JIMMA UNIVERSITY

A RESEARCH PROJECT SUBMITTED TO DEPARTMENT OF

MANAGEMENT FOR THE PARTIAL FULFILLMENT OF THE
REQUIREMENT OF BACHELOR OF ART (B.A) IN
MANAGEMENT

PROJECT TITLE: ASSESSMENT OF MATERIAL

MANAGEMENT PRACTICE IN METTU UNIVERSITY

PREPARED BY: TAMIRAT YIHUNE KASA

ID NO: DU0233/10
April, 2022

Jimma, Ethiopia
 DECLARATION

I am Tamirat Yihune, declare that this study entitled “Assessment of Material Management
Practice in Mettu university” is my original work and has not been presented for a degree in any
other university, and that all sources of materials used for the study have been duly acknowledged.

Declared by: Tamirat Yihune

Signature……………………...

Date 04/15/2022
 JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

ADVISOR RESEARCH PROJECT SUBMISSION APPROVAL SHEET

This is to certify that the research project entitled “Assessment of Material Management Practice
in Mettu university” submitted in partial fulfillment of the requirement of bachelor of art (B.A)
degree in business management, has been carried out by Tamirat Yihune under my supervision.
Therefore, I recommend that the student has fulfilled the requirements and hence hereby can
submit the Research Project to the department for defense.

Advisor: Tsigereda A.
 ABSTRACT
A study in titled assessment of material management practice in the case of mettu University. The
study was conducted with the objective and importance of assessing the practice of material
management and also has the importance of helping the researcher to improve his practical
knowledge and familiarize with the real world. The data was collected through primary and
secondary data collection method and the collected data was analyzed by using descriptive
method. Using the sample and results of data analysis conclusion was made. Finally, the
researcher came to an end by recommending important issue to modify the material management
practice of the company.

Key word: Material management, material disposal, inventory management,

I
 ACKNOWLEDGEMENT

First of all, we are grateful and we would like to express our sincere gratitude to our advisors Ms.
Tsigereda A. for providing their advice, guidance, assistance and encouragement as well as
precious time and continuous support throughout the duration of the project. Secondly, to all the
member and staff of, thanks for their comments and suggestions given which is crucial for the
successful completion of this project.

We would like to special thanks to our lovely parents for their support, love and sacrifice through
our life and we appreciate their devotion, support and faith in our ability to attain our goals.

Finally, we would like to appreciate Jimma University for giving us this chance to improve our
skills on practical knowledge which helps the society.

II
Contents
ABSTRACT................................................................................................................................................... i
ACKNOWLEDGEMENT ............................................................................................................................ ii
CHAPTER ONE ........................................................................................................................................... 1
INTRODUCTION ........................................................................................................................................ 1
1.1 Background of the Study ........................................................................................................................ 1
1.2 Statement of the Problem .............................................................................................................. 2
1.3 Scope of the Study .............................................................................................................................. 4
1.4 Objective of the Study ........................................................................................................................ 4
1.4 .1. General Objective ...................................................................................................................... 4
1.4.2. Specific Objectives ..................................................................................................................... 4
1.5. Limitation of the study ....................................................................................................................... 5
1.6. Significance of the Study ................................................................................................................... 5
1.7. Organization of the study ................................................................................................................... 5
CHAPTER TWO .......................................................................................................................................... 6
LITERATURE REVIEW ............................................................................................................................. 6
2.1 Concept of Material Management....................................................................................................... 6
2.1.1 Definition of Material Management............................................................................................. 6
2.2 Elements of Material Management ..................................................................................................... 6
2.2.1 Purchasing .................................................................................................................................... 7
2.2.2 Inventory Management and Storage .......................................................................................... 12
2.2.2. 5 ABC analysis ......................................................................................................................... 15
2.2.3 Material Demand Forecasting .................................................................................................... 24
2.2.4.2 Concept of disposal ..................................................................................................................... 29
2.2.4.4 Procedures of disposal ................................................................................................................ 30
2.2.4.5 Methods of Disposal ................................................................................................................... 30
CHAPTER THREE .................................................................................................................................... 32
RESEARCH METHODOLOGY................................................................................................................ 32
3.1 Research design ................................................................................................................................ 32
3.2 Nature and source of data.................................................................................................................. 32
3.3 Data gathering tool ............................................................................................................................ 32

III
 3.4 Target population .............................................................................................................................. 32
3.5 Sampling technique and sample size ................................................................................................ 32
3.6. Method of Data analysis .................................................................................................................. 32
CHAPTER FOUR....................................................................................................................................... 33
DATA PRESENTATION AND INTERPRETATION .............................................................................. 33
4.1 Analysis of questionnaires ................................................................................................................ 33
4.2 Analysis of Interview question for the manager of the division of purchasing and material
administration ..................................................................................................................................... 40
CHAPTER FIVE ........................................................................................................................................ 42
FINDING CONCLUSION AND RECOMMENDATION ........................................................................ 42
5.1. Summary finding ............................................................................................................................. 42
5.2. Conclusion ....................................................................................................................................... 43
5.3. Recommendation ............................................................................................................................. 44
REFERENCES ........................................................................................................................................... 46
Appendix A ............................................................................................................................................. 47
Appendix B ............................................................................................................................................. 50

IV
 List of tables
Table4. 1 Demographic information of the respondents ............................................................................. 33
Table4. 2 Questionnaire analysis related with purchasing .......................................................................... 34
Table 4.3 Questionnaire analysis related with inventory management and storage ................................... 36
Table 4.4 Questionnaire analysis related with material demand forecasting: ............................................. 37
Table4. 5 Questionnaire analysis related with disposal management: ........................................................ 39

V
 CHAPTER ONE
INTRODUCTION
Materials management is an integrated process that consists of the people, organizations,
technology, and procedures used to effectively identify, quantify, acquire, expedite, inspect,
transport, receive, store, and preserve the materials, equipment, and associated information across
the life cycle of a capital project. The goal is to ensure that the correct quality and quantity of
materials and equipment are procured in an effective manner, obtained at a reasonable cost, and
available when needed

1.1 Background of the Study

Material is the basic resource for the operation of any organization. Accordingly, it should be
managed in efficient and effective manner. Material is the term to describe the grouping of
management function related to the complete cycle material which flows from the purchasing and
internal control of production (Sharma, 2006). Material management practice is the process of
planning, coordinating, organizing and controlling the flow of goods from one place to another
place. Material management practice is the activity that applies to get right quality, right quantity
at right place and time with the right price. Material management practice can include purchasing
Inventory controlling, goods transportation, ware house, material handling and the like
Management is simply a balancing act: the objective of management is too able the delivery of
activity (Belington, 1995).

Most of the time material management practice installed in manufacturing, firm and every other
considered small. The modern concept of material management practice is now widely acclaimed
in forward thinking, productive industry in this country, but if we are to become really effective -
against giant competitors for our share of world trade then companies, Large, medium who have
not yet begun to consider (Sharma; 2006).

The narrow definition of Billington Widen by, Wild (1995), materials management practice is a
concept which brings together the Responsibility for determining the manufacturing requirement;
scheduling the manufacturing Processes and procuring, storing and disposing materials.

1
As such it is concerned with and Controls all activities involved in the acquisition and use of all
materials employed in the Production of finished goods. Materials management practice concepts
enhance communication and coordination by bringing together all functions which are interrelated.
Material management practice is the coordination, function for planning, and controlling of
material flows. Its objective is to maximize the firm’s usage of the resources and to provide the
required level of the customer services (Robert1981). Despite the obvious importance, material
management has no always received it’s for share of attention. Commonly the organization puts
all their effort in to making products and gave a little through to the associated process of material
management practices. By now considering change which is coming, the reason, why for these
changes the recognition of the importance of material management practices, developed. In a sense
assessing all part of the practice of material management practices are so difficult the reason
why? It is so wider however; we are very eager to conduct the study in specific area of Mettu
University to assess the practice of material management.

1.2 Statement of the Problem

Assessing the practice of material management in more advanced way is very necessary issue and
also it leads the organization to evaluate their performance. Material management practice is very
essential for today’s competitive economic development and it play’s significant role in
profitability of business, this enables the business to gain competitive advantage over another. It
tells us all merchandizing and manufacturing firms should use material management practice and
the largest investment material management must take us interested to the accomplishment of the
companies’ vision, mission and goal (Data, 2006).

According to data (2021) he tried to assess the practice of material management in the case of
mettu university with the specific objective of identifying the major factors that affect material
management, examining the relations of material management and organizational performance, to
recommend the best on material management of the case company, to analyze the organization
with regard to material management practice, to identify the material management problems of the
organization and to assess the mechanism used by the organization to improve material
management practice

2
According to data (2021) also tries to assess material management practice in the case of Mettu
coffee factory with the keen to see the major factors that affect material management practice, to
know either the company have well organized policy and procedure to manage materials and to
know the technique that are used to material management practice in the case company

So, the problems that we observed in this university are, as a general there is a difficulty in
managing materials through applying all elements that needed to consider when materials are
managed. The other problems we observed are misappropriation and miss location of materials,
shortage enough space to store the materials, problems in disposing materials which are outdated
or which need further recycling, price mismatch on the paper and in the real world, lack of
personnel which fit the position, lack of enough personnel on disposal activity. In relation with
this issue we are tried to assess how material management are effective in this organization and
also we tried to investigate the practice of material management in the organization. In most
organization there is some difficulty in, purchasing, inventory management and storage, material
demand forecasting, and disposal management. So, we had tried to show how those above
difficulties are handled in Mettu University. As I live around this University we observed that there
is a problem related with the above issues in this organization. In taking the above issue in to
consideration, this research is different from others because it focused on the case of Mettu
University and this study addressed strategic points related with material management which are
never addressed before like: - material demand forecasting, purchasing, inventory management
and storage, and removal/disposal management.

