ABSTRACT
The research provides
an assessment of the impact of stock management on the
Performance of an organization. It analyses the nature of
stock and profer principles and measures required for effective stock
management. The research portrays the significance of stock management and its
impact on the performance
On the organization. It provides a case study of the impact of stock management
On the performance of
Nigerian bottling company plc.
INTRODUCTION
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.Inventory is a
vital part of current assets mainly in manufacturing concerns. Huge funds are
committed to inventories as to ensure smooth flow of production and to meet
consumer demand. However, maintaining inventory also involves holding or
carrying costs along with opportunity cost. Inventory management, therefore,
plays a crucial role in balancing the benefits and disadvantages associated
with holding inventory. Efficient and effective inventory management goes a
long way in successful running and survival of a business firm.
Stock management in the retail supply chain follows the
following sequence:
Request for new stock from stores to head office
Head office issues purchase orders to the vendor
Vendor
ships the goods
Warehouse
receives the goods
Warehouse
stocks and distributes to the stores
Stores
receive the goods
Goods
are sold to customers at the stores
The
management of the inventory in the supply chain involves managing the physical
quantities as well as the costing of the goods as it flows through the supply
chain.
In
managing the cost prices of the goods throughout the supply chain, several
costing methods are employed:
Retail
method
Weighted
Average Price method
FIFO
(First In First Out) method
LIFO
(Last In First Out) method
LPP
(Last Purchase Price) method
BNM
(Bottle neck method)
The calculation can be done for different periods. If the calculation is done
on a monthly basis, then it is referred to the periodic method. In this method,
the available stock is calculated by:
ADD
Stock at beginning of period
ADD Stock purchased during the period
00100 AVERAGE total cost by total qty to arrive at the Average Cost of Goods
for the period.
This
Average Cost Price is applied to all movements and adjustments in that period.
Ending stock in qty is arrived at by Applying all the changes in qty to the
Available balance.
Multiplying the stock balance in qty by the Average cost gives the Stock cost
at the end of the period.
Using
the perpetual method, the calculation is done upon every purchase transaction.
Thus,
the calculation is the same based on the periodic calculation whether by period
(periodic) or by transaction (perpetual).
The
only difference is the 'periodicity' or scope of the calculation. - Periodic is
done monthly - Perpetual is done for the duration of the purchase until the
next purchase
In
practice, the daily averaging has been used to closely approximate the
perpetual method. . Bottle neck method ( depends on proper planning support)
CHAPTER
1
1.1
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
1
What is the nature of stock management
2
What are the principles and methods for
effective stock management
3
What is the impact of stock management on the
performance of an organization
4
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
1
To
determine the principles and method for effective stock management
2
To determine the impact of stock management
on the performance of an organization
3
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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