AN ASSESSMENT OF THE IMPACT OF STOCK MANAGEMENT ON THE PERFORMANCE OF AN ORGANIZATION A CASE STUDY OF NIGERIAN BOTTLING COMPANY PLC
CHAPTER 1
BACKGROUND OF THE STUDY
Inventory constitutes a major portion of current assets especially in manufacturing companies and retail/trading firms. In order to maintain inventory levels of such magnitude, huge financial resources are committed to them (Mittal, 2014). As such, inventory also constitutes a major component of working capital. To a large extent, the success or failure of a business depends upon its inventory management performances. Inventory management, therefore, should strike a balance between too much inventory and too little inventory (Gupta & Gupta, 2012). The efficient management and effective control of inventories help in achieving better operational results and reducing investment in working capital. It has a significant influence on the profitability of a concern thus inventory management should be a part of the overall strategic business plan in every organization (Gupta & Gupta, 2012).
Inventory plays a significant role in the growth and survival of an organization in the sense that ineffective and inefficient management of inventory will mean that the organization loses customers and sales will decline. Prudent management of inventory reduces depreciation, pilferage and wastages while ensuring availability of the materials as at when required (Ogbadu, 2009). Efficient and effective management of inventories also ensures business survival and maximization of profit which is the cardinal aim of every firm. More so, an efficient management of working capital through proper and timely inventory management ensures a balance between profitability and liquidity trade-offs (Aminu, 2012). Specific performance indicators have been proved to depend on the level of inventory management practices (Lwiki et al., 2013
Inventory management is recognized as a vital tool in improving asset productivity and inventory turns, targeting customers and positioning products in diverse markets, enhancing intra and inter-organizational networks, enriching technological capabilities to produce quality products thereby imparting effectiveness in inter-firm relationships. Proper inventory management even results in enhancing competitive ability and market share of small manufacturing units (Chalotra, 2013). Well managed inventories can give companies a competitive advantage and result in superior financial performance (Isaksson& Seifert, 2013). Management of inventory is also fundamental to the success and growth of organization as the entire profitability of an organization is tied to the volume of products sold which has a direct relationship with the quality of the product (Anichebe&Agu, 2013)
There are many administrative tasks associated with stock control. Depending on the size and complexity of your business, they may be done as part of an administrator’s duties, or by a dedicated stock controller.
For security reasons, it’s good practice to have different staff responsible for finance and stock.
Typical paperwork to be processed includes:
- delivery and supplier notes for incoming goods
- purchase orders, receipts and credit notes
- returns notes
- requisitions and issue notes for outgoing goods
Stock can tie up a large slice of your business capital, so accurate information about stock levels and values is essential for your company’s accounting.
Figures should be checked systematically, either through a regular audit of stock –stocktaking – or an ongoing program of checking stock – rolling inventory.
If the figures don’t add up, you need to investigate as there could be stock security problems or a failure in the system.
Health and safety
Health and safety aspects of stock control are related to the nature of the stock itself. Issues such as where and how items are stored, how they are moved and who moves them might be significant – depending on what they are.
You might have hazardous materials on your premises, goods that deteriorate with time or items that are very heavy or awkward to move.
The research seek to provide an assessment of the impact of stock management on the performance of an organization with a case study of the Nigerian bottling company plc
1.2 STATEMENT OF THE PROBLEM
Stock management which is the function of understanding the stock mix of a company and the different demands on that stock is a very crucial for the survival and growth of the organization in view of the fact that huge amount is invested in inventory. stock demands are influenced by both external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level.Stock control, otherwise known as inventory control, is used to show how much stock you have at any one time, and how you keep track of it.It applies to every item you use to produce a product or service, from raw materials to finished goods. It covers stock at every stage of the production process, from purchase and delivery to using and re-ordering the stock.Efficient stock control allows you to have the right amount of stock in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.
However evidence shows that many organization do not maintain efficient stock management process typified in understanding the following
Types of stocks ,How much stock to keep?Stock control methods
Stock control systems – keeping track manuallyStock control systems – keeping track using computer softwareUsing RFID for inventory control, stock security and quality management
Stock security ,Control the quality of your stock ,Stock control administration
Therefore the problem confronting this research is to provide an assessment of the impact of stock management on the performance of an organization.with a case study of the Nigerian bottling company plc.
1.3 RESEARCH QUESTION
- What is the nature of stock management
- What are the principles and methods for effective stock management
- What is the impact of stock management on the performance of an organization
- What is the impact of stock management on the performance of Nigerian bottling company plc
1.4 OBJECTIVE OF THE RESEARCH
1 To determine the nature of stock management
- To determine the principles and method for effective stock management
- To determine the impact of stock management on the performance of an organization
- To determine the impact of stock management on the performance of Nigerian bottling plc
1.5 SIGNIFICANCE OF THE RESEARCH
The research shall profer a detail appraisal on the principles and methods of effective
Stock management.
It shall serve as a source of information for managers and other professionals.
1.6 STATEMENT OF HYPOTHESIS
1 Ho investment in stocks in NBC IS Low
Ho investment in stocks in NBC is High
2 Ho Stock management in NBC is not given significant attention
Ho Stock management in NBC is given significant attention
3 Ho The impact of stockmanagement on NBC Performance is low
Hi The impact of stock management on NBC Performance is high
1.7 SCOPE OF THE STUDY
The study focuses on the assessment of the impact of stock management on the performance of the organization.with a case study of Nigerian bottling company
1.8 DEFINITION OF TERMS
STOCK MANAGEMENT DEFINED
Stock management is the function of understanding the stock mix of a company and the different demands on that stock. The demands are influenced by both external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level.Theadministrativerole of assessing the inventory of a business and making sure it is sufficient to meet consumer demand. The demands that a stock management process seeks to satisfy are affected by external and internal factors, and can be expressed usingpurchase order requests to help maintain appropriate inventory levels
Minimum stock level – you identify a minimum stock level, and re-order when stock reaches that level. This is known as the Re-order Level.
Stock review – you have regular reviews of stock. At every review you place an order to return stocks to a predetermined level
Just In Time (JIT) – this aims to reduce costs by cutting stock to a minimum. Items are delivered when they are needed and used immediately. There is a risk of running out of stock, so you need to be confident that your suppliers can deliver on demand.
Re-order lead time – allows for the time between placing an order and receiving it.
Economic Order Quantity (EOQ) – a standard formula used to arrive at a balance between holding too much or too little stock. It’s quite a complex calculation, so you may find it easier to use stock control software.
Batch control – managing the production of goods in batches. You need to make sure that you have the right number of components to cover your needs until the next batch.
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