This research examined either most of the material management elements are implemented in the
way to what the science is said. The activity of the organization, with regard to how they manage
inventory and forecast material demand, purchasing, storage and material handling, and removal
/disposal of the required material within the organization. There for the following basic research
question was raised: -

Basic research questions:

 What techniques are Mettu using for managing inventory and forecasting material
demand and how accurate is it?

3
  Is there a policies and procedure that the organization follows for purchasing
activities? And what ways the organization follow for effective purchasing, does it
include the 5R principles?
 What techniques the organization is using for inventory management and storage? Is
there computerized system of managing inventory?
 And at the last, how wastes are disposed within the organization?

1.3 Scope of the Study

The study was conducted in Mettu University located in Mettu city. It was included Universities
which are located in some geographical location. And theoretically the study was limited to the
frame works of material management like, inventory management and storage, purchasing,
material demand forecasting, and removal/disposal management.

1.4 Objective of the Study

1.4 .1. General Objective

 The study purpose was to assess the practice of material management in the case of Mettu
University (MeU).

1.4.2. Specific Objectives

The specific objectives of this research were to address the following issues:
 To examine the existence of effective material demand forecasting within in the
organization;
 To examine the existence of policies and procedures and effective way of purchasing
materials;
 To examine the techniques that the organization were using for inventory management and
storage; and,
 To know how wastes are managed in the organization

4
1.5. Limitation of the study

In conducting this research, the researcher was faced the following limitation. Those are:
 Job stress of employees this contributes some employee cannot explain their ideas
 Some questions are not filed as expected by researcher.
 The unavailability of secondary data in the organization.

1.6. Significance of the Study

When we see the value of this research; firstly, the result of this research could take as a base for
further research to any researcher who need to see link of the result with other variables. Secondly,
because of the growing challenges in material management the drown conclusions on the base of
findings were have its own value for making remedial actions to Mettu University. Thirdly, it gave
the researchers the opportunity to gain deep knowledge with regard material management.

1.7. Organization of the study

The study consists of five chapters. The first chapter includes introduction, statement of the
problem, objective of the study, significance of the study, limitation of the study and organization
of the study. The second chapter is about review of related literature, the third chapter deals with
research methodology, the fourth chapter analysis and interpretation of the collected data and the
last chapter (chapter five) covers conclusion and recommendation of the study.

5
 CHAPTER TWO

LITERATURE REVIEW

2.1 Concept of Material Management

2.1.1 Definition of Material Management

The definition of materials is so difficult to list out all definition of material management practice;
however, some definitions are the follow. Material management practice is a coordination function
which is responsible for planning and controlling material flow with two main objects. These will
be the minimizing of the firms, resources and provide the required level of the customer services
(gopal krishnan & sundaresan, 1998) what is management and its major function of material
management practices? Management is the process of setting and achieving goals through the
excursion of five basic management functions, planning, organizing, staffing, directing, and
controlling of utility of human, financial, Material, resources for the organizations; it works
through the organizational members to reach stated objective.

There are various types of materials with organization like purchasing procurements, material
management, physical distribution management those concepts cut in different terminology. (rout,
2003)Material management views materials flow as system these includes:-
Anticipating material requirements scientifically Sourcing, obtaining and inspecting
materials Introducing materials in to the organizations Storing and handling materials, and
disposal of scarps and un service able items. Monitoring the status of materials Replacement of
stock and strengthening material information system (Burt, 1996)

Material management is the as the function responsible for the coordination of planning, sourcing,
purchasing, moving, storing, and controlling materials in an optimum manner so as to provide a
pre-decided service to the customer at a minimum cost (gopalkrishnan & sundaresan, 2006)

2.2 Elements of Material Management

Materials management is a concept which brings together the responsibility for determining the
manufacturing requirement that is scheduling the manufacturing processes and procuring, storing
and dispensing materials (wild, 1995; Ondiek,2009).An integrated approach to material

6
management defines it as the function responsible for the coordination of planning, sourcing,
purchasing, moving, storing and controlling materials in an optimum manner so as to provide a
predetermined service to the customer at a minimum cost (gopalkrishnan & sundaresan, 2006).
TEO barker (1989) put the element of material management as follows:-Demand and supply
resource management, Material planning management, requisitioning management, Source
management, Quality management, Price management, Legal aspect management, Delivery
management, Physical store keeping management, Inventory management, Production control
management, Distribution management, And disposal management

These definitions provide the scope of materials management which includes materials
requirements planning (MRP), decision on purchasing, procurement of materials, inventory
management, staffing, stores and warehouse management, production and distribution of finished
goods at minimum cost at due time.

Considering these models this study will try to synthesize related literature on these dimensions:

A. Purchasing,
B. inventory management and storage,
C. Material demand forecasting, and
D. Disposal management

2.2.1 Purchasing

2.2.1.1 Definition of purchasing

Purchasing is the process of obtaining the correct equipment, materials, supplies and service in the
right quantity, of the right quality, from the right source and at the right time and right cost (alan
muhelman, etal, 1992) purchasing is the process of acquiring the optimum quality and quantity of
goods and service for the company in a timely manner and at lowest total cost (altekar,
2005)Purchasing is the process of buying\obtaining the right material in the right quantity, times,
with the right delivery (time and place), from the right source and at the right price are all
purchasing function (Arnold, et al. 2008)

(rushton etal, 2010) Purchasing insure there are sufficient suppliers and raw materials at the right
price, of the required quality, in the right place, and at the right time. Purchasing is the process by

7
which a company (or other organization) contact with third party to obtain good and service
required to fulfill its business objective in the timeliest and cost efficient manner (euliot, etal.1985)

Purchasing is way of identifying and budgeting material from the given source. No inventories are
created until either raw material or component part is bought (amrine etal,, 1993). (Arjan, 2010)
Purchasing is considering the amount of money generally involved in the preparation and
execution of purchasing and supply function is not a surprise, but rather they can make an
important contribution to company result as a result of the implementation of improvement
program in engineering, manufacturing, and logistics management

2.2.1.2 Importance of purchasing

Purchasing has come to stay as the most important function of materials management. The moment
a buyer places an order he/she commits a substantial portion of the finance of the corporation
which affect the working capital and cash flow position. He/she is highly responsible persons who
meets various sales men and thus can be considered to have been contributing to the public
relations effort of the company. Thus, the buyer can make the company’s images by his or her
excellent or poor relation with the vendors (gopal krishnan & sundaresan, 1998)

2.2.1.3 Goal of purchasing

(amrine etal, 1993) As part of the overall material control activity, the statement of the objective
of purchasing group will include the objective of inventory management and control. The primary
objective is to contribute toward the profit of the manufacturing activity. The other important
objective is to ensure the availability of materials. So that, delivery schedule can be maintained,
thus keeping customer satisfied. The specific objective that support the objective are

 Procurement of the right material, in the right quantity, of the right quality.
 Receipt or delivery of this material in the right place, at the right time.
 Purchase of the material from the right source, at the right price.

In most organization the purchasing department is not responsible for determining either what
material is to be bought or it’s quantity and quality, except for routing items such as: - paper and
pencil’s. Also, other organization personnel may designate the time and place for delivery.

8
However, for effective buying, the purchasing group must be assigned the full responsibility and
authority for the determination of the source of supply and the price to be paid.

According to Gopalakrishinan & Sundaresan(1998) The 5 R principles are as follows;

 The right price

It is the primary concern of any manufacturing organization to gate an item at the right price. But
right price need not be the lowest price. In this context it may be worth remembering johnRuskin’s
famous statement: “there is hardly anything in the world that somebody can’t make a little chipper
and the man who considers price alone is the lawful prey”. While it is very difficult to determine
the right price, general guidance can be adding from the cost structure of the product. The ‘tender
system ‘of buying is normally used in public sectors organization but the objective should be to
identify the lowest “responsible” bidder and not the lowest bidder. The price can be kept low by
proper planning and not by “rush “. Price negotiation also helps to determine the right prices.

 The right quality

This implies that quality should be available, measurable, and understandable as far as practicable.
In order to determine the quality of a product, sampling scheme on incoming materials inspection
will be useful. The quality particulars are normally obtained from the indent, and experience
indicates that a substantial portion of the indents prepared by the user departments are invariably
incomplete. Such incomplete indents often cause unnecessary delays in procurement as the
indenter has to be referring to, and if not referred results in heavy rejection. Drawing is also
attached to the indents, particularly for spare parts. Since the objective of purchasing is to ensure
continuity of supply to the user departments, the time at which the material is provided to the user
department assumes great import ants.

