EFFECT OF INVENTORY CONTROL ON PRODUCT QUALITY IN THE CADBURY NIGERIA COMPANY

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CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the study

Inventory control is pivotal in effective and efficient organization. It is also vital in the control of material and goods that have to be held [or stored] for later use in the case of production or later exchange activities in the case of services. The principal goal of inventory control involves to balance the conflicting economics of not wanting to have too much stock. There by having to tie up capital so as to guide against the incurring of costs 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.

Inventory problem of too great or too small quantities on hand can cause business failures. If a manufacturer experiences stock-out of a critical inventory system, production halts could result. Moreover, a shopper experts the retailer to carry the item wanted, if an item is not stocked when the customer thinks it should be, the retailer losses a customer not only on that item but also on many items in the future.

The conclusion one might draw is that effective inventory control can make a significant contribution to a company’s profit as well as increase its return on total assets. It is thus the control of this economics of stockholding, that is appropriately being refers to as inventory control. The reason for greater attention to inventory control is that this figure, for many firms is the largest item appearing on the asset side of the balance sheet.

Essentially, inventory control, within the context of the foregoing features involves planning and control. The planning aspect involve looking ahead in terms of the determination in advance:

(i) What quantity of items to order; and how often do we order for item to maintain the overall source – store sink coordination in an economically efficient way.

(ii) How often [periodically] do we order for item to maintain the overall stock coordination in an economically efficient way.

The control aspect, which is often described as stock control involves following the procedure set up at the planning stage to achieve the above objective. This may include monitoring stock levels periodically or continuously and deciding what to do on the basis of information that is gathered and adequately processed.

Inventory to a manufacturing concerns means:

(a) Raw Material: Materials, sub assemblies from other plants or purchases from suppliers, which are used to manufacture final products.

(b) Goods in Process: Also called work in process are the uncompleted goods or goods that are skill in the process of completion. They are also goods in transit from raw materials to the final products.

(c ) Finished Goods: They are already completed products.

(d) Supplies Inventories: They are fixed assets of the company, the activities of manufacturing firms includes.

i. Purchase of raw materials

ii. Conversion of raw materials into the final products

iii. Sales of the final product to the consumers, the retailers and the wholesalers. In all cases, inventory control performs the functions of separating all the prominent successive activities or stage in the manufacturing and distribution process. This claudicates that the chief activity is to make use of inventories to successfully perform their respective operations and on the other hand, inventory has to pass through these operations in order to attain the primary corporate objective.

In between is exercise, a lot of decisions are to be made by different operational sections in the plants. Decisions like what to invest, when to invest, how to invest on inventory and its corresponding level. Other decisions include pricing the store issue on inventories firm:-

i. Purchasing of raw materials section to the store house.

ii. Warehouse of raw materials to the factory

iii. Warehouse of finished goods to sales.

It is in this regard that it becomes necessary to examine the relevance of inventory control to decision making, that is the relationship between decision – making and inventory control with particular emphasis to unilever plc.

1.2 Statement of the problem

Some of the manufacturers of house hold products, like Unilever Plc, P2 industries e.t.c Aj Seward Limited, VAC Limited, and Dally heed industries are presently undergoing difficulties especially in the area of inventor functions and managerial policies. The evaluation techniques of inventory issues and pricing techniques of supplies, since these are certain cost benefit rations to be associated with every unit of inventory the firm maintains, this fact calls for a decision to be made on what quantities purchases and manufactured items should be kept in stock certain criteria are to be evaluated by good control so that it can make good decision on its inventory policy. This will definitely facilitate a sound and reliable decision on the