EFFECT OF MATERIAL MANAGEMENT ON

ORGANIZATIONAL PERFORMANCE
A Study of Lubcon Oil Service Limited, Ilorin Kwara State

BY
ABDULSALAM JIBIKE MEDINAT

NOU193138946
 CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

In a business organization, the need for material management is very important because

of the need to verify the accuracy of stock record with identification of every items of stock in

the store. The management wishes to ensure that fraud and theft are reduced and dominate into

barest level. In other words the management wish to put a minimum level of losses which

emanate from store operation, however there is no way to achieved these purpose without a

proper stock taking of the stock items as well as infusion of strong and effective control into

establishment store system.

In a business concern availability of tools maximizing profit guarantee community of

stock taking with its positive effect of materials control. This will help the organization to

achieved its goods and maximize its profit, also at the end of financial year whether in public or

private sector there is need to value the closing stock for its need to value and inclusion in

balance sheet. To ensure the accurate figure of stock items there must be an effective stock

control and stock taking.

The material is necessary in the area of saving cost of production and also helps the

management of organization to know the worth of their asset. Also it enhances strong familiarity

of the stock taken with stock items and contributes to materials to be effectively control. The

materials in the store commonly constitute 35.40% of invested capital therefore it should be

adequately taken care of because it has to do with profit of the organization.

The goal of materials management is to insure that materials are available at their point of

use when needed. The materials management system attempts to insure that the right quality and
quantity of materials are appropriately selected, purchased, delivered, and handle in a timely

manner and at a reasonable cost. Materials management is the system for planning and

controlling all of the efforts necessary to ensure that the correct quality and quantity and

equipment are properly specified in a timely manner, are obtained at a reasonable cost and most

importantly are available at the point of use when required (Mohammed 2018).

The scope of materials management varies greatly from company and may include

material planning and control, production planning, purchasing, inventory control, implant

material movement and waste management. It is a business function for planning, purchasing,

moving, storing materials in an optimum way which helps organization to minimize the various

costs like inventory, purchasing, material handling, distribution cost.

Material management is division making with respected design, procurement storage

issue packing and handling an accounting of material to get most out of every amount invested in

materials and its connected with maintaining adequate supply of something (raw material, spare

and components, operating suppliers (utilities) to meet anticipated demand economically.

The research emphasizes on the assessing the effect of material management on

organizational performance with Lubcon Oil Service, Ilorin Kwara state as case study. The

company uses different material of high value so that the material management practice is the

area attracting significant concern of the top management which has multiple influence in its

overall performance.

1.2 Statement of the Problems

Many organizations seem to be failing in the realization of the corporate goals and

objectives. However, for most of these organization (particularly manufacturing organizations),

materials are crucial aspect of the firm’s prosperity and goals attainment (Burt, 2019) ‘the
challenge is that some firms do not have genuine and efficient management of the purchase,

storage and usage of the material. The importance of material management is evident in amount

of expenditure allotted to material and the significant contribution of material to organizational

performance.

It is common to observe the scattered equipment and asset out of the warehouse in the

office compound that is at risk of theft. A large number of stocks of materials are stacked in the

store which is seriously exposed to the dust and at risk of getting expiration due to overstocking.

Sometimes the interruption of operation happened due to the lack of raw material, inventories

and there is damage and spoilage of material due to improper placement. The different corners of

warehouse compound covered with dust. Items are not stacked in a proper way so that easily

accessible when need for withdrawal or for execution.

The research will be expected to introduce the modern materials management in stock

level, safety and a proper system of ordering for inventory. The characteristics of efficient and

effective materials management will be recommended after the data analysis and presentation of

the study.

1.3 Research Questions

The research questions of this project are design to ascertain the important of material

management on organizational performance to be employed to ensure the attainment of

organization goals. For the purpose of this project, this research question must be strictly looking

into:

1. How Does inventory control have any relationship with organization performance in

Lubcon Oil Service Limited Ilorin, Kwara State?

2. To what extent does material handling impact on organizational performance in Lubcon

Oil Service Limited Ilorin, Kwara State?

3. How Does procurement process has impact on organizational performance in Lubcon Oil

Service Limited Ilorin, Kwara State?

4. How does material management affect organizational performance in Lubcon Oil Service

Limited Ilorin, Kwara State?

