COVER
PAGE
THE
IMPACT OF INVENTORY CONTROL SYSTEM ON PUBLIC ENTERPRISES PERFORMANCE IN
NIGERIA: A CASE STUDY OF ABUJA URBAN MASS TRANSPORT COMPANY.
BY
SCHOOL OF BUSINESS AND HUMAN
RESOURCES MANAGEMENT NATIONAL OPEN UNIVERSITY OF NIGERIA, ABUJA, NIGERIA.
AUGUST, 2016
TITLE
PAGE
THE
IMPACT OF INVENTORY CONTROL SYSTEM ON PUBLIC ENTERPRISES PERFORMANCE IN
NIGERIA: A CASE STUDY OF ABUJA URBAN MASS TRANSPORT COMPANY.
BY
BEING
AN ORIGINAL RESEARCH PROJECT SUBMITTED TO THE SCHOOL OF MANAGEMENT STUDIES IN
PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF PGD PUBLIC
ADMINISTRATION PROGRAMME OF NATIONAL OPEN UNIVERSITY OF NIGERIA ABUJA, NIGERIA.
DECLARATION
I, ---------- do hereby
declare that this dissertation is entirely my own composition. All references
made to works of other persons have been duly acknowledged.
--------------------------
Your name
APPROVAL
This
is to certify that this research work was carried out under strict supervision
and has been approved for submission to the National Open University Abuja,
Nigeria in partial fulfillment of the requirement for the award of post
graduate diploma in public administration.
-------------------------------------------------------- ------------------------
------------------------------- Academic Adviser Project Supervisor.
-----------------------------------------------------
Administrator
DEDICATION
This work is dedicated
to God Almighty.
ACKNOWLEDGEMENT
It
is a known fact that a good research work involves many days of critical
thinking and brainstorming. To make this work a reality there were intellectual,
moral and physical contribution from different quarters.
First
and foremost, glory to the Almighty God who provided necessary enabling
conditions needed for this work.
I
also express sincere appreciation to my project supervisor, -----for his through intellectual guide in the course of this
research work.
I
thank my family especially parents for their support and encouragement.
I
also wish to acknowledge my classmate for his all round support and for making
this work a reality.
I
wish to acknowledge my siblings and colleague at work for their encouragement
and support.
ABSTRACT
This
research work explores the impact of inventory control system on public enterprises,
using the Abuja Urban Mass Transport Company as case study. As investment in
business enterprise inventory needs to serve the purpose of maximize resources
utilization. Inventory constitutes the most significant part of current assert
of larger majority of Nigeria enterprises ventures. Because of the relative
largeness of inventories maintained by organizations, considerable sum of an
organization’s funds is being committed to them. It thus become
absolutely/imperative to manage inventories efficiently so as to avoid the cost
of changing production rates, sub-contracting, unnecessary lost of sales and
back order penalties during peak demand. The problem of poor system of
inventory control have been identified to include overstatement of gross margin,
overstatement of net income, over-statement of current assets, poor decision
making, procurement challenges etc. This problem may eventually lead to
organizational failure and poor return on resources investment. The main
objective of this study is to determine whether or not inventories in the Abuja
Urban Mass Transport company can be evaluated and understood using the various
existing tools to optimization in inventory control. The study methods employed
include the chi-square method. It is observed that inventory control has
continued to play a leading role in determining the survival of any
organization. To a great extent a highly proportion of human, material and
financial is usually tied up in inventory. Inventory is classified into raw
materials, work – in – progress, finished goods and assets, the process of
effective inventory management involve the determination of the value of
inventory transparency and accounting purposes. In conclusion, a proper control
of inventory has a positive impact on an organization performance and
productivity, this is because inventory control improves the efficiency,
effectiveness and enhances prudency in managerial decision making. The answer
to the fundamental question of how best an organization which handles inventory
can be efficiently run is provided for in the analysis and findings of the
study. Consequently, recommendations in regular physical verification of stock
through the use of perpetual inventory system is made, enlightenment on the
importance of proper inventory control system to all supervisors and timing of
material, at the most favorable price conclude the research study.