 Right time

For determine the right time, the purchase manager should have lead time information for all
products and analysis it’s components for reducing same. Lead time is the total time elapsed
between the recognition of the need of an item till the item arrives and is provided for use.
Obviously, this covers the entire duration of the material cycle and consists of pre-contractual
administrative lead time, manufacturing and transporting lead time, and inspection lead time.

9
Since the inventory increase with higher lead time, it is desirable to analyses each component of
the lead time so as to reduce the first and third component which are controllable. While
determining the purchases, the buyer has to consider emergency situation like flood, strike, etc…

He/she should have “contingency plans” when force majeure clauses become operative, for
instance, the material is not available due to strike, lock out, floods, and earthquakes. However,
rush purchase should be resorted to only in exceptional cases.

 Right source

The source from which the material is procured should be dependable and capable of supplying
items of uniform quality. The buyer has to decide which item should be directly obtained from the
manufacturer. Aspects such as source selection, source development, and vendor rating are major
way of getting material from the right source. In emergency, open market purchase and BAZAR
purchases are resorted to. Techniques such as value analysis enable the buyers to locate the right
material. Right mode of transportation has to be identified as this forms a critical segment in the
cost profile of an item. It is an established fact that the cost of the shipping of ore, gravel, sand, is
normally more than the cost of the item itself. Specifying the right place of delivery, say, head
office of works, wood often minimizes the handling and transportation costs. Similarly, packaging
forms are important aspect in the cost of an item; for instance, in tooth paste the tube is costlier
than the paste it holds.

 Right quantity

The right quantity is the most important parameter in buying. Concepts such as, economic order
quantity, economic purchase quantity, fixed period and fixed quantity system, will serve as broad
guide line. But the buyer has to use his knowledge, experience, and common sense to determine
the quantity after considering factors such as price structure, discount, availability of the item,
favorable reciprocal relations and make or buy consideration. Developing the right attitude, too, is
necessary as one often comes across such statements: “purchasing known the price of everything
and value of nothing”; “we buy price and not cost”; “when will our order places become purchase
managers?”; “purchasing acts like a post box”. Purchasing should, therefore keep ‘progress’ as its
key activity and should be future oriented.

10
The purchase manager should not follow the safe and well-trodden path; he should be innovative
and his long term objective should be to minimize the cost of the ultimate product. He will be able
to achieve this if he arms himself with technique such as value analysis, material inelegancy,
purchase research, SWOT analysis, purchase budget and lead time analysis. The buyer has to adopt
the separate policy and procedures for capital and consumer items. He or she should be able to
distinguish between indigenous and international purchasing procedures. He/she should be aware
of the legal and contractual aspects According to Amrine(1997) the in international practice.

2.2.1.4 Purchasing procedures

complete purchasing cycle consists of the following steps:

1. Receipt & analysis of purchase requisition.

2. Selection of potential sources of supply.
3. Issue of request for quotations.
4. Receipt &analysis of quotation.
5. Selection of the right sources.
6. Determination of the right price.
7. Issuance of the purchase order.
8. Follow up to ensure scheduled delivery.
9. Analysis of receipt report.
10. Analysis & approval of vender’s invoice for payment.

Additionally, according to A.K. DATTA (1998) there are certain basic objectives:

To ensure un interested flow of materials, to buy economically in competitive market, to keep

investment low, to develop buyer supplier relationship, to develop alternative and reliable supplies,
to act as material intelligence information center with regard to specification, process, price,
quality. Additionally, the purchase department must be able on occasional, to suggest alternative
source of supply. With this objective in view, the function of the purchasing department is stated
as: selection of supplies, analysis of bid, price negotiations, issuance of purchase order, follow up
action, cost analysis &market study, maintenance of price catalogues and information library.

11
2.2.2 Inventory Management and Storage

Inventory management is a core operation of management activity. Effective inventory

management is important for the successful operation of most business and their supply chain. It
has its own impact on the following department:-on operation, marketing and finance. Poor
inventory management hampers operation, diminish customer satisfaction and increases operating
cost unsatisfactory inventory management is the sign that management does not recognize the
importance of the inventory (Stevenson, 2012) Inventory is a sock or store of goods which ranging
from small items such as pen, paper clips, screws, nests, and bolts to large items such as machinery,
trucks, construction equipment and air planes (stevenson, 2006)

Inventory management is the determination of optimum inventory levels and procedures for the
review and adjustment of inventory needed (amrine etal,, 1993) Inventory are held for variety of
reasons, such as meeting un anticipated demand, smoothing production de coupling internal
operations, protecting against stock out, taking advantage of quantity discount, and hedging against
increase in price (Sevenson & Van ness, 2005)). (joseph, 1987), inventory of raw material, work
in process and finished goods plays a critical role in the production process, an understanding of
cost and benefit is necessary.

2.2.2.1 Importance of inventory

Inventories are vital parts of business. Not only are they necessary for operations, but they also
contribute to customer satisfaction. Atypical firm probably has about 30% of its current asset &
perhaps as much as 90% of its working capital invested in inventory. Inventory decision in service
organization can be especially critical. The major sources of revenue for retailer & wholesaler
business is the sale of inventory (Stevenson, 2006).

2.2.2.2 Types of inventory

According to DATTA (1998), there are many types of inventories, such as raw materials and
production inventories, components and service parts, as well as work in process and finished
goods inventories. They may also be functionally classified as: - moving inventories, anticipation
inventories, and fluctuation inventories, etc.

12
According to the function they are required to perform:

 Raw materials (production inventories): - these are raw materials and other supplies, parts
and components which enter in to the product during the production process and generally
from part of the product.
 In process inventory: - these are semi-finished, work in progress, and partly finished
products formed at various stage of production.
 MRO inventory: - maintenance, repairs and operating supplies which are consumed during
the production process and generally do not form part of the product itself.
 Finished goods inventories: - these are complete finished products ready for sale.

Based on function:

 Moving or transit inventories: - it arises because of the time necessary to move stocks from
one place to another. The average amount can be determined mathematically

Thus

I =s*t where
S- Represent the average rate of sales
t- Represent transit time required to move from one stage to another in a week. And I-
Represent the moving inventory needed.
 Lot size inventories: - in order to keep costs of buying, receiving, inspection, transport,
and handling low, large quantity are bought than are necessary for immediate need. It is a
common practice to buy some raw materials in large quantity in order to avail of quantity
discount.
 Fluctuation inventories: - in order to cushion against unpredictable fluctuation in demand
there are maintained.
 Anticipation inventories: - such inventories are carried to meet predictable changes in
demand. In case of seasonal variation in the availability of some raw materials, it is
convenient and also economical to build up stocks when consumption patterns may be
reasonably uniform and predictable.

13
2.2.2.3 Functions of inventory
Inventory has many invaluable importance; to meet anticipated customer demand, to smooth
production requirement, to develop operation, to protect against stock outs, to take advantage of
order cycle to hedge against price increase, to permit operation are some importance of inventory,
(Stevenson, 2006).

2.2.2.4 Objectives of inventory control

The objective of inventory control is:

 Assurance of having the items needed:

This is not limited to projected requirement only, but also looks into the requirements that may
arise from time to time. This requirement may be result of the delays in delivery, or items received
but rejected on inspection.

 Economic buying

Economic buying, in addition to the economic order quantity, considers various other factors,
which influence the overall cost. Economic not only determines the quantity to be procured but
also considers the price fluctuation trend, quantity discounts, and other external factors having an
impact on the price. One of important objective of the economic buying is to reduce the
procurement cost to the minimum.

 Avoiding any likely shortage of materials

 Avoiding overstocking of materials
 Reducing inventory-caring cost
 Providing flexibility to the purchase department to apply the appropriate purchasing
policies such as:
i. Taking quantity discounts for lower unit prices
ii. Forward buying in case of cost likely to increase
iii. To adjust quantity to match with economic lots
iv. To order full truck load to reduce transportation cost
v. To adjust quantity conforming t standard packaging requirement

14
Inventory-carrying cost

Carrying of inventory is an important element of production activity. Various element of

inventory-carrying cost are:

 Interest on the inventory investment: - depend on the size of the inventory

 Overhead charges for the storage spaces: - cost of lighting, safety provisions, air-
conditioning, ventilation, furniture, racks etc…
 Cost of handling facilities: - store operation involves handling of heavy items, which
include loading and unloading, internal transportation, and shifting.
 Cost of manpower in stores division: - this depend up on centralized or decentralized
operation of the warehouse
 Obsolescence cost: - there are a large number of items in the inventory, which are in
stock for long but no longer useful. Such obsolete items create numerous difficulties
such as a high inventory value, occupying a useful space, and requiring continuous
attention for cleaning and accounting.
 Other element of inventory carrying cost such as Insurance cost for the material
stored, Depreciation, and taxes: - these all are related with the size of the inventory.

2.2.2. 5 ABC analysis

A big organization has a very large number of items, sometimes 50,000 to 100,000. All items
cannot be give equal attention. It is essential to determine the item or group of items that deserve
the maximum control. One of the most important considerations for control is the value of annual
consumption of inventory items. It has been observed that a small number of inventory items
consume a very large share of inventory consumption during the year. Further, a little larger
number of inventory item cover a moderate share of annual inventory consumption, and a very
large number of inventory items just cover a very small share of annual inventory consumption.
This bought out the concept of ABC analysis. Various studies have shown that only 10% of items
have 70% of the annual inventory consumption, 20% of items have 20% of the annual inventory
consumption and 70% items have only 10% of the annual inventory consumption.

