EFFECTS OF INVENTORY MANAGEMENT ON ORGANIZATIONAL EFFECTIVENESS A CASE STUDY OF SIBA GROUP OF COMPANIES IKOT EKPENE

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY
In a world intense competition fueled by globalization increasing consumer awareness, and technological improvement organization that are keen toward large scale success must act all times hypes its services availability as consumers can very easily divert their patronages elsewhere. Consequently, managing inventory efficiently has become an important operational weapon for products and service firms whishing to survive the competitive pressures. To demonstrate how vital the efficient management of inventory is, we have to make a careful study and learning from the “proverbial Ant” seemingly inconsequential; the biblical ant appears to have mastered the art and science of adequately keeping inventories of food and other materials for its future use.
Inventories represent those items which are either accumulated for sale or they are in the process of manufacturing or in the form of materials, which are yet to be utilized. An inventory system is the set of policies and controls that monitor levels of stocks and determine what levels should be maintained, when stock should be replenished, and how large orders should be, thus, inventory management be defined as the system used by a firm to control its investment in inventory (Stevenson, 2010). It involve the recording and monitoring of stock level, forecasting future demand and deciding on when and how to order (Adeyemi and Salami, 2010).
The primary goal of inventory management, therefore, is to have adequate quantities of high quality items available to serve customer needs, while also minimized the costs of carrying inventory (Brigham and Ehrhard, 2005). According to Adeyemi and Salami (2010), inventory constitutes the most significant part of current assets of majority of Nigerian manufacturing firm, SIBA group of companies are not an exception. Because of the relative largeness of inventories maintained by flour milling firms, a considerable amount of organization’s fund is being committed to holding inventory. It thus becomes essential to deploy cutting-edge techniques to manage inventories efficiently so as to avoid lost sales, costs of changing production rates, over time cost, sub-contracting, unnecessary cost of sales and back order penalties during periods of peak demand (Chen, 2005). Effort must also be made by the management to strike an optimum investment in inventory since it costs much money to tie down capital in excess inventory.

1.2 STATEMENT OF THE PROBLEM
Problems of inventory management and control have been around for a very long time. The need to collect food when it is readily available and them store it for times of shortage is perhaps the fundamental stock holding problems, which was tackled long ago by man. Nowadays, we usually think of stocks being held by organizations to allow for efficient and continuous operations.
Managers are aware of the vital roles inventory plays in the activities of organization. In most organization, direct materials represent up to 50% of the total product cost, as a result of the money invested in inventory, there by affecting the profitability of the organization. Organization at times do not control their inventory holding, resulting in under stocking and causing the organization to stay off production, thereby resulting to organization ineffectiveness.
Therefore this study seeks to examining the effect of inventory management on organizational effectiveness.

1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to evaluate the effects of inventory management on organizational effectiveness of Siba group of companies Ikot Ekpene.
i. To examine the nature of relationship between inventory management and organizational effectiveness.
ii. To determine the effect of inventory management on organization productivity.
iii. To examine the nature of correlation between inventory management and organizational profitability.
iv. To examine the problems associated with inventory management and control.

1.4 RESEARCH QUESTION
The following question are formulated to guide this study.

1. What is the nature of relationship between inventory management and organizational effectiveness?
2. What is the effect of inventory management on organizational productivity?
3. To what extent does inventory management correlates with organization profitability?
4. What are the problems associated with inventory management and control in Nigeria?

1.5 SIGNIFICANCE OF THE STUDY
The research is believed to have the following importance. The study will show the overall inventory management system of the manufacturing firms, it will also suggest solutions for the problem related to inventory management function. It will enable employees charged with responsibility of managing inventory to examine themselves and indicate the strengths and weakness of the firm as it relates to inventory management practice.
Furthermore, the study will serve as guide to students researchers who may wish to explore more on this related topics in the future.

1.6 SCOPE OF THE STUDY
The scope of the study is limited so the effects of inventory management and control on organization effectiveness. These the study will bean its search light on the impact of inventory management and control on the performance of the organization. It will also examine the methods of controlling inventories in order to determine the most effective means. The study will also examines the problems associated with inventory management and control with a view to recommending measures to overcome the challenges.