TABLE OF CONTENTS
Title
page - - - - - - - - - - -
Certification
- - - - - - - - - - -
Dedication
- - - - - - - - - - -
Acknowledgement
- - - - - - - - - -
Abstract
- - - - - - - - - - -
Table
of content - - - - - - - - - -
List
of figures - - - - - - - - - - -
CHAPTER ONE: INTRODUCTION
1.1 Background To The Study - - - - - - - -
1.2 Statement Of Research Problem - - - - - - -
1.3 Objective Of The Study - - - - - - - -
1.4 Research Question - - - - - - - - -
1.5 Statement Of Hypothesis - - - - - - - -
1.6 Significant Of The Study - - - - - - - -
1.7 Scope And Delimitation Of The Study - - - - - -
1.8 Definition Of term - - - - - - - -- -
CHAPTER TWO:
LITERATURE REVIEW
2.1
Introduction - - - - - - - - - -
2.2
Conceptual Clarification - - - - - - - -
2.3 Theoretical Framework - - - - - - - -
2.4
Literature on the Subject Matter - - - - - - -
CHAPTER THREE:
METHODOLOGY
3.1
Research Design of the Study - - - - - - -
3.2
Population - - - - - - - - - -
3.3
Sample Size - - - - - - - - - -
3.4
Sampling Technique - - - - - - - - -
3.5
Instrumentation - - - - - - - -
3.6
Instrument Validation - - - - - - - -
3.7
Reliability of The Research
Instrument - - - - - - -
3.8 Procedure For Data Collection - - - - - - -
3.9
Method of Data Analysis - - - - - - - -
CHAPTER FOUR:
DATA PRESENTATION ANALYSIS AND INTERPRETATION
4.1
Results and Data Analysis - - - - - - - - -
4.2 Test of Hypothesis - - - - - - - - -
4.3
Discussion of Finding - - - - - - - -
CHAPTER FIVE:
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary - - - - - - - - - -
5.2
Conclusion - - - - - - - - - -
5.3
Recommendation - - - - - - - - -
5.4
Suggestion For Further Research - - - - - - -
Bibliography - - - - - - - - - -
Appendix I: Letter of Introduction - - - - - - -
Appendix II: Questionnaire - - - - - - - -
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Just like any
investment in enterprises every public or private organization requires
resources to carry out its activities and set objectives. These resources play
vital role in the survival and success of any organization. These resources
could be human or material. The material resources are known as inventories and
there are of three types in the manufacturing or services business and
enterprises:- Raw materials, goods – in process, services, finished goods,
infrastructure inventory (Ihunda, 2000).
Inventory control of
pivotal in effective and efficient organizations, it is also vital in the
control of materials and goods that have to be held (or stored) for later use
in the case of service. The principle goal of inventory control involves having
to balance the conflicting economic of not wanting to hold so as to guide
against the incurring of cost such as storage, spoilage, pilferage and
obsolescence and the desire to make items or goods available when and where
required (quality and quantity wise) so as to avert the cost of not meeting
such requirement (Anyanwu and Chima, 1999).
Drury (1996) defines
inventory as a stock of goods that is maintained by a business in anticipation
of some future demand. This definition was also supported by Schroeder (2000)
who stressed that inventory control has an impact on all business functions,
particularly operations, marketing, services accounting and finance.
Meigs (1987) defines
inventories as the aggregate of those items of tangible property which are:
1. Held
for sale in the ordinary course of business:
2. Are
in process of production for sale:
3. To
be currently consumed in the production of goods and service to be available
for sale.
Inventory control has a
very important effect on an organizations finance corporate performance and
human resources on firm or public enterprises.
Hermanson (1992) stated
that an organization can only prepare accurate income statement, statement of
owner’s equity, statement of cost of goods manufactured and balance sheet only
if the organization has correctly values it inventory.
Net income, for a
merchandising organization depends on the valuation and control of ending
inventory and for a manufacturing firm, on the valuation of the finished goods
and services inventory will lead to an over statement of cost of goods sold.
This would eventually result in an overstatement of Gross Margin and Net
Income, Current Assets, Total Assets and owner’s capital. Moreover, when an
organization misstates its ending inventory in the current year, the
organization carried misstatement into the next years, the beginning inventory
amount for next year. Also an error in one periods ending inventory automatically
causes an error in the opposite direction in the next period (Braid, 2000).