15
Other technique of analysis

Each inventory item is different from another from the point of view of its importance. Each
inventory items examined from different consideration while deciding the importance attached to
it. Some of these considerations could be critically of the item for the production, high cost of the
item, or difficulty in procurement of the item. Some of the techniques adopted for control of
inventory are

 VED (vital, essential, and desirable)

 HML (high, medium, and low cost)
 FSN (fast, slow, and non-moving items)

2.2.2.6 Codification

Codification is one of the important elements of inventory control activities. It helps in avoiding
duplication of items in the inventory and enables correct entries in the bin cards, stock control
cards, and account codes.

Method of codifications

One can adopt different method of codification. They are;

 Numerical code: use numeric for codification that describe the item by using group of
numerical to describe the general class to which a part might belong, such as electrical,
plumbing, pipes, and fittings etc.
 Mnemonic code: use alphabet and describe the items. Since there are only 26 alphabets,
there is a limitation in giving a code to classes/subclasses more than 26 in number. A
combination of alphabet is used to describe items, but very soon overlapping meanings are
represented by these codes. For this reason, mnemonic codes are not well adopted to
machine data processing methods.
 Consonant code: These also use alphabets, either singularly or in combination. In this system
abbreviation are used, which are selected in such a way that sound like the item to be
described. In this system initial letter is retained, but all subsequent vowels (including W
&Y) are droped.it is commonly used for coding long names and addresses.

16
 Examples:

TPT- transport
MAT- materials
PLN- planning
MNTC- maintenance

 Alpha-numeric code: this system use combination of alphabet with numerical for
codification. Used to maintain the list of individuals or company names, usually their
account names.

2.2.2.7 Standardization

Standardization plays an important part in inventory control. It helps in reducing variety and thus
reducing the demand for storage space for less number of items. It also helps in higher inventory
turnover and reduces the number of slow moving items. It also assists in reducing the rate of
obsolescence of spare parts.

2.2.2.8 Valuation of inventory

Inventory is a very important in any organization it is controlled so that if does not exceed the
requirements and at the same time there are no stock outs. Excess inventory is a source of worry
money various item of inventory are procured at different times item of inventory are procured at
different times and at different prices. Price fluctuation is regular phenomenon and can be small
or even large. These fluctuation is price do have a direct impact on the cost of material issued as
well as on the cost of inventory.

2.2.2.8.1 Importance of Valuation of Inventory

Valuation of inventories is important for various reasons which may be:

 To know the trend of value of various categories of inventories in the ware house.
 To know the value of each category in a ware house
 To material budgets.
 To work out various ration for management reporting

17
  To control inventory cost by controlling the cost of nonmoving and slow moving
items.
 To control spoilage and obsolescence of materials.
 To act as a control tool in reducing cost of over heads.
2.2.2.8.2 Methods of Valuation of Inventories
Various methods can be used for valuation of materials issues which are

a. FIRST IN FIRST out (FIFO)

b. Last IN FIRST out (LIFO)
c. Weighted Average
A FIRST IN FIRST OUT

In this method of material issue is worked out on the basis of cost material received eeriest in the
ware house. This method ensures that the materials are issued to the actual cost and thereby no
profit or loss is incurred in the evaluation. If the cost of material purchased is low, the value of
issues worked out easy to work with provided the price fluctuation are reasonable during specific
period under inflationary condition, the profits are inflated there by advancing the payment of taxes
this method is therefore not preferred by the finance manager.

B. LAST IN FIRST OUT

The value of material issued under this method is based on the price of last purchase this method
insures that materials are issued at actual cost, but it is option of FIFO method under this method,
the profit are not showmen immediately and consequently, text liability is differed the main
advantaged to this method Of valuation is that the cost of material charged to production is closely
related to the current price level, provide that the material in purchased recently this method is
preferred in case of material whose price reduce over period.

C. Weighted Average Method

The weighted average method of inventory valuation is based on the assumption the good
commingled and what no particular both of goods is retained in the inventories when the perpetual
Inventory system is used, the weighted average method given the result of a mount weighted
average, under the perpetual inventories system, a new weighted average is computed after each

18
purchase and for this reason is known as moving we inventory valuation and inventory income
measure under FIFO and those achieved under LIFO.The weighted overage method does not
reduce an inventory value constant method does not reduce of items in inventory by its lay’s behind
market producing a period of rising price it tend to below replacement cost and during a period of
below replacement cost and during a period of felling price if tend to the above replacement cost.
The method of evaluation has considerable effect on the profit and loss of accompany.

High Inventory Valuation result in

 Estimation of caring of a higher level

 Working capital look better
 There is a possibility of higher dividend and bonus
 More tax payment
Low Inventory Valuation Result In

 Reduce Financial strength of the company

 Heavy taxation
Therefore, the average weighted method remove these difficulties this method censured more
calculation as it considers the total cost by considering the total quantities un like the simple
average method when only the average price is considered (saxena, 2005)

2.2.2.9 Inventory Control Techniques

There are a number of techniques which play an important role in the inventory control program
these techniques are very helpful in rationalization of inventory control approach and assist in
formulation of inventory control policies. Some of these techniques forming part of the inventory
control program are

Best Ordering Quantity

Quality and Quantity of an item are the two most important aspects in its procurement, once the
quality is established, the question remains as to, how much to procure, A decision on the best
quality to purchase is quite a complicated one, if all the pertinent factor are considered and number
of items for procurement its very large.

19
Economic order Quantity

The Economic order quality, which minimize the sum of the acquisition cost and the inventory
carnage cost the volume of the inventory and is normally presented as percentage of inventory
cost.

ABC Analysis

ABC Analysis is an important to control the inventory investment in an organization. If provides

good quid lines for appropriated purchasing policy for different categories items and also for the
amount of attention, which is required from different level of management, to be give various
items according to the importance of “A” category items, Both Quantity to be procured creating a
keen price completion for “A” of “A” category items in appropriate lost will ensure against any
shortage. At the same time no Excessive stocks are built up from these items.

“B” Category items also deserve attention from the top level of management but not to the same
extent as that of on “C” category item the middle level of management may give the responsibly
to monitory the procurement of this category of item, the top crenel management should just over
see that action for procurement should just over see that action for procurement of this over see
that action for procurement of the “B” category items are taken as per directions and guide lines
laid down by It.

The lower level of management should manage the “C” category items. The management should
by down system for establishing rate constant or blanket contracts with reputed supplier to
purchase materials without much effort and with minimum paper work even cash purchases may
have permitted to procure immediate requirement of the “C” category items (saxena, 2005) ware
house management and item project control (vikas, 1997).

2.2.2.10 Inventory Counting

The span of material management activities purchasing through production, planning and
scheduling to the final ware house relies heavily on accurate record of a hand materials the record
are inaccurate, Excessive inventions or shortage may result. This could mean stoking obsolete item
or explaining UN met schedules or late deliveries to irate customer.

20
To maintain accurate inventory record
1. All receipts and disbursements material must be recorded and
2. The system must be periodically anodized for accuracy their system are two methods of
counting that are typically used, either affirm may do periodic counting or perpetual
(Cyclic Counting).

2.2.2.10.1 Periodic Physical counting

Perhaps you can recall having tried to enter a retail store only to find that it is closed for inventory
company that use the periodic physical counting method typically close their door or at least stop
all flaw in to an input of inventory from one day a year to account their physical inventory which
is available, often on an overtime pay basic, un information these once a year inventory taker is
usually unskilled at inventory taker may well generates as many errors as they find. There are firm,
such washing ton inventory service, wide, but gain, this involve cost

2.2.2.10.2 Perpetual (Cycle) counting

Is continuous physical counting of inventory so that all items are counted at a specified frequency
and inventory recording are counter periodically reconciled with actual account data the objective
of cycle counting in to maintain a high level of inventory record accuracy so that the level of
inventory record accuracy so that company asset can be reported correctly and dependent
production and marketing activities can be supported. This requires that errors can be quickly
identified, causes of error determined and conditions connected so that the same errors are
knowledgeable individual.

Cycle full time by counting inventories as professionals they develop skills for using hand counters
and scales, for forms moving toward computerized inventory system, inventory record in accuracy
is me of the first hurdles to overcome. Record accuracy is measured by first establishing an
allowable to clearance regarding the difference between the actual count and the record, the
quantity on the record would be considered accurate if it is within this tolerance.

The procedure for determining the number of items to count per day (On overage) is relatively
simple. A cycle is the time required to count all item in inventory at least once. This is often a year
the account frequency is the number of item is counted in each cycle.

21
Definition of store

Store is an area in which all kind of materials needed for production, distribution, maintenance,
and packaging are stored, received, and issues. Store is a temporary storage of material until the
customers needed. The store function is therefore covering great deals for more than just aspects
and includes the following activities:

 Controlling store house, stockyards

 Holding, controlling, and issuing stocks.
 Material handling functions
 Quality control activities
 Clerical stores operations administrations

Objective of store

The concept of store keeping is not new concept store must be in constant with touch the user
department in order to provide uninterrupted services to manufacturing decisions. Since working
capital is locked up in ware house, store is often equated directly with money.

