IMPACT OF EFFICIENT INVENTORY MANAGEMENT IN HOSPITALITY INDUSTRIES
ABSTRACT
As the topic states “The impact of effective inventory management in a hospitality industry” one will then assay that impromptu, manufacturing / hospitality industries, face a lot of inventory management problems. This is the around head of what the researcher tried to bring to force, to examine and analyze the possible causes to this problem. The writer also defined the concept “Inventory management” and traced its origin and usage of methods applicable to its effective management. A step was also taken to suggest solutions by making constructive recommendations aimed at addressing the raised. Some of the problems associated with inventory management are unavailability of raw materials; determination of optimum level of stock, as well as discrepancy between policy and practice in stock management. In-depth research was conducted and the study retracted the need for management of inventory and its attendant benefits in chapter five.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
The organization goal of most business enterprise includes survival and growth, fulfillments of social responsibility and realization or maximization of profits. This level returns enable the company to take advantage of business opportunities, undertake research programmes and innovations which will further increase investment portfolio in the long-run; prompt discharge of her social responsibilities and its economic obligation to the members of the company. In order to maintain this formidable position, it becomes imperative that positive attempts must be made to minimize operational capacity of the business, increase production capacity and efficient marketing of their products to the consumers. However, one of the problem ways of achieving the most desired efficiency in business management is through reducing operational cost to a bearable level.
One major component of this cost reduction concept in many manufacturing organization that deserves the attention of management is through reducing operational cost to a bearable level. One major component of this cost – reduction concept in many manufacturing organization that deserve the attention of management is the investment in “INVENTORIES” otherwise known as stock in most business enterprise, inventory or stock budgeting is the largest single item in the current asset of an industry. Improper management of stock level often contributes to most business failures. Inventories are mostly inputs used in the manufacture of a product and the components of stock are raw materials, work in progress (WIP) and finished goods. Raw materials are those stored for further production. Work-in-progress (WIP) is send – manufactured products. They present products that need further processing before they become and work – in – progress facilitates production while stock of finished goods are required for smooth marketing operations. Considering the large sum of money work – in- progress and finished goods, it there the becomes imperative that these “stocks should be managed efficiently in order to avoid blutant waste of resources that would have been channeled to other capital budgeting and investment. Any non challant attitude towards the management of a company’s inventory will be tantamount to putting the progress of the firm in jeopardy.
The only way by which this risk can be effectively managed in a company is for the enterprise to install an efficient management information system (MIS) and sound inventory valuation system based on cost principle, No matter which method is adopted for prudent inventory management, my major concern is at a point where cost will be marched to maximum revenue and the ideal choice is the method at which marginal costs adds to the gross or periodic income. Given the level of inventories needed for the most successful merchandizing operation, the objectives of operational management is to advice on the lowest possible total cost of maintaining these inventories. This means employment of skilled labour and plant efficiency in the overall handling of inventories into and out of storage; planning and controlling of stocks by various departments. There is an optimum level of investment for any capital whether it be cash, physical plant or inventories for example, the liquidity had by someone mighty be too large or small. The reasons for having excess liquidity or cash balance will be a function of financial sacrifice made by the members of the company. On the other hand, the reason for the meager resources of the company might be due to the poor credit rating of the firm. Therefore, a break – even point should be adopted for the efficient management of the firm’s assets. An optimum level of investment budgeting that will not create room for unnecessary wastes and as well guarantee satisfactory profits as long run investment profit. Consequently, inadequate inventory management usually disrupts production and remotely facilitates loss of revenue. Moreover, excess stock level is contagious because it introduces risk of carriage and obsolesces.
However, the prime facise of this study is to establish the fact that poor inventory management is existent, device always of computation and valuation of stock; significance and recommend maintenance of this level which will eventually maximization of profits. Thus, the primary focus of this studious engagement is to discover and profound techniques that will effectively see to the adequate planning and controlling of inventories as it is practiced in NBL Enugu; the emphasis being placed on cost management. In taking this problem, a well organized method will be sold.
1.2 STATEMENT OF THE PROBLEMS
The problem of this study includes:
(1) Difficulties in determination of the optimum level of stock in inventory management
(2) How the level of influence in inventory of raw materials pad to inventory management
(3) Controlling of stock as a problem of stock management in hospitality industry
(4) Impacts of various departments towards the planning and controlling of stock in inventory management
(5) Effect of inventory valuation in hospitality industry
1.3 THE PURPOSE OF THE STUDY
The cardinal objective of this research study are
(1) To determine the usefulness of optimum level of stock in inventory management
(2) To find out the extent the level of influence in inventory of raw material paid to inventory management
(3) To ascertain the extent controlling of stock contributes to the stock management in hospitality industries
(4) To know the extent controlling of stock in various departments has contributed in planning of stock in inventory management
(5) To find out the extent of inventory valuation in hospitality industry.
1.4 THE SCOPE OF DELIMITATION OF THE STUDY
The study is to analyze the need for efficient stock management in hospitality industries in general but with particular reference to the Nigerian Bottling Company NBC Plc Enugu (NBL) PLC.