The above underscores
the important role played by inventory valuation in determine the performing of
a public enterprises. Every public enterprises has the objective of welfare
service, not for profit making but the management put in a lot of effort in
order to effective achieve this objective.
According to Inanga
(1990) in a business organization, the underlying motive of its economic
activities is profit making. It is the return received on a business
organization undertaking after all operating expenses have been met and
deducted from the sales made for a specific period “profit occurs when there is
excess of the value of output over the cost of inputs (resources) used by an
organization. When the reverse happens. It is a loss profit is the main
objective of business organization like public enterprises that are set up for
charitable or welfare purpose and is classified as “non-profit organization”.
The performance of an organization
is dependent on a number of factors (both internal and external) inventory
control, being one of the tools that internally determine the performance and
profitability of public enterprises, also determines how efficient an
organization management achieve it goals. It against this backdrop that we
undertake this research work. This research work will, therefore examines the
impact of inventory control system on public enterprises performances in
Nigeria, using the Abuja Urban Mass Transport Company. The main purpose of this
study is to determine the effect of inventory system on public enterprises
performance. Public enterprises could benefit more inventory control system as
it brings about cost control and efficiency of both human and material resources.
1.2 STATEMENT OF THE PROBLEM
Due to the current rate
of business failure there is an upsurge of interest to why some public
enterprises succeed and why some fails. As the blood of an organization, how
can inventory be properly valued? Also,
what role does this control of inventory play in enhancing the performance and
managerial efficiency of public enterprises? Many business organization due to
lack of proper inventory control suffer great loses. Some organizations have
gone under due to the negative impact of either over-control or under –control
of their inventory.
The aim of an inventory
system is to minimize the cost of an inventory that is holding whilst at the
same time maintaining a certain level of customer services. Clearly, there are
some problems in having either too little inventory or high inventory.
Basically, there are three reasons why inventory should be control and held.
These are: Transaction motives, precautionary motives and speculative motives.
These motives are pattered towards the Keynesian theory of holding money which
entails that: business hold inventory in form of stock for transaction in order
to meet the day to day demand of their customers, and precautionary so as to
avoid situation of stock out and
lastly speculative in
order that they may gain out of an unprecedented situation. Speculative and
precautionary motive are both vital to the Abuja Urban Mass Transport Company.
This research work
intends to solve the problems that are associated with the keeping of either a
low level of inventory or a high level of inventory. It has been observed that
there are problems associated with either of the levels. A further problem in
inventory control system is the cost that is incurred in providing service to
customers. This work however intends to highlight the probable solution to
this. Inventory control systems are primarily held to ensure nothing is out of
stock, for service or sale. The problems now arise of either to hold high –
level of stock. Lastly, the problem of estimating the cost of inventory is a
major constraint on inventory control system. As there are several method of
stock, resources estimation or valuation.
Hence, for public
enterprises to excel in performance efficiency, profitability and managerial
protectiveness in decision – making, there is need for the inventories of that
organization to be properly controlled. There is also a need for a relationship
to exist between inventories control efficiency of a public enterprises
management.
1.3 OBJECTIVES OF THE STUDY
The general objectives
of the study is to determine the effect that intervention valuation has on the
performance, managerial efficiency and customers satisfaction of the Abuja
Urban Mass Transport Company with a view to suggestions some measure of improving
inventory control system.
To meet it general
objective, the study will focus on the following specific objectives;
1. To
inquire the inventory control system used in Abuja Urban Mass Transport
Company.
2. To
find out the level of consistency in the sued of this system and to see if it
conforms to generally accepted inventory country principles.
3. To
ascertain the impact of different inventory control system on an organizational
performance and managerial efficiency.
4. To
determine the problems associated with inventory control at Abuja Urban Mass
Transport Company.
1.4 RESEARCH QUESTIONS
i.
Does the inventory control system used
by an public enterprises affect the public enterprises performance?
ii.
Does inventory control system affect
management decision making?
iii.
How consistent do public enterprises in
Nigeria use inventory control system.
iv.
What are the problems associated with
inventory control in Abuja Urban Mass Transport Company?
1.5 RESEARCH HYPOTHESIS
In order to ensure
objectives of the research and also provide answer to the research problems,
the following research hypotheses are formulated:-
1.
