and ventilation highly affect their stores.
4. Administration (manpower problem): Unskilled manpower affect the stores in ABC transports, since people employed has little or no idea of inventory management it affect the stores.
5. Insuffiency of Storage of Materials: There should be adequate means of storage in stores like shelve, trays, pallet, racks etc should be provided to enhance flow in inventory management.
1.3 OBJECTIVES OF THE STUDY
Some of the objectives of inventory control management in ABC is
1. To enhance good administrative of man power training. To provide means of training those that has little or no idea of the job.
2. To provide adequate means of transporting materials to sub-units and to places found necessary.
3. To ensure sound and appropriate space to store materials since 70% of materials are spare parts.
4. To provide sufficient storage of materials in stores so as to avoid damage in inventory control management.
5. To create room for adequate lighting and good ventilation in stores, thereby enhancing maximum flow of materials.
1.4 SIGNIFICANCE OF THE STUDY
This study will be very important or useful to the following people.
1. The researcher: it will help the researcher to secure her award for the Higher National Diploma
2. Other student: It will serve as data bank i.e. it will serve as reference materials to students.
3. Firms: It will help the firm to know currently if what they do can improve profitability or not.
4. Society: This study will help societies or industries who are not perfect in inventory control to sit-up and amend their errors
1.5 RESEARCH QUESTIONS
Here, the researcher came up with the following question.
1. Does the company provide room for manpower training?
2. Do they provide means of delivery to the sub-unit stores?
3. Did they create sound space in their stores?
4. Is there adequate lighting and ventilation?
5. Is there any sufficient storage of materials?
1.6 HYPOTHESIS
Based on research questions, the researcher formed the following hypothesis which will be tested in chapter four.
Hi: They maintain adequate delivery of materials to sub-units
Ho: They do not maintain adequate delivery of materials to sub-units.
Hi: There is adequate lighting and ventilation in stores.
Ho: There is no adequate lighting and ventilation in stores.
1.7 SCOPE OF THE STUDY
This study is for all bus services, but due to time (i.e.) time to reach the destination of all this bus services which the researcher will found as difficult task to undertake, and how large the bus service is, so the researcher decided to write on ABC Transport as case study.
1.8 LIMITATION OF THE STUDY
The researcher experience some limitations when gathering information of this study.
The researcher face the problem of finance in gathering data.
The researcher face the problem of time factor, since time give to run up this project is limited.
The researcher also experience poor response needed form respondent.
1.9 DEFINITION OF TERMS
1. Inventory Control: A financial activity the objectives of which is to minimize that total cost of maintaining inventories and of acquiring them in order to render a stipulated level of service.
2. Inventory Management: A branch of materials management concerned with the formation and implementation of policies which should be met by an inventory control system.
3. Stock List: This is a list comprising all items held in the storehouse or stockyard. It contains a detailed description of dimensions, locations, unit of issue, prices per unit and column for periodic stock balances.
4. Inventory Policy: A definite statement of policy stating when to purchase and how much to purchaser usually to ensure that the sum of the cost associated with inventory.
5. Stock: This consists of raw materials, parts components or finished goods kept for immediate use or sale.
6. Stocktaking: This involves counting, weighing or measuring stock items to ascertain that the stock or items are physically present in the store house.
7. Stores: Place in which materials are kept. It includes warehouse, stock rooms bounded stores an open access stores.
8. Economic Order Quantity: The quantity of materials to be ordered at a time calculated so as to minimize the total cost incurred in purchasing and stock taking item.
9. Central Stores: This is generally recognized as one which acts as a \”wholesale\” supplier to other units, departmental or sub stores operating on a retail basis issuing goods directly to the users.
10. Safety Stock: This is stock set aside to cooler errors in forecasting the lead time or demand/usage during the lead time. It is normally referred to as buffer stock.
11. Obsolete Stock: These are materials whose demand does not exist any longer.
12. Stock Level: Fixing level for each item held in storehouse. This is the means of controlling stock by quantity.
13. Minimum Stock Level: This is the lowest level expressed in quantity to which the stock of any item held must not be allowed to fall below.
14. Re-Order Level: This is that stock level at which a replenishments order is considered.
15. Fifo: First-in-out: This is the system use in stores and inventory accounting.
16. Finished Goods Inventory: This is the inventory of the final product which is ready for shipment and awaiting delivery to the customer either in the basis of orders already received or anticipated.
17. Coding System: This means the classification of items held in stock with a unique name or code for easy identification.
18. Dispatch of Materials: This involves the selection of materials or goods in their correct quantities, making the necessary documentation arranging for delivery van loading and eventually making delivery of materials or goods to their final destination.
19. Buffer Stock: This means an additional inventory kept as a protection against the possibility of stock out or delay in supply.
20. Stock Recording: This is the process of identifying and taking accurate records of materials or items in stores. It is the key to any successful control system.
21. Deterioration of Stock: This occurs when an item or materials can not serve it purpose or it is when materials has loose its quality of satisfying need, it is said to be deteriorate.
22. Redundancy of Stock: This occurs mostly when the quantity of an item held in stock is more than the required quantity that is necessary to provide an adequate service to the production or operational activities, the excess over is said to be redundant.
23. Discrepancy: It is a non-agreement between the stock balance as indicated in the stock record and the quantity physically found and counted during stocktaking.
24. Obsolescency: An item is said to be obsolescent when it is going out of use but is not ye completely unusable.
25. Stock Replenishment: It is a set of procedures, decisions, rules and records intended to ensure continuous physical availability of all items comprising an inventory in the face of uncertain demand.