The store functions organized as follows:

- To receive materials, components, and equipment’s

- To meet demand of user department by issuing the same
- Account the transaction correctly
- Minimize obsolescence, scraps, and surplus by proper identification
- Ensure good housekeeping, comprising receipts, issue handling and storage.

Duties and responsibilities of stores

 Economy: one of the basic duties of storage is to ensure that all operations within the store
system are performed efficiently as economically as possible.
 Stock control: to ensure that the process of stock control is performed with in the store
section. The store must be analyzed information concerning with productivity, distribution,
sales, and other needed to maintain the store control system.

22
  Stock record: used to ensure that adequate and up to date stock records are maintained for
every item held in stock whether on site or in adopt warehouse.
 Stock taking and checking: the store manager is responsible for organizing, supervising,
and controlling stocks checks carried out by the organization.
 Storage of stock: it is the basic duty of store to unload all goods delivered to the store.
 Inspection: to ensure inspect and check all the item deliveries made to the store, this checks
include such factors such as quantity, type, quality, damage and shortage.

General classification of store

 Ordinary stores: these are generally such items of stores for which there is regular turn over
caused by a constant demand. This may be further divided in to
- New
- Second hand
- Serviceable
- Second hand repairable
 Emergency stores: the store adopts are required to stock certain items of stores even though
they do not have a regular turnover. These are emergency stores and comprise of item
which do not ordinarily wear out or require renewable but which are required to be kept in
the stock to meet emergency due to break age or unanticipated deterioration thus items a
long time for procurement in case they are not stocked.
 Surplus store: these are items of ordinary of stocks which are not demanded by users. If
any item is not issued for past 24 months or more, it is considered as surplus.
Surplus stores are further divided in to
- Dead surplus: items which are not being issued to any indenter during past 24 months
or more and are not quickly to be utilized on any rail way with in next 2 years.
- Movable surplus: items which have not been issued to indenter during past 24 months,
but their use in near future are anticipated.

23
Other classification

 Custody stores: these are stores which have been used for special works and charged to
that works but due to in adequate stocking facilities available with user. These are
generally on a stock item but in certain situation. Stock items are also may be under these
classifications.
 Impressed stores: certain important units like loco sides training, examining, deports, chief
signal inspector, electrical Forman etc. such item are known as no standard item

2.2.3 Material Demand Forecasting

Forecasting is clearly not one of the main stream activities in the production or operation control
function. Nevertheless, there are a number of aspects of this function which relay on forecasts of
one sort of another if they are to be carried out efficiently (alan muhelman, etal, 1992)). forecasting
is a prelude to planning. Before making plan, an estimate must be made of what conditions will
exist over some future period (arnold,etal, 2008). material demand management is a function of
recognizing and managing all demands for materials it occurs in the short, medium, and long term
(arnold,etal, 2008). (Stevenson, 2012) Forecasting is a statement about the future value of variables
of interest. He states that having a forecast of demand is essential for determining how much
capacity or supply will be needed to meet demand. Forecasts are the basis for budgeting, planning,
sales, production and inventory personnel, purchasing and etc…according to Stevenson,
forecasting plays an important role in planning process, because they enable managers to anticipate
the future, so they can plan accordingly. Forecasting is a science as well as an art of viewing the
future what will be happen, which is an essential discipline in planning and running business.
Working environment is constantly changing, which become increasingly complex, so the
organizations have to the capacity to setup specialist unit to provide forecast for wide range of
subject (morrell, 2001)). (joseph, 1987) Forecasting demand is the vital link between firm and
production facilities and its customer and market environment. If sufficient customer order already
exists, the firm can produce to order otherwise to produce to stock and store the product in the
ware house or distribution center.

24
2.2.3.2 Characteristics of forecasting
The following are the characteristics of forecasts:

 Forecasting techniques generally assumes that the same underling causal system that
assisted in the past will continue to exist in the future.
 Forecasts are rarely perfect; actual results usually differ from predicted values.
 Forecasts for a group of item tends to be more accurate than forecasts from individual
items, because forecasting errors among items in a group usually are smaller than that of
individual items.
 Forecast accuracy decrease as the time period covered by the forecast-time horizon
increase.

2.2.3.3 Use of forecast

Components, subassemblies or/enquired services that are part of the finished product may not require
formal forces (i.e. not all materials required formal forces). Forecast should be used for end items and
services that have uncertain demand. The purpose of forecasting activities is to make the best use of present
information to guide decision to award the objective of the organization in general. Accurate projections of
future activity levels can minimize short term fluctuation in production and help balance workloads. This
reduces hiring, firing, and over time activities and helps maintain good labor relationship. Good forecast
also help managers have appropriate level of materials available when needed. By anticipating employment
and material needs, the forecasts enable managers to make better use of facilities and give improved service
to customers.

Generally, good forecast

 Could improve employee relation

 Improve materials management
 Helps to have better use of capital and facility and
 Improve customer service

2.2.3.4Techniques of forecasting
There are two types of forecasting techniques. They are

 Qualitative forecasting techniques and

 Quantitative forecasting techniques

25
Qualitative forecasting techniques

It is a technique that is used when there is no historical data available about past performance. This
forecasting technique is subjective and judgmental in nature and most of the time they are based
on opinion and expertise judgment. This technique relay on analysis of subjective inputs obtained
from customers, sale person, manager and experts. There are four common types of qualitative
forecasting techniques. They are: -

 Expert opinion method: one of the simplest and widely used method of forecasting which
consists of collecting opinions and judgments of individual who are expected to have the
best knowledge of current activities or future plans. This technique has the advantage and
disadvantage. some Advantages are, (fast decision, clear responsibility and accountability,
brings together the considerable knowledge, experience, skill and talents of various
managers, managers (experts) will acquire experience that is obtained in discussion) and
some of its disadvantages are, (probably poor forecast (due to lack of experience), .
 Sales opinion: the sales representatives require maintaining to estimate the demand for
each products and the forecast of each sale representative is consolidated to prepare the
overall forecast of the company. Advantages of this method are (it can reset in quality
forecast, pools together knowledge, can see from different approach) and the disadvantages
are, (time taking decisions, influenced by majority high stares persons, avoidance of
responsibilities).
 Consumer survey: it is based on the data which is collected from the customers.
Advantages are, (tap information that may not be available elsewhere, enhance the quality
and accuracy of forecast) disadvantages are, (experience and knowledge’s are constructive,
expensive and time consuming).
 Delphi techniques: it involves the development, distribution, collection, and analysis of
series of questionnaires to get the view of expertise that is located at different geographical
areas to generate the forecast. Its advantages are, (the tendency of process loss is avoided
or minimized, no influence of the majority) and its disadvantages are, (it takes time to reach
a consensus, coordination and interpretation difficulty).

26
Quantitative forecasting technique

There are two types of quantitative forecasting technique

 Time series analysis

 Causal method

Time series analysis

It is a set of some variable (demand) overtime (e.g. hourly, daily, weekly, quarterly, and annually).
This are based on time and do not take specific account of outside or related factors.

Forecasting technique based on time series data are made on the assumption that history follows a
pattern that will continue. Time series analysis is a time-ordered series of value of some variables.
The variables value in any specific time period is function of four factors:

a) Trend: it is a general pattern of change over time. It represents a long time secular
movement, characteristics of many economic series. It classified as linear trend, parabolic
trend, asymptotic trend, and exponential trend.
b) Seasonality: refers to any regular pattern recurring with in a time period of more than one
year. These effects are often related to seasons of the year. Example: weather variation,
vacation or holidays theater demand on weekend etc. there are two models of seasonality:
 Additive model
 Multiplicative models
c) Cycles: are long term swings about the trend line and are usually associated with a business
cycle (phase of growth and decline in a business cycle)
d) Randomness: are sporadic effect due to chance and usually occurrences.

Types of time series analysis

 Simple moving average (SMA): obtained by summing and averaging values from a given
number of periods repetitively, each time deleting the oldest value and adding the new
value.

27
  Weighted moving average (WMA): in this method the weight is given in such a way that
more weight is given to the most recent value in the time series weight can be percentages
or any real numbers.
 Simple exponential smoothing (SES): weight past data in exponential manner so that
most recent data carry more weight in the moving average.

Casual forecasting methods

This method relay on identification of related variables that can be used to predict value of the
variable of interest (demand). this method is used when historical data are available and the
relationship between the factor to be forecasted.

2.2.4 Disposal Management

The activity and action required to manage waste material from its inspection to its final disposal.
It is the handling of discarded materials; recycling and compositing which transform waste in to
useful products are form of waste management. Waste disposal is the process of treating solid
wastes and offers varieties of solutions for recycling items that do not belong to trash. It is about
how garbage can be used as a valuable resource. Waste management is something that each and
every household and business owner in the world needs the dispose of the product and substance
that they have use in a safe and efficient manner. Waste can be almost anything including food,
leaves, newspaper, bottles, old cars, chemicals from factory, and wrappers, disposable drapers,
people always produce waste material, but as industry and technology have evolved and the human
population has grown, waste management has become complex. The primary objective of waste
disposal management is to protect the public and the environment from potential harmful effect of
waste. Some waste materials are normally safe, but can become hazardous if it is not managed
properly. Waste management is simply means the collection, transport, processing, or disposal,
managing and monitoring of waste material to minimize its own consequence on human and
environment (world of earth science, 2003).

