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INVENTORY MANAGEMENT AND PRODUCTIVITY LEVEL IN MANUFACTURING INDUSTRIES (A CASE STUDY OF SIBA GROUP OF COMPANIES IKOT EKPENE)
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This study was a survey research aimed at finding out the impact of inventory management and the productivity level of manufacturing industries. The study was conducted in SIBA group of companies Ikot Ekpene, Uyo. One hundred management staff formed the population out of which twenty (20) was selected through simple random sampling technique. A well structure questionnaire was used for data collection and was analyzed using the chi-square (X2) analyzing technique. It was found out that inventory management has a significant technique and requirement. That there is need for holding inventories in manufacturing industries and that there is an impact of inventory management on the profit of manufacturing industries and that profit of manufacturing industries. It was recommended that management of manufacturing industries should be attaining seminar so as to update the skill and knowledge in inventory management among other recommendations.
1.1 Background of the Study
According to Akpan (2004), every business organization including manufacturing industries, is established for one motive or the other, which must be connected with manufacturing of goods or rendering of services. Since these goods and services must be efficient and adequate then the firm productivity or level of productivity becomes inevitable especially now that competition as well as challenges posed by the business environment is the other of the day.
Perhaps, it is on the account that Inyang (2006) pointed out that, in this present age that modern business organization face increasing global competition and challenges and only those establishment that are prepared to re-invent, injuvenate and re-engineer their work processes and services can survive.
According to Hornby, (2001), productivity is the rate at which a worker, a company or a country produces good and the amount produced compared with how much time, work and money is needed to produce them.
Therefore, as a derivative from its definition the issue of an enterprises productivity becomes a major concern for corporate executives. Like other business organization, manufacturing industries strive to attain an appreciable level of productivity, qualitatively and quantitatively in a bid to satisfy their customer’s numerous demands, hence, the management of these industries is faced with the strategies and techniques to adopt to enhance higher productivity one of which is inventory management or control inventory refer to stock.
Many industries are faced with what level of material (which Okoh and Okories, (2006) saw as the level of least possible cost. This is where inventory management holds away because raw-materials, sub-assemblies and finished product from the top element of cost and as such as efficient system of inventory management leads to a significant economy in total cost.
Inventory management according to Okoh and Okorie (2006) involves a number of issues like the determination of quality and quantity purchasing store-issuing and dispatching manufacturing industries holds inventories for one reason or the other. So obvious is the fact when some product and commodities are scare, inventory management becomes pertinent so as to yield more profit. Conversely, some manufacturing industries do not hold inventory at all or for too long to avoid loss due to deflation or fear of their product loosing, value, in addition some school of thought maintain the customer, competent staff profit and goodwill.
Given the background of inventory management productivity, what is the impact of inventory management in the level of productivity of manufacturing industries? And is there any relationship between inventory management and profitability level of manufacturing industries? It is against the backdrop that this study is undertaken.
1.2 Statement of the Problem
In manufacturing setting, inventory consists of raw materials or work-in-process and the finished goods manufacturing industries keep or hold inventory in inventories as a deliberate investment policy. While finished goods inventory may be held to meet unexpected demands made up on the firm by customers. Thus guiding against possible stock out with its attendant loss sales revenue. Despite the advantages of holding inventory, there are enormous cost associated with its, for example, apart from inventory in whatever form means longing down working capital which affects the liquidity position of a firm. Now, in the case of invent affecting working capitals, what are the impact of inventory management and the productivity level of manufacturing industries and how this affect the profitability level as well? The above underscored the need for the study.
1.3 Purpose of the Study
The purpose of the study aimed at the following objective.
- To examine inventory management techniques and its requirements.
- To examine the need for holding inventory in manufacturing industries.
1.4 Research Questions
The following research questions were asked in the study:
1 Does inventory management have significant technique and requirement in manufacturing industries?
- Does holding investment have any effect on manufacturing industries?
- Does inventory management have any impact productivity level of manufacturing industries?
- Does inventory management have any impact on the profit of manufacturing industries?
1.5 Significant of the Study
The study will be of immense importance to the manufacturing industries, as it will provide them will the skill and knowledge of inventory management business man and women as well as small business industries will find this study a valuable asset or guide to them day-to-day operation as then affect inventory management. Also, prospective researchers and students will finds this study a good source of reference.
1.6 Research Hypothesis
The following hypotheses were formulated to guide the study.
- Inventory management has no significant techniques and requirement in manufacturing industries.
