THE EFFECT OF MATERIALS MANAGEMENT ON THE PROFITABILITY OF THE MANUFACTURING COMPANY
This research was to examine The Effect of Materials Management on the Profitability of the Manufacturing Company with special reference to 7Up Plc, Kaduna. This study show with statistical evidences that materials management significantly increase the profitability, wellbeing and productivity of the organization. The research methodology adopted has the limitations peculiar to the use of questionnaire like, the uncooperative attitude of respondents, slow pace of instrument retrieval, etc. Although the study adopted the use of simple languages, but some respondents still found it difficult to understand some concepts and they had to be put through, so much time is wasted in the course of doing this. Finally, the opinions of the respondents form the basis of this research, but this did not in any way affect the quality of the study. Simple percentage distribution was used in the presentation and interpretation of the data collected. To this end, the data were tabulated in a frequency distribution form and the corresponding percentage equivalent were calculated and recorded respectively. To test the hypotheses earlier formulated, the chi-square statistical method was also adopted.Materials management should be handled through the act of directing and controlling the acquisition and usage of materials in the organization and it should be seen as the most important resources for any organizational production. Without the materials, no one can do anything. In the light of field discoveries, the information gathered will assist the management of any organization in general and 7Up Plc, Kaduna in particular, in taking appropriate steps of inculcating means of managing materials as parts of the prerequisite for improving organisational productivity.
It is quite obvious that every organization keeps materials which form one of the pivotal elements in the organization. Any establishment that is set up to produce one thing or another; any organization could either be goods producer or services delivery or both, and they must make use of materials in all their operations, and these materials must be properly managed to achieve the desired objectives.
Materials management is one of the most technological choices in any organization. Thus, it must be decided as to when, how and by who materials should be handled. It covers the processes of moving, packing and storing materials. Note that in the past, there was no any distinct method in use.
However, today the methods employed are numerous such as: The Automated Guided Vehicle (AGV), the Automated Storage and Retrieval System (ASRS).
1.1 Background of the Study
What dominates organizational operations and there seeks to transform management practices is no other than material management.
It is obvious that in all kinds of organizations, management effort is often times committed to the effective and efficient management of materials. Furthermore, the management practices have gained the understanding that the success of any can only be guaranteed in today’s circumstances by a practical and holistic commitment to materials management.
Materials management is not a mere technique, but a philosophy anchored on a belief that long run success depends on the uniform commitment to materials management in 7Up Plc, Kaduna Plant which can be achieved via the interplay of both the analytical and holistic facilities of the personalities concerned.
Over the last decade, our world has changed dramatically due to the growing phenomenon of globalization and revolution in information technology. There is tremendous demand on companies to lower costs, enlarge product assortment, improve product quality, and provide reliable delivery dates through effective and efficient coordination of production and distribution activities. To achieve these conflicting goals, companies must constantly re-engineer or change their business practices and employ information systems (Mahesh, 2006).
Materials Management has always been an area of scrutiny for organizations. This has become a central focal point as trends from the supply chain arena have indicated that substantial operating cash can be freed with leaner and more efficient handling of inventory.
As organizations examine the state of their inventory, they often find that visibility across locations and warehouses are inadequate, stock levels are inconsistent, demand is uncertain, and communication between stocking locations or warehouses may be minimal or non-existent. Among other things, the lack of an integrated interaction between peripheral systems and materials managers leads to unnecessary purchasing and overstocking.
The concepts of “materials management,” “physical distribution management,” and “logistics management” are the primary materials organizational tools which have been used successfully in the past and will be used increasingly in the future to achieve closer coordination and control of a firm various materials activities.
In general materials management is concerned with bringing materials from outside of an organization to the point of production and moving in processes.
If we distinguish between the operational function of customer service and the resultant goal of customer value and satisfaction, this discussion leads us to conclude the consequences of materials management are lower costs and improved customer value and satisfaction to achieve competitive advantage. Industry reports support this contention (Performance Management Group, 2001).
The fast developing and technologically changing environment has placed before the materials manager a tremendously challenging task and responsibility. The task is really herculean when we recognize the importance of materials, equipments and components per annum that go into the production channels. The challenges become tough because the money tied up in inventory or materials and equipment are enourmous.In fact, in many organizations (big and small), materials form the largest single expenditure item. According to Subramanian (1974) an analysis of the financial statements of a large number of private and public sector organizations indicates that materials account for nearly 60% of the total expenditure. Consequently, the importance of materials management lies in the fact that any significant contribution made by the materials manager in reducing materials cost will go a long way in improving the profitability and rate of return on investment. Such increase in profitability, no doubt, can be affected by increasing sales.
While most of the writing and discussion on materials management is on acquisition and standards, much of the day to day work conducted in materials management deals with quality assurance issues. Parts and materials are tested, both before purchase orders are placed and during use, to ensure there are no short or long term issues that would disrupt the supply chain. This aspect of material management is most important to the heavily automated industries, since failure rates due to faulty parts can slow or even stop production lines, throwing off timetables for production goals (Mentzer, 2001).
The other major component of materials management is standards compliance. There are standards that are followed in supply chain management that are critical to a supply chain’s function. For example, a supply chain that uses just-in-time or lean replenishment requires absolute perfection in the shipping of parts and materials from purchasing agent to warehouse to place of destination. Systems reliant on vendor-managed inventories must have up-to-date computerized inventories and robust ordering systems for outlying vendors to place orders on (Hax and Candea, 2004).