The act of disposing of anything argument orderly distribution, putting in order as the disposal of
troop in two lines (sharma, 2006) Ordering reputation adjustment management government
direction the exculpation levels to high disposal. Regulation of the fact condition, application etc.
of anything the Trans frees of anything to two new hands a new place condition etc. (sharma,

28
2006)simonies, distribution, arrangement, regulation Operating as disposal of property domestic
affairs of great importance which is no less than the disposal power or authority to disposal of
determine the condition of contracted etc. especially in the phrase at or in the disposal of the sole
and obsolete disposal of him and his concerns solution control (sharma, 2006)
2.2.4.2 Concept of disposal
The concept of disposal site reuse involves the reduction involve and actual removal of dredged
material from disposal area. For use lose when there by additional placement of advantage to be
related material size. Permute reusable site would be provided for the maintenance dredging at a
centralized location. Operation of reusable sites would be environmentally compatible because
facilities could be properly planned and engineered. Dredge materials, legal and policy constraints
regarding and depositing of material and potential use of dredge material for land fill and
construction purpose (sharma, 2006)
2.2.4.3 Reason for disposal
In order to minimize disposal, let us now analyze the reason for obsolescence and surplus usually
encountered in many organizations. One of the most common reasons for disposal and
obsolescence in many organizations is the sudden development of high technology /new
technology/, rationalization, design change, product change, diversification. Another reason is the
factory need to income (Gower press, 1972).
Adoption of standardization and elimination of nonstandard varieties has led to disposal and
obsolescence. Disposal practice is knowing how to properly dispose of waste generated that
practice is essential to protect the health of people animal and ecosystem keeping with all
(vedmark, 1992) Recycling is a process to change waste material in to new product to prevent
waste of potentially use full material reduce the consumption of fresh raw (vedmark, 1992)
Objectives of disposal
The objectives of disposal planning are to ensure that assets identified and being surplus to existing
or anticipate requirements as part of the assets review and analysis process are examined in detail
to establish. Firstly, that there are no alternative economic or community uses for these assets and
it disposed of that maximum return to government is achieved (gokhan, 1970)
Disposing of surplus assets and in accordance with a disposal plan ensure that they do not become
a maintenance and/or financial burden. It may also free up funds required for capital worked
influence decision making and support the ward estimates and budgets. Process (i.b by enabling

29
reinvestment of disposal revenue). Re invests, with funds being provide substantiate benefits for
agencies and their client, with funds being used to achieve enhanced service delivery out comes
(gokhan, 1970)

2.2.4.4 Procedures of disposal

All CNM generates of hazard waste must keep a monthly log with proper name manufactured and
amount of hazard waste. All hazard waste will be properly labelled with exact product name; exact
amounts of product, manufacturer name must legible (dobler, 1990)
When selling crop and surplus materials adequate producers must be established that will protect
the company from less due to ships had method, dishonest employees, and irregular practices on
the part of purchaser, these procedures must over abroad of activities, including segregation and
storage, weighing and measuring delivery, negotiation, supplier selection, and paneling crop and
surplus materials adequate producers must be established that will protect the company from less
due to ships had method, dishonest employees, and irregular practices on the part of purchaser.
These procedures must over abroad of activities, increasing segregation and storage, weighting
and measuring delivery, negotiation, supplier selection and payment (dobler, 1990)

2.2.4.5 Methods of Disposal

Ordinary the disposal may be carried out by one the following ways:
Transfer
This method involves transfer to ministry of central government, state government.
Allocation to priority indenter’s: under this method the following procedure is generally followed.
Preparation of a list surplus stores, circulation of stores to priority indent ores, release of stores to
priority indent ores and Calculation and realization of incidental chargers for packing handling etc.
For release to priority in dent ores (sharma, 2006)
Sale
One of the methods may be adopted in disposing of surplus under this method, by advertised
tenders: Disposal at call receipt (tender application money) Receipt tenders, opening and handling
of the same, acceptance of tenders’ disposal of store. By action: If surpluses are to be disposed of
through action a wide publicity has to be given to such a decision and in auction team is selected
for the stores to the value of RS (vedmark, 1992)

30
By negotiation
a provision for disposal of stores by negotiation also exists but this method must be recorded in
writing. A decisions of adhering to this regards is first taken by the ministry of suppliers and the
conducting of negotiation is responsibilities the dissector general of suppliers and disposal or his
nominee. The association of the finance ministry is necessary at all stages of the negotiations
(datta, 2004)
Following two methods of disposal are commonly adopted for scrap disposal, Disposal by auction,
Disposal by tender, Buyers in both cases are required to inspect the scrap yard and they also
required to deposit earnest money. Sales by action. Following aspects should be considered while
conducting the sale by auction. This method is adopted for small value laths; Separate fenced scrap
yard should be available so that production and other normal activities of the enterprise may not
be affected by the auction. The auction should be conducted by committee who should be
authorized to take decision on spot. Prevented terms and condition of the auction should be
available with the auction committees, who will announce them before the auction is striated.
Committed should know the reserve price and the lowest price up to which auction bids can be
accepted (GOKARN, 1970).
Sale of tenders
Tenders forms containing duly vetted terms and condition (from legal and finance department) of
sale shall be drawn and forms the part of the tender document.
Whiting inviting the tenders either through the advertisement of through limited tender enquires,
a definite time and date should be prescribed for sale documents, receipts of documents, and their
opening and this time and date should be adhered to strictly (dobler, 1990) Other procedures for
tenders shall be similar to those of purchase tenders.
Material should be allowed to be lilted offer acceptance of bid and receipt of payment. Storage
charges should also be stipulated and recovered after the free period of removal before giving the
delivery (sharma, 2006).
Disposal can be defined interims absolute surplus and scrap. One such items are identified there is
no paint in retaining them hence they must be disposed of. Although such items are kept in the
custody of stores, it is general practice that the disposal action is taken by the purchase department.
This system is favoured because the following reasons. Purchase officer supposed to know price
trend better than any other section/department (Gower press,1972)

31
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research design

The study was conducted through descriptive type of research. The reason why we used this type
of method was, because it helps to describe the existing condition as it is and it is mostly preferable
for studies conducted in the area of business and economics.

3.2 Nature and source of data

The study used both primary and secondary data obtained from both sources. The primary data
was collected through close ended questionnaires and we gathered additional information from the
management through structured interview.

3.3 Data gathering tool

For the purpose of gathering accurate and reliable data we used both primary and secondary
sources. In order to collect primary data, we used close ended questionnaires.

3.4 Target population

The study was conducted in Mettu University and the target of the research were employees which
have direct relation with the store, purchasing, material demand forecasting, inventory, and
disposal related activity. Therefore, the targeted population was 75 staff employees which are both
internal and external customers of the organization.

3.5 Sampling technique and sample size

Because of the heterogeneous nature of our targets, and its helpful nature in gathering accurate
reliable data’s, we decided to use stratified sampling technique, and to select the respondents from
the target population, we used simple random sampling technique. Based on the above reasons we
select 50% of the respondents from the directed targets, which are: -

Staff division Population Sample size

Main staff 45 23
Supportive staff 30 15
Sum 75 38

3.6. Method of Data analysis

Data collected from different sources are analyzed, interpreted and summarized using qualitative
approach. We also used tables and percentage to present and analyze the data obtained from
questionnaire.

32
 CHAPTER FOUR

DATA PRESENTATION AND INTERPRETATION

4.1 Analysis of questionnaires

Table4. 1 Demographic information of the respondents

No Item Respondents
Frequency Percent (%)
1 Age 18-25 12 31.6
26-50 18 47.4
>50 8 21
Total 30 100
2 Sex Male 20 53
Female 18 47
Total 38 100
3 Educational Diploma 13 34.2
status First degree 21 55.2
Master degree 2 5.3
Other… 2 5.3
Total 38 100
4 Years of <5 14 36.84
experience 6-10 12 31.60
11-15 4 10.52
15-25 7 18.42
>25 1 2.63
Total 38 100
Source: questionnaire: 2017

33
As shown on the above table most of respondents 18(47.4%) between 26-50 age and about 12(31.6%) of
the respondents between 18-25 the remaining of the respondents 8 (21%) above the age 50 year

It indicates that most respondent in the Mettu university adult age level it is important to the university

As shown on the above table most of the respondents 20 (53%) are male and the other 18 (47%)
of the respondents are female. It shows male employees more participate in the university
It is also shown that first degree holders constitute 21(55.2%) of the respondents, there are 13
(34.2%) respondents having diploma, 2 (5.3%) of them have masters and above educational level,
while the remaining 2(5.3%) of the respondents are categorized under the other option. it means
most of employees are educated

The table also shows that respondents which cover 14 (36.84%) have an experience of <5 year, 12
(31.6%) of the respondents are experienced with 6-10 years, the organization have 4 (10.52%)
employees with 11-15 years of experience, 7 (18.42%) of the respondents have work experience
of 15-25, and only 1 (2.63%) respondent of the organization from the target population have above
25 years work experience. This indicates that majority of the respondents have a work experience
of less than 5 years. Majority of the respondents have good educational qualification ranging from
diploma to masters and above. They also have good work experience.