- There is no need for holding inventories in manufacturing industries.
- There is no impact of inventory management on the productivity level of manufacturing industries.
- There is no effect of inventory management on the profit of manufacturing industries.
1.7 Scope of the Study
The effective management of the inventory is crucial to the performance of many organizations. Inventory is one of the key determinants of the productivity of cement industry. Inventory management plays an important role in the cement industry both in production of new assets and operational maintenance of existing assets.
Therefore, the continuous availability of inventory is prime requirement for uninterrupted working and better capacity utilization. The purpose of his paper is to examine the efficiency of inventory management in the select five cement manufacturing companies in Tamilnadu. The study also highlights the correlation.
1.8 Limitation of the Study
Management is getting more and more attention in today’s highly competitive environment in this context, the aim of this study is to test the hypothesis that efficient (lean) inventory management lads to and improvement in a firm’s financial performance.
Design/methodology/approach-data for the analysis came from the ICAP database, which contain financial information on all medium to large Greek firms the sample period extended from 2000 to 2002. for each year all manufacturing firm with the corporate form of societies anonyms operating in any one of the three representative industrial sectors in Greece: food textiles and chemicals were selected given the great number of the possible determinant of performance it is difficult to isolate the effect of inventories even by using large sample and advanced methodologies.
1.9 Definition of Term
- Finished Goods Inventory: These are the completed product ready for sales or distribution (Drury, 1995).
- Inventory: Are the goods, which are held with a view to resale a being converted into, finished or semi finished state (Drury, 1985)
- Inventory Control: Refers to the method of ensuring the right quantity and quality of the relevant stock is available at the tight time and at the night place (Eward, 1990).
- Productivity: The rate at which a company produces goods and the amount produces compared with how much time, work and money is needed to produce them (Hornby, 2001).
- Profit: This is the benefit derived from the product being sold after deducting the cost of production (Drury, 1995)
- Raw Materials: This refers to the material components used in the manufacturing of product (Edward 1990)
- Work-In-Process: This is a partly finished goods material suit, assemblies etc held between manufacturing stages (Drury, 1995).
1.10 Historical Background of SIBA Group of Companies
The vision to established SIBA group of companies came as a result of deliberate effort to compliment the vision of Akwa Ibom State Government to industrialize the state. In March 30th 2010 SIBA Group of Companies Ikot Ekpene commenced operations. The factory is situated in Itu Ikot Ekpenyong, in Ikot Ekpene Local Government Area, Akwa Ibom State Nigeria.
The factory was commission on April 17th 2012 by the present Governor Chief Dr. God’swill Obot Akpabio (CON) the Governor of Akwa Ibom State with the staff strength 731 employees. This is inclusion of 426 casual labours. They are pulled from the 31 Local Government Area of, Akwa Ibom State and beyond. the president and CEO of the SIBA Group of companies is Chief Sunday while the board of directors of the companies are Mr. Cosby Sunday Ibanga, Mr. Idongesit Ibanga Umoh, Mr. Ime Ibanga Umoh Mr. Ukpong Ekuki nah-Bassey, Mrs. Vivian Sunday Ibanga as well as Bar David Umoh as legal Adviser.
SIBA group does not only reduce unemployment in the state but also is a melting pot of unity, and most importantly, they are serious actor. The pursuant of vision to make Akwa Ibom State a unified entity and the national economic power house, Siba group is a conglomerate of the following companies. SIBA maritime Agency Ltd; SIBA flame Ltd (make of SIBA polythene) SIBA food and confectioners Ltd (producers of SIBA biscuit, SIBA premium, table and sachet water) Visi View (Nig) ltd; Visi View Out Door Catering Service and Permsek (Nig) Ltd. SIBA group also include media outfit namely: Weekly torch and the light Newspapers which is under the torch publishing and communication. Each independently charged with the responsibility of providing world class services to the numerous clients both within and outside the state.
SIBA factory produce 672 dozen of plastic product annually (using films extrusion technology) the star product, SIBA biscuit produce 90,000 cartons of fantastic – yummy biscuit produce under a hygiene environment yearly. SIBA premium table water is one of the hygiene table water in the region. It produces 500 cartons of bottled water and 5000 bags of sachet water for the numerous customers daily. The product and service rendered by SIBA Group of Companies suggest that the company has a financial statement analysis on the company profitability at least for a while. Hence, the need to choose SIBA Group of Companies as a case study for the impact of financial statement analysis on the profitability and efficiency.