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Inventory Management And Control: A Strategy For Effective Production



This project is a case study of the inventory management system function as it is practiced in the Nigeria Bottling company Plc.
The management of inventory is a very difficult task and calls for hard and coordination of the activities of various categories of workers. For efficiency to be achieved in the management of inventory, all the sections and staff involved have to be efficient in their functions.
The major problem in inventory management is the determination of optimum inventory balance that will be advantageous to the company. This study therefore seeks for ways by which the problem can be reduced.
Chapter one gives the background information to the study chapter two is a review of the basis concept, theories and practices of inventory. Chapter three discuss about the methods used in collating and analysis data which is actually presented and analysis in chapter four. In chapter five, the concluding chapter, is to evaluate the findings in the course of the study and made due recommendation.


 Historically, inventory management has been referred to as excess inventory and inadequate management or shortage of
inventory and adequate management practice. Several penalties could be apportioned to excesses in either direction.
Inventory problem has escalated as progress in technology increases the ability of organizations to produce goods faster
in multiple design variation and greater quality (Letinkaya and Lee, 2000).Since the mid-1980’s inventory management,
production planning and scheduling has become the obvious strategic benefit (Larrson et al.,1995).
In recent years, many of the firms have raised the bar yet again by coordinating with other firms in their supply
chains. For instance, instead of responding to unknown and variable demand, they share information so that the
variability of the demand they observe is significantly lower (Jainand Render, 2006).
Colling (1990) argue that in the United States of America and other Western countries, improvement in productivity
was achieved through reducing the direct manufacturing labour expenses cost per unit of output. This strategy was
justifiable because of the high labour content in many manufactured products. However, the ratio of unit cost due to
labour has constantly decreased in recent years. Even large manufacturing firms, such as the United States (US) auto
assemblers, purchase up to 60 percent of the value of the product. This implies that management of raw materials
inventories is an area that shows great promise for productivity improvement.
Japanese firms earned more deserved attention in the mid-to late 1980s due to there notable performance on
quality and inventory management. The constant alert of the bar code being scanned at a check out lane shows a pillar of
modern system of inventory management stock tracking. In the earliest days of shop keeping, merchants write down
 procurement or they looked at how many units where gone at the day’s end and then did their best to forecast future
needs. The key skills where experience and intuition, but it remain an imperfect method, even when applied to operations
that where quite small by today’s standards (Miller,2010).
After the industrial turn around, the main goals of businesses are efficiency and mass production, along with an
improved customers experience at the point of sale. The first modern check-out system was designed by a team at
Harvard University in the early 1930s. punch cards that corresponded with catalog items were in use. The punch card
would be read by a computer and pass the information to the stock room which would bring the item up front to the
waiting customers. Owning to the automated system, the machines could also generate billing records and manage
inventory. The system is too expensive to use, but a version of it is in use today in some stores where cards are placed
with product information by merchants on the aisle for customers to select and bring to the check-out line. This usually
applies to items that are expensive or large and also controlled items such as medicines. Researchers created the
forerunner of the modern bar coding system in the late 1940s and early 1950s because they knew merchants needed a
better system. Ultraviolet light-sensitive ink and reader are used to mark items for sale. The system lacked the computing
power needed to make it work and it was too cumbersome. Technology had yet to catch up with their ideas (ibid).
The development of affordable laser technology in the 1960s revived the concept. Lasers allowed smaller, faster
and cheaper readers or scanners. The universal product code (UPC) or modern bar code was developed and introduced
just before the 1970s. As computing power became better, the power of universal product code codes to help track and
manage inventory, improved exponentially. Retailers began implementing modern inventory management system,
possibly made in large part by advances in computer and software technology during the mid to late 1990s. The system
works in a circular process, from purchase tracking to inventory monitoring to re-ordering and back around again. Another
promising technology for tracking inventory has also made its way into stores, warehouses and factories in recent years.
Product information such as type, manufacturer and serial no are transmitted by Radio Frequency Identification(RFID)
using microchip to a scanner or other data collection device, which is superior to bar codes in several ways (Agha, 2010).
For instance, from several yards away a scanner reads the information from radio frequency identification, making it
suitable for tracking items stacked on high shelves in warehouses. It also provide excellent anti-theft characteristics and
also encode more data than a bar code, in some systems inform the merchants if an item is out of place in the store
(Arnold, 2000).
In Nigeria, the size of industry, small, medium, and large scale, has a significant effect on both the numerical
strength of staff and level of involvement in inventory management of both raw material and the finished product. The
type of inventory system in practice in any organization depends on many factors among which are economic stability of
the place, infrastructural facilities available, transportation network and many more which are called constraints.
For many companies the root cause of underproduction stoppages and high production cost could be easily traced
to unscientific method of arriving at a general inventory policies and crucial inventory decisions. The situation is more
acute in a developing country like Nigeria, where the practical application of operation research techniques in industry
and business enterprise is in its infancy. Moreover, the bulk of raw material inventory and the finish goods inventory used
by companies in developing countries have to be imported from the industrial nations of Europe, America and Asia, which
gave rise to higher cost of procurement and higher uncertainty in the availability of such basic raw materials. Ogbo
(2011), opined that inventories are the goods or materials that are waiting to be used or dispatched for sale. A day-to-day
practice in all fields of human endeavour, households, manufacturing firms, servicing firms, etc is inventory control.
Inventory control is the supply of goods and services at the right time with the right quality and quantity. It is a
reliable means in which businesses are been managed to ensure customers are satisfied and organization remains in
operations via minimization of losses. Inventory management has been a problem to many business organizations in
Nigeria. Inventories provide a significant link between production and sales of product, and constitute a large percentage
of the cost of production. It is one of the most expensive and important assets of many manufacturing companies
representing a considerable percentage of the total invested capital. At any level of a firm, inventory is among the largest
investment made and therefore logically deserves to be treated as a major policy variable, highly responsive to the plans
and style of top management. However, to date in most organization, both analysts and managers have been relatively
unsuccessful in convincing top management to give this area the due consideration that it logically deserves
Inventories are basically stocks of resources held for the purpose of future production and/or sales. Inventories
may be viewed as an idle resource which has an economic value. Better management of inventories would release
capital for use elsewhere productively, (Ghosh and kumar, 2003). Hence Inventory control implies the coordination of
materials accessibility, controlling, utilization and procuring of material. The direction of activity with the purpose of getting

the right inventory in the right place at the right time and in the right quantity is inventory control and it is directly linked to production function of any organization.

This implies that profitability of any organization directly and indirectly is affected
by the inventory management system operated (Miller, 2010). Inventory of goods has many reasons why organization
should maintain it.
It is economically unsound and physical impossible to have goods arrive in a system exactly when demands for
them occur. Without stock at hand customers would have to wait for long period before their orders are fulfilled. Inventory
management is the control of materials used and stored in a company with the objective of providing exactly what is
required where and when it is required employing a minimum of residual stock and thus incurring the least possible cost (

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