Effective materials management according to Christine (2002) is essential in order to provide the best service to customers, produce at maximum efficiency, and manage inventories at predetermined levels to stabilize investments in inventories. Successful materials management requires the development of a highly integrated and coordinated system involving sales forecasting, purchasing, receiving, storage, production, shipping, and actual sales. Both the theory of costing materials and inventories and the practical mechanics of cost calculations and record keeping must be considered.
Costing materials present some important, often complex, and sometime highly controversial questions concerning the costing of materials used in production and the cost of inventory remaining to be consumed in a future period. In financial accounting, the subject is usually presented as a problem of inventory valuation; in cost accounting, the primary problem is the determination of the cost of various materials consumed in production and a proper charge to cost of goods sold (Freeman, 2006).
1.2 Statement of the General Problem
Materials management as we all know is considered “life blood” of every organization. Unfortunately enough, most companies have entrusted the materials management functions into the hands of mediocre.
Therefore, the basic problem with which the study is concerned about is the unethical practices in the 7Up Plc Kaduna plant which includes: the placement of unqualified personnel on the functional, they do not have professional knowledge about, over invoicing and local inaccessibility of raw materials. Also, therefore is the problem of wastage and pilferage of materials in 7Up Plc, Kaduna plant.
1.3 Objectives of the Study
The main objective of the study is to determine the impact of materials management in the productivity of Seven-Up Bottling Company. Other specific objectives include to:
- Identify ways in which materials can be controlled to increase productivity in 7Up Plc, Kaduna plant.
- Identify and evaluate how buying, stock taking, stock checking and stock recording in the organization ensure continuity of operation in 7Up Plc Kaduna plant
- To outline the accompanying benefits that will accrue to the management of the organization if materials are properly managed.
- Identify how shortage of quality personnel deter the effective management of materials in the organization.
- To recommend procedures, processes and techniques for effective and efficient management of materials in the organization.
1.4 Significance of the Study
This study would add to the knowledge of the subject matter, “materials management” and equally help managers in 7Up Plc Kaduna plant in tackling the effects of stock taking, stock checking and stock recording in the organization, as one of the salient components of materials management.
It would enable managers to boost productivity and minimize or eradicate problems related to materials for students and businesses that will be embarking upon materials management operations.
It will generally help management in reducing wastage and pilferage of materials and equally enhance proper utilization of materials.
1.5 Research Questions
- Can materials management increase productivity in organization?
- Can proper buying, stock taking, stock checking and stock recording ensure continuity of operations in 7Up Plc Kaduna plant?
- What are the benefit that will accrue to the management of the organization if materials are properly managed?
- Does shortage of qualified personnel deter the effective management of materials in 7Up Plc Kaduna plant?
- Can formidable procedures, processes and techniques bring about effective and efficient management of materials in an organization?
1.6 Scope of the Study
The study is concerned with materials management as an effective tool for productivity in Seven Up (7-Up) Nigeria Plc Kaduna plant. The study would cover the practical activities performed by Seven Up (7Up) Nigeria Plc Kaduna plant from the identification of new order up to the issue of ordered materials to the user department from 2008 – 2012).
1.7 Limitations of the Study
In every research work, the researcher is bound to face hitches. One of the problems anticipated during this research study include lack of cooperation from subjects or objects leading to use of smaller than anticipated numbers, low return of questionnaire and inability to use correct data gathering instruments due to ignorance about their availability. Another limitation was the attitude of the staff during visits to the organization. At the end, despite all the constraints, I was able to conduct the research successfully.
1.8 Definition of Terms
Stocks: These are raw materials of varying qualities held in store house.
Stores: This is a house or a structure prepared for safe keeping of materials.
Logistics: This is the process of averaging the movement and storage of goods and materials from their source to the point of ultimate consumption.
Bulk Issues: These are materials that are made in set agreed quantities in designated departments.
Obsolescence: These are items held in stock which becomes out of date and no further use to the organization.
Distribution Requirement Planning (DRP): This is a requirement placed by customers at the points of use or demand.
Stock Yard: This is an open air place in which materials may be kept for reasonable time without serious deterioration.
Work in Progress (WIP): These are inventories of materials in a part finished or partially assembled state.
Scrap: These are wastes, used or surplus materials or part arising out of manufacturing processes or other activities.
Stock Checking: This involves the inspection of materials for quality and quantity.
Stock Taking: This is the physical counting of materials in the store.
Materials Requisition Planning (MRP): This is a set of logically related procedures decision, rules and records designed to translate or master production schedule into net requirement and planned coverage of such requirements for each component inventory item needed to implement a schedule.
Inventory Status File: This is a document used in keeping records of what is in stock and allows the gross requirements to be adjusted to net requirement by taking into account the current position.
Automated Guided Vehicles: These are trucks used in the store house with no driver but guided automatically.
Materials: These are items used for production of goods and services.
Replenishment: This is the process of supplying back materials in order to replace what has been used up.
THE EFFECT OF MATERIALS MANAGEMENT ON THE PROFITABILITY OF THE MANUFACTURING COMPANY