CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF STUDY
The American institutes of accountants defines the term inventory as
“the aggregate of these items of tangibles properties which are held on
sales in the ordinary course of business, are in process of production
for such sale or one to be currently consumed in the production of goods
or services to be available for sale”. Advanced accounts.
Inventories are the significant portion of most forms of assets which
accordingly requires substantial investment in order to keep these
inventories from becoming unnecessarily large, inventories must be
managed efficiently. In efficient procedures regarding inventory and
some items of stocks, other overstock, necessitate excessive
investment. Inefficiencies ultimately will have an adverse effect upon
profits, thus the effect of inventory control in flexibility and level
of investment required in categories represent two sides of the same
coin. These are various principles of inventory control which will be
viewed from the content of a profit oriented organization form which a
base can be formed for the title of the project.
In the modern business worlds, greater importances have been put to
the control of inventory. Its concern in the management of inventory
control must be to provide right goods in right condition at the right
time. It implies that, the control procedure should be able to;
i. retain appropriate stock levels
ii. Ensure proper use of stock in business operation.
iii. Ensure the inventory is duly accounted for.
iv. Safe guarding of stock against loss or misuse the
management needs to ensure that adequate control procedures for
purchasing and controlling of inventory in a way that optimum balance is
obtained between efficient control and economy.
1.2 STATEMENT OF THE PROBLEM
Using information technology in inventory control is one of the most
recent aspects of the modern business method. A lot of establishments
engage diverse strategies to achieve accountability goal. The control
problem of inventory control as it store and proper recondition of
possible loss to a business through interruption of production or
failure to meet other with the holding cost of stock large enough to
give security against loss.
In examine the concept of control to know weather the present
inventory control of company does not provide for reliability for the
control designed. It can therefore be seen that for us to fully discuss
inventory control in KRPC. It is essential to examine and evaluate the
following as they exit in the oil and gas sectors
(a) accounting system
(b) stock taking procedure
(c) Management supervision.
The complexity of modern business techniques and the increase in the
size of business units encourage the adoption and practicalization of
inventory control.
For inventory control to operate efficiently and effectively there
should be a perpetual inventory to facilitate regular checking and it
obviates closing down of stock taking. The balance of any account in
stores ledger should give an accurate balance with the bin lard or stock
control record. In most private organization there is tendency to say
that there can be no effective system of control, its inventory control
as the stock keeper control many division with only few staff to assist
him through the oil and gas sector (KRPC) understudy, has advance
information technology on inventory control, but lack of proper
personnel to handle the programmers is still a bottleneck for proper
recondition, we shall examine whether or not there is a provision for
control which ensure profit maximization in the company.
1.3 OBJECTIVES OF STUDY
The study is aimed at realizing the following objectives:
i. Real sizing the impact of information technology on inventory control in KRPC
ii. To know the importance of information technology organizational performance as a whole.
iii. To provide useful recommendations where necessary to where the study is related.
iv. To give other and future researchers to improve where this present research stop.
1.4 STATEMENT OF HYPOTHESIS
Ho: the usage of information technology on inventory control does not have a positive impact on material usage.
Hi: the usage of information technology on inventory control has a positive impact on material usage.
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1.5 SIGNFICANCE OF THE STUDY
The significance of the study is to asses the impact of information
technology in inventory control in KRPC and also to suggest and make
recommendation to problems that may likely occur if information
technology has not been used to control inventory in oil and gas sector.
1.6 SCOPE OF THE STUDY
The scope is limited to all aspect of inventory control in a
production industry and will serve as a useful guide to users and
researcher who would want to know on KRPC a well as inventory control.
This research work covers the following:-
i. The concept of inventory control.
ii. The concept of information technology
iii. Method of inventory control
iv. The effect of information technology on inventory control
1.7 LIMITATION OF THE STUDY
A study of this nature would normally entail investigation into a
variety of issues to be able to achieve a comprehensive study of the
problem; a lot of constrains would be encountered in form of collection
of data. Lack of adequate information and scarcity of researcher’s
infrastructures. As a result of this, certain limitation will be imposed
on the area covered.
Firstly, the study will be confirmed to KRPC who does not have
library section, which would have ease the researcher’s effort by
providing information containing its comprehensive details of it’s
operational background from it’s inception.
Secondly, inaccessibility of data (collection of data) to provide the
necessary information were difficult to acquire especially the
financial figures, some of the employees who co-operated were not in
better possession of the facts and figures necessary in this project.
Thirdly, limited area of study, there are many section in the
organization, and a lot of forms of inventory, however, the researcher’s
intension is to concentrate only on the material store for the project.
These problems apparently pose serious limitation of this project and
the researcher has to work with data available.
Finally, there are hardly many writers on the subject matter,
therefore text books on this topic are scarce, so the information was
gathered from books of accounting, purchasing, internet also due to
using such as liquefied petroleum gas (LPG), petrol, automotive gas oil
or diesel oil, kerosene, fuel oil and sculpture and those from the
lubricating oils complex historical base oils, asphalt and waxes.
1.8 HISTORICAL BACKGROUND OF KRPC
The decision to construct the third Nigeria National in 1974 along
with second (NNPC) refinery located in warri, however, it was decided
that work would commence on the construction of their refinery wherever
the projection of the consumption of petroleum products justifies it.
By early 1975, in view of fuel shortages experienced then, the
federal government decision that work on the third refinery should be
advanced. It was built so that it could meet up with the fuel demand
then.
Based on feasibility studies curried out, which took into
consideration the consumption of various petroleum products within the
Northern zone, and the adequate means of disposal for the surplus
products. A crude oil capacity of 42,000 barrels per stream day (BSPD)
could be easily justified. Hence, the refinery was designed for the
capacity of 60,000 barrels per stream day (BSPD). It was much later that
the federal Government decided that the capacity for more barrels per
stream day (BSCD) which would have led to the production of large
equinity of heavy ends and no one practical and variable solution is
reprocessing the heavy fuel. In order to do this, the whole project plan
had to be modified so that what initially was planned to be a simply
shydrosking type of refinery developed into integrated refinery. The
refinery would now be able to produce a wider variety of petroleum
products, some of which should be lubricating base oil. Hence, it
becomes necessary to import suitable paraffin base crude oil from
Venezuela, Kuwait, or Saudi Arabia.
Products from Kaduna refinery are to include fuels.
1.9 DEFINATION OF TERMS
INVENTORY, MATERIAL, STORES: - these are words that
are used inter-changeably and they refer to goods in different forms,
for different purpose, such as for production, maintenance, processing
of finished goods.
STOCK: - these are the list of stock (inventory). One item in this list referred to stock or material.
KRPC: - is an acronym of Kaduna refinery and petrol chemical company
NNPC: - is also an acronym of Nigerian national petroleum co-operation (NNPC)
STOCK TAKEN: - is a complete process of verifying the physical qualities, or balance with a view to ascertain the actual balance in the store.
STOCK MANAGEMENT: - Are the activities involving store handling, store security and store maintenance.
INFORMATION TECHNOLOGY: - is the theory and practice of using computers to store and analyse information.
STOCK OUT: - This occurs when there is insufficient stock to Meet production requirements.
STOCK TURNOVER: -This is the ratio which cost of inventory is used per annum the average stock of inventory.