Table4. 2 Questionnaire analysis related with purchasing

No. Questions Yes % No % I don’t % Total Total

know %
1. Do you think that 20 52.6 14 36.8 4 10.52 38 100
skilled man power is
exist on the position?
2. Do you think that 22 57.89 9 23.68 7 18.42 38 100
enough budgets are
set for purchasing
material?
3. Are there any policy 24 63.15 11 28.94 3 7.89 38 100
and procedure in the

34
 organization
regarding purchasing?
4. Do you think that the 21 55.26 12 31.57 5 13.15 38 100
materials purchased
meet the requirement?
5. Do you think that 14 36.84 23 60.52 1 2.63 38 100
materials are
purchased on time?
Source: questionnaire: 2021

As shown in the above table, from the total respondents, 20 (52.6%) of the respondents replied
that there is skilled manpower on the position of purchasing, 14(36.8) respondent are said that
there is no skilled manpower on the position and the rest of the respondents, which means 4
(10.52%) respondents, have no any idea whether there is a skilled man power on the position
or not. it shows that almost comparable manpower.

For the second question which is whether enough budget is set for the purchasing purpose or
not,22(57.89%) respondents replied that there is enough budget that set for purchasing purpose,
9(23.68%) of the respondents replied that there is no enough budget that set for purchasing
purpose, but the rest of 7(18.42%) of respondents do not have any idea about the issue. It
indicates that no fulfillment of budget.

For the third question, 24(63.15%) of the respondents replied that the organization has its
own policies and procedure related with purchasing activity, 11(28.94%) of the respondents
replies that there is no any policy and procedure that the organization follow related with
purchasing, But the remaining 3 (7.89%) of the respondents don’t know whether there is
purchasing policies and procedure or not. it shows that do not completely enough police and
procedure
From the fourth question 21(55.26%) of the respondents replied that the materials purchased
can meet the requirements, 12(31.57%) of the respondents replied that the materials purchased
do not meet the requirements, but the rest 5 (13.15%) of respondents do not know whether the
purchased material can meet the requirements or not. It indicates that There was not completely
fulfill the requirements.
From the last question of the table above,14 (36.84%) of the respondents replied that materials
are purchased on time, 23 (60.52%) of the respondent replied that the materials do not
purchased on time, but only 1 (2.63%) respondent replied that do not know whether the
materials purchased on time or not. It indicates that it was purchased material on time.

35
Table 4.3 Questionnaire analysis related with inventory management and storage

No. Question Yes % No % I don’t % Total Total

know %
1 Is there skilled man 17 44.73 18 47.36 3 7.89 38 100
power on the position?
2 Dose the inventory 20 52.63 15 39.47 3 7.89 38 100
properly located in the
warehouse?
3 Dose the management 16 42.11 19 50 3 7.89 38 100
use computerized
system for controlling
and recording
inventories?
4 Is there adequate space 23 60.52 15 39.48 0 0 38 100
in the store for
purchased materials?
5 Do you think that the 21 55.26 14 36.84 3 7.89 38 100
store is clean enough?
Source: questionnaire: 2021

From the table above for the first question, 17 (44.73%) of the respondents responds that there is
skilled man power in the position, 18 (47.36%) of the respondents responds that there is no skilled
man power in the position, but the rest 3 (7.89%) of the respondents replied that they do not know
whether there is skilled man power or not in the position. It indicates that no enough skilled
manpower.

For the second question, from the total respondents, 20 (52.63%) respondents replied that the
inventories are properly located in the store, 13 (39.47%) respondents respond that inventories are
not properly located in the store, and the remain 3 (7.89%) respondent replied that they do not
know whether the inventories are located properly or not. it indicates that inventories have a store
but not proper store

36
For the third question, 16(42.11%) respondents replied that the management uses computerized
system to recording and controlling the inventory, but 19 (50%) respondents responds that the
management do not use computerized system to recording and controlling the inventories, and the
rest 3 (7.89%) respondents replied that they do not know whether the management uses
computerized system or not. it indicates that no enough computerized system of recording and
controlling inventory.
For the fourth question, 23 (60.52 %) respondents replied that there is adequate space in the store
for the materials purchased, 15 (39.48%) of the respondents responds that there is no adequate
space in the store. it indicates that there is most respondent adequate space in the store.
For the last question, 21(55.26%) respondents replied that the store is clean, 14(36.84%)
respondents replied that the store is not clean, and the rest of 3 (7.89%) respondents replied that
they do not know whether the store is clean or not. it indicates that most respondent have a clean
store.
Table 4.4 Questionnaire analysis related with material demand forecasting:

No. Question Yes % No % I don’t % Total Total

know %
1 Do you think that 21 55.26 13 34.21 4 10.52 38 100
forecasting plays a
significant role on
estimating the demand
for materials?
2 Is there specialist unit 18 47.36 15 39.47 5 13.15 38 100
that provide forecasting
regarding materials
demand?
3 Is there available data 16 42.10 14 36.84 8 21.05 38 100
to make forecast?
4 Is there coordinated 14 36.84 15 39.47 9 23.68 38 100
method of forecasting?

37
 5 Do you think that the 11 28.94 19 50 8 21.05 38 100
accuracy of forecast
that was made
satisfactory?
Source: questionnaire: 2021

The above table indicates that for the first question, from the total respondent’s, 21 (55.26%)
respondent’s replied that forecasting plays a significant role on estimating demand for materials,
13(34.21%) respondents replied that forecasting does not play significant role on estimating
demand for materials, and the rest 4 (10.52%) respondents replied that they do not know whether
forecasting play an important role on estimating demand for materials or not. It indicates that most
respondent forecasting play significant role on estimating demand for material.

For the second question, from the total respondents 18(47.36%) of the respondents replied that
there is specialist unit that provide forecasting regarding materials demand, 15 (39.47%)
respondent replied that there is no specialist unit that provide forecasting regarding materials
demand, and the rest of 5 (13.15%) respondents are do not know whether there is specialist unit or
not. It indicates that most of respondent specialist unit that provide forecasting regarding materiel
demand.

For the third question, the respondents of 16 (42.10%) replied that there is available data in order
to make a forecast, 14 (36.84%) respondents from the total respondents are replied that there is no
data available to make a forecast, but the remain 8 (21.05%) of respondent replied that they do not
know whether available data or not which helps to make a forecast. It shows that most respondent
have available data.

The replies of the respondents for the fourth question, which is whether there is co-ordinated
methods of forecasting or not, 14 (36.84%) respondents replied that there is co-ordinated methods
of forecasting, 15 (39.47%) respondents are responded that there is no co-ordinated methods of
forecasting, and the rest 9 (23.68%) of the respondent replied that that they do not know whether
there is co-ordinated methods of forecasting or not.it indicate that most respondent have no co-
ordinated methods of forecasting.
From the total respondents around (28.94%) or 11 of them are replied that the forecast that was
made related with material demand are satisfactory, and half (50%) of the respondents replied that
38
“no” the forecasts that was made related with material demand are not satisfactory, it needs more
effort than what exist before, but 8(21.05) of respondents are not familiar with the issue of material
demand forecasting, this means they have no any idea about it. It indicates that no materiel demand
satisfactory.
Table4. 5 Questionnaire analysis related with disposal management:

N Question Yes % No % I % Total Total

o. don respo respondents
’t ndent in %
kno s
w
1 Do you think that 16 42. 17 44.73 5 13.15 38 100
materials are disposed 10
in the right way?
2 Is there an activity of 14 36. 19 50 5 13.15 38 100
changing wastes in to 84
useful product?
3 Do you think that the 15 39. 17 44.73 6 15.78 38 100
environment of the 47
school is vulnerable to
risks related with the
way of disposing?
4 Is there enough 13 34. 16 42.10 9 23.68 38 100
personnel’s in the 21
position of disposal
management?
5 Is there recycling 15 39. 21 55.26 2 5.26 38 100
method in disposal 47
management activity?
Source: questionnaire: 2021

39
As shown on the above table, for the question that says do you think that materials are disposed in
the right way? 16 (42.10%) of the respondents are replied that “yes”, and 17(44.73%) of the
respondents replied “no”, and the rest 5(13.15%) of the respondents are replied “I don’t know” or
they have no an idea about whether the materials are disposed in the right way or not. it indicates
that most respondent no right materiel disposal.

For the second question that says “is there an activity of changing wests in to useful product?
“14(36.84%) 0f the respondents replied that “yes”, 19(50%) of the respondents replied “no”, and
the remaining 5(13.15%) respondents replied that “I don’t know”. It indicates that most respondent
that not changing west in to useful product.