Chapter Five
5.1 INTRODUCTION
The main purpose of this study was to find out how the ABC transport operates in terms of the inventory control system since it is a service oriented organization.
As a case study, it is only the material management department that sees to the functions and making sure that the company\’s operation is effective. It is this department that sees to the provision of materials be it raw, semi or finished product for the day-day services of the buses and trucks used in the company\’s operation. The researcher applies several techniques in getting information. On the fulfillment of this research work. This chapter therefore, gives a summary of the study based on the data collected and the analysis made.5.2 SUMMARY
Summary of chapter one, this involve the
i. Overview of the study, and this is all about inventory control system how important and vital it is to an organization.
ii. Statement of problem: This talks about the problems an organization or company encountered that hinders them in functioning well.
iii. Objectives of the study: This focus on how the problem should be solved, the objective of the study should be the aim of an organization.
iv. Significance of study: The significance talks about the people that will be benefit form the research work either in correcting them from their past mistake or serve as data bank.
v. Research question: Are question gathered that will be used in testing the hypothesis
vi. Hypothesis: This is the area where the research questions is been formulated, which will be tested in chapter four.
vii. Scope of the study
viii. Limitation of the study and
ix. Definition of terms used in the research write-ups
Summary on chapter two literature review, this involves the different review of inventory control system by different writers or authors, it is on this chapter that every thing concerning inventory control are been discussed, and some of them are
i. The role of materials management in business organization
ii. The inventory control system: types of inventory
iii. The use of \’ABC\’ pareto analysis in inventory control systems
iv. Stores managers responsibility in relation to materials storage
v. Stock record system: Reasons for keeping stores methods of stock records.
vi. Deterioration of stock: ways of preventing deterioration
vii. Discrepancy, Obsolescence and redundancy of stock
viii. Inventory related cost
ix. Inventory control techniques
Summary on chapter three
In this chapter, all the methodologies applied in this research work were designed in such away to expose the methods through which information were received in the fulfillment of the research work, and this include;
i. Research design
ii Questionnaire design
iii. Population and sample size selection
iv. Sources of data
v. Data collection method/techniques
vi. Data analysis techniques
vii. Questionnaire distribution/return table
Summary on chapter four
This deals with the presentation of findings and the analysis of data, the uses of percentage method. This chapter consist of
i. Analysis of data
ii. Testing of hypothesis
iii. Decision rule and
iv. Discussions on major findings of the study
Summary on chapter five
This chapter talks about the summary of all the chapters in briefing, recommendation found in any chapter and drawing up a conclusion of all work done.
5.2 CONCLUSION
In concluding this research work, it will be of great important to state that
1. The inventory control system involves the procedure or systems through which the stock held in store are maintained and proper care of them are taken.
2. The inventory control of any organization must have the function of constant inflow and outflow of materials into the store house.
3. Since the calculated x2 of 403.8 is greater than x2 from the critical text value of 3.841, the null hypothesis is rejected which states that there is adequate lighting and ventilation in the stores house and alternative hypothesis is accepted.
4. The regular issuing of materials according to the authorized director must always by ready to account for the material received, issue or held in store when ever the need for it arises.
5. Also the inventory control system must see to the allocated materials purchased and sent to the specified department in order to make sure that they can be accounted for whenever there is the need for it since most of them are highly capital items.
6. Since the calculated chi-square x2 of 414.9 is greater than x2 of critical text value of 3.8441, the null hypothesis should be rejected which states that there is adequate delivery of materials to sub-unit and alternative hypothesis is accepted.
7. In a null shell, the store house or the inventory control system is a sine-qua-non of any operational and functional organization and the organization should see it as a very important section of the organization.
8. More so, the research questions tend to help determine the system through which the ABC Transport Company operates in terms of its inventory control system.
9. While analyzing data in the tables, each table were followed by a brief discussion on that table in order to throw more light on the information for the reader.
10. The data collected for the respondents were analyzed using percentage and chi-square text (x2) for the test of the hypothesis.
5.4 RECOMMENDATION
After taking careful and detailed study of the inventory control system in service oriented organization like the Associated Bus Company Limited, the researcher strongly recommend the following;
1. Both the central stores and the inventory control unit should be one unit entity since they have the same function to carry out.
2. In relation to the fact that the inventory control system is the function that requires high sensitivity and with the knowledge and belief that the material management is technically know how, the organization should employ those with high sensitive knowledge.
3. They should equip the inventory control and stores unit with purchasing and supply specialist who should have good professional judgment, well balanced shrewd and fortified inventory and stores knowledge
4. Adequate delivery of materials to sub-unit should be considered, since the sub-unit is part of the organization and as such will help in the outflow and inflow of operations.
5. The central unit or stores and inventory control unit should be provided with facilities like vehicles that will help transfer goods (materials) to the sub-unit.
6. There should be adequate security at the house so as to control and avoid theft or armed robbers invading the store house since 70% capital are held in store.
7. The company should construct a separate store house were most fragile or chemical like windscreens (that is the paradisco, viagioet) should be stored so as to avoid them from breaking or causing respiratory problem to the staff and also since they are not made to be stored with other parts.
8. The company should provide adequate means of storage in stores like shelves, trays, pallets, racks etc to enhance flow of materials in the organization.
9. Unskilled manpower affect the stores of ABC Transport , the management should see after that or create an avenue for training.
10. Inadequate space in store may lead to deterioration of materials, since all the materials are jam pack any where space is it will not do them good.