1.5 RESEARCH QUESTIONS
To guide this study five research questions were formulated as follows:
(1) To what extent does benefits being derived from maintaining stock at there optimum level in inventory management.
(2) To what extent does the level of influence in inventory of raw materials paid to inventory management
(3) To what extent does the controlling of stock contributes to the stock management hospitality industry
(4) To what extent does various department in hospitality industries help in contribution to planning and controlling of stock inventory management.
(5) To what extent does stock valuation hospitality industries.
1.6 RESEARCH HYPOTHESIS
After careful study and consideration of the subject – matter of the project, four hypotheses were formed.
HO1: There will be no significant difference (P < .05) at the HO1,
Probability level of 0.5) between the mean perception of accounts and stores department on the benefits derived from maintaining stock at there optimum level in inventory management.
HO2: There will be no significant difference (P < 0.05) at the probability
Level of 0.05) between the mean perception of accounts and stores department on the level of influence in inventory of raw materials to inventory management.
HO3: There will be no significant difference (P < 0.05) (at the probability
level of 0.05) between the mean perception accounts and stores department on how to control of stock contributes to the stock management in hospitality industries.
HO¬4: There will be no significant difference (P<0.05) (at the probability
level of 0.05) between the mean perception of accounts and stores department on the impact of various departments towards the planning and controlling of stock in inventory management.
1.7 SIGNIFICANCE OF THE STUDY
This study is significantly derived into the following reasons:
(1) The result of this study would help the management of NBC PLC Enugu in maintaining their stock at optimum level to enable them eliminate problems associated with inventory valuation and management
(2) The result will go a long way to alleviating problems of this nature by other hospitality industries especially breweries in planning and controlling of stocks to avoid wastages and risk of cash drain.
(3) The result would help the management of NBC PLC to avoid the danger point which is the excess stock level that introduces unnecessary cost and risk obsolesce.
(4) The research study would also create a foundation that will facilitate the under standing of need for stock valuation.
(5) It is hoped that result of the study will encourage other departments in NBC PLC to help in contributing data for planning and controlling of stock inventory
(6) This study will help inculcate new ideas to the management of various methods that can influence inventory acquisition to achieve effective and efficient inventory management.
(7) The result will definitely encourage hospitality industries to be sending their staff on courses and workshops to acquire new skills and update their knowledge on inventory management information technology and system.
(8) The result would help the management to NBC PLC Enugu to review their organizational goal and see the extent their objectives are being achieved.
(9) The result would help NBC Plc to asses their overall performance for possible modifications, policy strategies and economic growth.
(10) Finally, this study would copiously as work of reference to future researchers, while suggestions made in this study would serve as a rallying point on formative evaluation for the maximization and utilization of best brains for effective and efficient inventory management in NBC PLC Enugu.
1.8 DEFINITION OF TERMS
ORDERING COST: Ordering cost usually cost of denial cost of preparing a purchase order or production order and special processing and receiving costs relating to the number of orders processed.
CARRYING COST: Carrying cost of a desired rate of returns on the investment in inventory and costs of storage, breakage, obsolesce, deterioration, insurance and personal property taxes.
ECONOMIC ORDER QUANTITY: Economic order quantity is that size of inventory that will result in minimum annual costs of the item in question.
RE-ORDER LEVEL: This is the point of level that automatically triggers on new order of inventory or stock to replenish an exhausted order it is dependent on expected usage dumping.
SAFETY STOCK: This is the stock set aside to meet the demand of the customers in the course of production in case there is sudden usage of inventory beyond normal rate. The essence is to ensure that the industry does not run not of stock in a given period of time.
STOCK: A quantity of goods or anything that is kept or stored for use as need arises especially a quantity of raw materials, work – in – progress finished goods or supplies.
LED TIME: This is the internal between placing an order and receiving delivery.
STOCK CONROL: Activities process or aimed at ensuring that quantities of stocks are such that satisfactory service level is maintained for all stock units while holding cost is minimized.
STOCK HOLDER: A firm or a person who has a specified type of stock (e.g. wholesaler that has stock of particular manufactured goods).
STOCK HOLDING COST: The cost incurred because at a stock of something is kept for a time e.g. the rent of storage space, the wages of a store keeper, the costs of stock records.
STOCK LEVEL: The magnitudes of stocks of something.
STOCK OUT: A state of having no stock of stocking keeping unit
STOCK CARD: This is the card made for each items of inventory held.
STOCK TAKING: Measuring the quantities of items of stock that an enterprise has in order to obtain accurate list of it.
STOCK TURNOVER: The ratio of the sales revenue of a firm for a period of the average value of its stock – in trade or stock of finished goods during that period.
VALUE ANALYSIS: Considering of a function of all the parts at the design of one of a firms product to see whether the changes in material manufacturing methods or design will increase the products value to the firm.
OBSOLENCE: The decline in the value of asset through external causes such as technological change, change in demand or change in fashion or taste.