For the third question 15(39.47%) of the respondents replied that “yes” the environment of the
school is vulnerable to risks, 17(44.73%) of the respondents are replied that “no” the environment
is not vulnerable to risks, and the rest 6(15.78%) of the respondents replied that “they don’t know”
whether the environment is vulnerable to the risks or not. it indicates that most respondent had not
the environment vulnerable to risks

For the fourth question 13(34.21%) of the respondents replied that “yes” the position is filled
with enough personnel’s, 16(42.10%) of the respondents are replied that “no” there is no enough
personnel’s on the position of disposal, and the remaining 9(23.68%) of the respondents are
replied that “I don’t know”. It indicates that most of respondent no enough personnel on the
position of disposal

At the last 15 (39.47%) of the respondents are replied “yes” for the question they asked ‘whether
there is recycling methods in the disposal management activities or not, 21(55%) of the
respondents replied that “no” there is no any recycling methods in the disposal management
activities, and the rest of 2(5.26%) respondents replied “I don’t know”.it indicate that most of
respondent no any recycling method of disposal management.

4.2 Analysis of Interview question for the manager of the division of purchasing
and material administration
The interview was made for management of mettu science and technology university department
of purchasing and property administration division in order to gather some information related
previously specified models.
Data from Interview
Q1. Does your organization used material handling system?

Yes, there is one department in this organization which is responsible for handling materials
through arranging stores and ordering the materials on self-according to their usage. Keeping

40
recorded of all materials so as to handle materials and also create awareness of the employee how
to handle materials.

Q2. When and where materials are dispose if the material is spoilage?

The manger replied that a material was disposed from the organization when materials become
obsolescence and no longer live, when breakage and spoilage was happening before there expected
life and when materials become expired. By understanding disadvantage of this broken spoilage
and obsolesce material the material management department remove the materials far away from
the organization by taking in to consider the safety of the society and cleanness of the environment.

Q3. What is the problem faced in the purchasing system?

There are many problems that is face during purchasing material among them lack of effective
bargaining power with the seller during they buy the materials for the organization and lack of
expert who evaluate the quality and durability of the purchased equipment (materials, and also)
There is lack of market information and we are not able to use the discount that the company gives
for their customer.

41
 CHAPTER FIVE

FINDING CONCLUSION AND RECOMMENDATION

This chapter deals with the findings of the study summery, conclusion and recommendations
helpful to come up to problem. Therefore, the result obtained through various sources has been
presented as follows.

5.1. SUMMARY FINDING

Material management is the coordination functions responsible for the planning, source sing and
making purchasing of materials in an optimal manner. However, during the material management
some problems are encountered, this paper tried to assess the problem of material management
and also identified some initials factor and alternative solution. The general objective of this study
is to assess the existing practices of materials management in mettu University based on the
analysis and interpretation.

42
5.2. CONCLUSION
From the total of the employees 53% of workers are males. Almost males are more than of female
employees in the organization. This indicates that males are dominantly employed in the
organization and Regarding to respondent background information most of employees are young
and found in productive age most of them are diploma holder and degree holder and have 1-5
years’ work experience

This implies that most of employees could easily understand questionnaires and also they have at
least one-year work experience, so they are familiar with materiel management practice.

Also according to the survey most the employees under the age of 26-50 years old from this we
can conclude that workers of the organization not young i.e. adult.

Materiel management is one of the crucial element that enable organization to provide smooth and
un interrupted service for the society. the study has been concluded the research major findings as
follow.

As the researcher understand from survey the practice of material management not that much
satisfactory under this conclusion some problem identified by the respondent which is mention
below.
 There is lack of evaluate the material management need and supply process
 The existing policy of purchasing performance is weaker
 The annual budget of purchasing performance was let arrived Stock system is not
technological

Based on the major findings mostly materiel was stored in separate distinct house. This helps to
clear counting and inspection of material seen through most of the time inventories are stored in
distinct area sometimes the organization stores all items at a center store method. At this in order
to easily count and identification each type of inventories from a center store the organization on
forced to use both codification and classification system

Most of the mettu university materials disposed before their useful life year and with some
amount of salvage value

43
5.3. RECOMMENDATION
After the above observation the following idea could be provided as recommendation for effective
materiel management to be implemented in Mettu University.

 Warehouse is the great aspect of materiel management that the manager of inventories should
have given advice for employees to give considerable attention to store inventories.
Appropriate store management play a vital role to the performance of business operation.
 More over to improve materiel management performance and to reduce cost associated with
inventories it is advisable to hiring a qualified personnel in the area of materiel management
 Classification of materiel is important to eliminate duplication of items in warehouse and to
achieve a physical control of inventories. The codification and classification of are advisable
to account the functions and technical nature of materials. The organization used deferent it
aims at the distinct store method. Due the separate layout materials these storing methods help
the organization to easily count, check and identify individual items. This method enables
organization to perform effective inventory inspection. Even though this enable to perform
effective counting, identification and inspection of materials it needs many warehouse for each
unique group of inventories which require high amount of capital. On the contrary, if the
organization apply all items at a center store method it enables the organization to reduce
inventory cost. But it difficult easily count, check and identifies the required items from
collectively stored over all inventories. However, this problem is solved by classification n,
identification and by frequent regular inspection. So it is better to the organization if it applies
all items at a center store method.
 The availability of adequate inventory enables organization to deliver uninterrupted service to
the society. Providing effective service requires the availability of excess amount of
inventories. As result some inventories would be deteriorating, obsolete and expired. In order
to remove these unwanted inventories, the organization sometimes use fire and burn them.
Drugs by its nature composed from so many chemicals, so burning drugs causes’ air pollution.
These directly affect health and safety of the society and environment. Therefore, it is better to
the organization to find other less risky disposal method such as putting under the ground.

44
 The top management of the organization should change the way evaluate the material
management need and supply process which done once at the end year collaborate two time
in a year.
 The knowledge skill and ability of purchasing is very vital so, the organization should
develop budget of purchasing by given different training.
 The annual budget of purchasing of organization should rely on schedules.
 The organization applied the method of FIFO and LIFO
 The stock system is should use updated accounting information system and the inventory
material should be disposed if and only of they lost their market value unless the materials
should be sold or exchanged for economic benefit of the organization

45
 REFERENCES

1. A.K Datta (2004) Material Management Tata MC Graw Hill, New Delhi.
2. Arora, (2003) Material Management and Material Management System, Mc Graw Hill,
New York.
3. Burtru (2002) Purchasing and Supply Management 6th edition. Mc Graw Hill New York.
4. Dressler G (2001) Material Management in the 21st Century West Publishing Company
New Delhi India.
5. Gopalakrushanan (2003) Purchasing and Material Management 7th edition.
6. Jacobs and Chase (2010) Predation and Operational Management 2nd edition.
7. Mari, N K (1990) Purchasing and Material Management Vipas pub. House New Delhi.
8. William J. Stevenson (2007 Practice of Material Management 2nd edition)
9. www.africanmanager.org

46
 Appendix A
Continuing and Distance Education
Jimma University

Questionnaire to be filled by employees of the organization

Dear respondent; these questionnaire is prepared to conduct research on the assessment of

material management practice in Mettu university. You are kindly requested to give the right
answer the best express your opinion.

Instructions

 these questionnaires used only for academic purpose

 No need of writing your name
 Answer the question by putting (x) mark in the box
Thank you:

I, personal information
1. Age 18-25 26-50 above 50

2. Sex male female

3. Educational status diploma first degree masters other

4. Years of experience <5 6-10 11-15 15-25 >25

II, questions related to purchasing (yes or no questions)

1. Do you think that skilled man power is exist on the position?

Yes no I don’t know

2. Do you think that enough budgets are set for purchasing materials?

Yes no I don’t know

3. Are there any policy and procedure in the organization regarding purchasing?

Yes no I don’t know

4. Do you think that the materials purchased meet the requirement?

Yes no I don’t know

47
5. Do you think that materials are purchased on time?

Yes no I don’t know

III, questions related to inventory management and storage (yes or no

questions)
1. Is there skilled man power on the position?

Yes no I don’t know

2. Does the inventory properly located in the ware house?

Yes no I don’t know

3. Does the management use computerized system for controlling and recording inventories?

Yes no I don’t know

4. Is there adequate space in the store for purchasing material?

Yes no I don’t know

5. Do you think that the store is clean enough

Yes no I don’t know

IV, questions related to material demand forecasting (yes or no questions)

1. Do you think that fore casting plays a significance role on estimating the demand for material?

Yes no I don’t know

2. Is there specialist unit that forecasting regarding material demand?

Yes no I don’t know

3.Is there available data to make forecasting?

Yes no I don’t know

4.Is there coordinated method of forecasting?

Yes no I don’t know

5.Do you think that the accuracy of forecasting that was made satisfactory?

48
 Yes no I don’t know

V, Questions related to disposal management (yes or no questions)

1.Do you think that materials are disposed at the right way?

Yes no I don’t know

2. Is there an activity of changing waste into use full product?

Yes no I don’t know

3.Do you think that the environment of the school is vulnerable to risks related with the way of
disposing?

Yes no I don’t know

4.Is there enough personnel’s in the position of disposal management?

Yes no I don’t know

5.Is there recycling method in disposal management activity?

Yes no I don’t know

49
 Appendix B
Continuing and Distance Education
Jimma University

Interview questions

Q1. Does your organization used material handling system?

Q2. When and where materials are dispose if the material is spoilage?

Q3. What is the problem faced in the purchasing system?

Thank you!

50