Ho: Inventory control system does not
improve the Abuja Urban Mass Transport Company performance.
H1:
Inventory control system improves
the Abuja Urban Mass Transport Company performance.
2.
Ho: Inventory control system does not enhanced efficiency in
managerial decision making.
H1: Inventory control system enhances
efficiency in managerial decision.
1.6 SIGNIFICANCE OF THE STUDY
Inventory control
system is an important aspect of running any business organization be it
manufacturing, service oriented or merchandising. This is because when there is
a proper control
of inventory, the
organization will be successful while improper inventory control system would
lead to severe losses. Therefore, inventory control system is of primary
importance in the affair of any public enterprises or corporation.
This research will show
the various method and their effects on managerial efficiency and public
enterprises performance. This will help the management of the Abuja Urban Mass
Transport Company the government, manufacturing, merchandising, individuals,
researcher and other interested users to select and apply suitable inventory
control system.
This study would be of
further great value as a reference material to student, researcher and other
interested persons who may wish to carry out a research on inventory system in
any form.
1.7 SCOPE AND RECOMMENDATION
The study is restricted
to the Abuja Urban Mass Transport Company. It will deal only with inventory
control system and its corresponding effects on the management efficiency and
performance of Abuja Urban Mass Transport Company. This research will likewise
be created on the relevant department if the public enterprises namely;
purchasing, stores human resources, customers service, accounting among others.
The research of this
magnitude is not without some limitations. The speed and cost of getting
material /data have limited effect on the study, to this end, the bottle neck
associated with some of the organization contacted for materials actually
slowed down data gathering and analysis.
The above limitations
does not however in any way nullify the validity and reliability of the
conclusions that have been reached in this research, it only makes room for
unavoidable errors.
1.8
DEFINITION OF TERMS
INTERVENTORY:
Is seen as the aggregate of
those items of tangible property which are to be currently
consumed in the production of goods and service to be available
for sale or servicing. It also
includes raw materials, work in progress and finished goods.
INTERVENTORY
CONTROL: Is defined as one of means to determine internally
the performance and
profitability of an organization it is the whole process by which materials are made
available when and where it is
required. It is the system acquisition, management and requisition
of stock in an organization.
PERFORMANCE:
This about employee input-output measured relationship. Performance is employee productivity.
MANAGEMENT:
This is made up of top and middle level management. Top management includes shareholders, boards of
directors and managing director while the
middle management includes heads of department, managers, deputy and assistant managers.
TOP MANAGEMENT:
This is management paradigm in which decision starts from highest echelon to the lowest echelon of an
organization, the participation of employees
in decision making extremely or
does not exist.
BOTTOM-UP MANAGEMENT: This
is modern management paradigm in which decision making starts from the
lowest echelon to the highest echelon of the
organization. This encourages brainstorming between the management and the employees
before decisions are taken on a particularly issues, sentiment it is called
industries democracy.
MOTIVATION:
This describes the level of desire workers feel to perform, regardless of the level of joy or happiness.
HUMAN CAPITAL:
This refers to the skills, knowledge and experience possessed by an individual, this formed the terms of
terms of value or cost to an organization.
DECISION
MAKING: It is cognitive process resulting in the selection
of a belief or a course of
action among several alternative possibilities.
STOCK
KEEPING UNIT: It is a unique combination of all the
components that are assemble into the purchasable item.
PRODUCTIVITY: This
is a measure of the efficiency of production, that is of production’s capability to create income, which is measured by the
formula real output value
minus real input value.
EFFICIENCY: It
about time management and limiting wastages in resource
EFFECTIVENESS:
It also about quality use of resources and obtaining good result
REFERENCES
Anyanwu, A. and Chima,
B.O (1999) Introduction to Business Administration. Enugu: Dran Alobe Publication.
Braid, J.J (2000) The
theory and practice of cost accounting: London Spring field Publishers.
Drury, C. (1987)
Management and cost Accounting (3rd ed) London Chairperson and Hall.
Hermanson, S.T (1992)
Management Performance Index and Public Enterprises. New York: Friesland Spring Books.
Ihunda, C.C (2000)
Management Information System, Springfield Publishers.
Inanga, P. (1990)
Organizational Profitability and Managerial efficiency, Lagos: Host Print Book.
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