1.4 Objective of the Study

The main objective of the study is to investigate the effect of material management on

organizational performance. However, specific objective of the study are:

1. To identify the relationship that exist between inventory control and organizational

performance in Lubcon Oil Service Limited Ilorin, Kwara State

2. To investigate to what extent material handling impact on organizational performance in

Lubcon Oil Service Limited Ilorin, Kwara State

3. To determine the impact of procurement process on organizational performance in

Lubcon Oil Service Limited Ilorin, Kwara State

4. To examine the effect of material storage on organizational performance in Lubcon Oil

Service Limited Ilorin, Kwara State

1.5 Statement of Hypothesis

The study will be geared towards testing the following hypotheses:

Ho1 There is no significant relationship between inventory control and organizational

performance in Lubcon Oil Service Limited Ilorin, Kwara State.

Ho2 Material Handling has no impact on organizational performance in Lubcon Oil Service

Limited Ilorin, Kwara State.

Ho3 Procurement process has no impact on organizational performance in Lubcon Oil Service

Limited Ilorin, Kwara State.

Ho4 material storage has no significant effect on organizational performance in Lubcon Oil

Service Limited Ilorin, Kwara State.

1.6 Significant of the Study

This research was taken up to investigate the effect of material management on

organizational performance. Apparently, all organizations, whether service oriented or goods

oriented need to pay attention to essence of materials management in their organizations

consequently, it is clear that this study will contribute immensely to the management by

emphasizing on the need for material management in order to be effective and efficient.

The research is also significant to the employers as it will give them the idea of what is

expected in material handling, developing skills in material management in turn to achieve and

improve departmental efficiency.

The study will as well impact on the economy in the area of given insight to how material

resources are expected to be managed in order to achieve expected outcome from available

resources by controlling and management of waste, quality procurement, storage facility system

etc.

Finally the result from this study should help scholars, students and upcoming researcher

in the conduct of future research.

1.7 Scope of the Study

 This study is design to study the effect of material management on organizational

performance with reference to Lubcon Oil Service Limited, Ilorin Kwara State.

The research work shall be limited to the staffs Lubcon Oil Service Limited, Ilorin Kwara

State from where sample of 60 respondents was be selected randomly as sample using in order to

give everyone equal chance of being selected. The scope of the sample will range from the

management staff t, senior staff and the junior staff.

The research will cover the concept of organizational performance and material

management, while the effect of material management on organizational performance was study

using four domains.

The primary data will be collected using questionnaire while that of secondary was be

collected using relevant journals and visiting the internet, the result will be analyzed using

simple percentage and presented in tabular form.

1.8 Definition of terms

Some of the key words commonly used in the research work are as follows:

Stock: There are the quantities of physical items of raw material that are kept in the store. The

following are the type of stock we have:

Work in progress: These are the items for which work has started in the manufacturing process

but not yet completed for sale i.e. it is partly finished goods and materials sub-assumable etc.

held between manufacturing stages.

Finished Goods: These are manufactured goods output and completed product which are being

held for sale that is they are completed product ready for sale or distribution. They are valued by
adding up direct materials, direct labour and direct expensed incurred with the overhead cost

absorbed by finished unit to be held.

Minimum Stock Level: This is the level of items above which the stock can be allowed. Fixing

the level to best possible expected condition are used one must bear in mind that even if there is

a low demand for materials stock level authorized in any business.

Minimum Stock Level: This is the level which stock cannot be allowed to fall. In setting this

level it is assumed that there will be normal consumption during normal waiting. The level must

be watched carefully, it is an indication of danger of stock-out which may result into production

or sales stoppages. It is otherwise known as being stock or safety stock.

Hastening Level: This is the reward amount express in unit of issue to which it is estimated that

hastening action necessary to request applier to make early delivery.

Ordering Stock Level: This is the amount expressed in unit of which ordering action is indicated

on time for the materials to be delivered before stock fall below minimum level

Average stock level: It measure the average level of stock held during an accounting period. It is

useful in measurement considering stock turnover

Economic Order Level: This is the quantity which is must economical to order. It equate cost

ordering with the cost of storage. However, it minimized the balance of cost between materials

ordering cost and record cost. It is important concept in the purchased of raw materials and in the

storage of finished goods and in transit materials, ordering can either be the purchased of time on

its production.

1.9 Historical Background of Lubcon Oil Service Limited, Ilorin Kwara State
 Lubcon Oil service Limited which is located at Ilorin was established in 1990 in August

and has an intensive network of subsidiary has its head quarter at Lubcon Avenue, Adewole

Industrial layout, Ilorin Kwara State.

This company is a refinery company/organization which produce the following class of

product, automobile lubricants, gear oils, general lubricants, greases, hydraulic fluids, marine

oils and process oils etc. category: oil and gas equipment and tools supplies, stockiest and oil and

gas exhibitions.

Lubcon has been producing world class product applying global best practice heating

employment opportunity for thousands of Nigeria across the country and in its entire operating

environment in West African.