EVALUATING INVENTORY MANAGEMENT AND CONTROL IN

MANUFACTURING FIRMS
TITLE PAGE

Certification

Dedication

Acknowledgement

Table of Content List of Tables

ABSTRACT

CHAPTER ONE: INTRODUCTION

1.1Background of the study

1.2 Statement of the problem

1.3 Objective of the study

1.4 Research Questions

1.5 Significance of the study

1.6 Scope of the study

1.7Definition of terms

1.8 Organization of the Study

CHAPTER TWO: REVIEW OF LITERATURE

2.1 Conceptual Framework

2.2 Theoretical Framework

2.3 Empirical review

2.4 Chapter Summary

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Research Design

3.2 Population of the study

3.3 Sample size determination

3.4 Sample size selection technique and procedure

3.5 Research Instrument and Administration

3.6 Method of data collection

3.7 Method of data analysis

3.8 Validity and Reliability of the study

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Data Presentation

4.2 Answering Research Questions

CHAPTER FIVE: CONCLUSION AND RECOMMENDATION

5.0 Summary
5.1 Conclusion
5.2 Recommendation

References
Appendix

ABSTRACT

Inventory management is a significant component of any business since inventories are normally

accountable for the majority of the costs incurred in business operations. Several researches

conducted to ascertain how companies meet customer demand by tracking and maintaining the

inventory required using and inventory management system. Thus, the desire to find out

inventory management and control on manufacturing ignited this study. This work examined the

inventory and control management with a particular reference to Champion Breweries Plc, Uyo.

To achieve this purpose, four research questions were formulated to guide the study. A structured

questionnaire was used as the main instrument for data collection from 50 personnel of the

company. The data collected from the respondents were analysed using simple percentage and

correlational analysis for testing hypothesis. The study concluded with some recommendations

that the company should hold inventory in the form of raw material, work-in-progress (process)

and finished goods.

 CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Inventory constitutes the most significant part of current assets a larger majority of Nigerian

manufacturing industries. Because of the relative largeness of inventories maintained by most

firms, a considerable sum of an organization’s fund is being committed to them. It thus becomes

absolutely imperative to manage inventories efficiently so as to avoid the costs of changing

production rates, overtime, sub-contracting, unnecessary costs of sales and lack order penalties

during periods of peaks demand.

According to Redhakrishman et al, (2009), manufacturing enterprises (companies) are compelled

to supply their best in order to survive because remarkable changes in the market scenario

frequently occur because of global competition, shorter product life cycles, dynamic changes of

demand pattern and product varieties and environmental standards. Pandey, 2008 says it is

possible for a company to reduce its levels of inventories to a considerable degree without any

adverse effect on production and sales, by using simple inventory planning and control

techniques. The reduction in excessive inventories carries a favourable impact on a company’s

profitability.

Nowadays, understanding of the significance of inventory control throughout the various links in

a supply chain is further increased by the awareness in supply chain management. In recent

years, management decisions are supported by lots of newly constructed supply chain and

inventory control models. A sufficient supply without too much oversupply of items are assured

by monitory supply, storage and availability is known as inventory control. Total inventory costs
can be minimized by optional order quantity in an inventory system in which an order is

considered slowly, as inventory continues to be used up. Improving company management at the

same time as improving custom services, maximizing return of investment, improving

production performance and minimizing investment on inventories is the major objective in

implementing an inventory system.

1.2 STATEMENT OF THE PROBLEM

The problem of this study is how to maintain a large size of inventories of raw material and work

in progress (process) for efficient and smooth production and of finished goods for interrupted

sales operators.

This study argues in its statement of the problem that inability to maintain a minimum

investment in inventories to maximize profitability and also maintaining an inadequate level of

inventories is also dangerous in the manufacturing company.

1.3 OBJECTIVES OF THE STUDY

The objective of the study is to find out the following:

(i) To find out the inventory management procedures in Champion Breweries Plc, Uyo.

(ii) To examine the inventory and control management in Champion Breweries Plc, Uyo.

(iii) To identify the problems associated with evaluating inventory management and control in

manufacturing company.

1.4 RESEARCH QUESTIONS

(1) Does inventory management increase profitability in Champion Breweries Plc, Uyo?
(2) Does inventories help Champion Breweries Plc to make effective and efficient production?

(3) What is the benefit of inventory management to Champion Breweries Plc?

(4) What are the problems associated with inventory management and control in Champion

1.5 RESEARCH HYPOTHESES

The following research hypotheses were formulation to guide this study.

HYPOTHESIS 1

H0: There is no significant relationship between Inventory management and profitability in

Champion Breweries Plc.

H1: There is a significant relationship between Inventory management and profitability in

Champion Breweries Plc.

1.6 SIGNIFICANCE OF THE STUDY

The ultimate goal of any industry or organization is to maximize profit. The goal can be achieve

in the manufacturing company like Champion Breweries Plc, Uyo through inventory

management and control in manufacturing firm.

This study is necessary because it would enable the employer and employee of Champion

Breweries Plc, Uyo to improve ethnical behavior and code of conduct in the management of the

company.

It would be of immense benefit to investors who want to invest in the company and the

shareholders of the company to earn more profit. It will also serve as a reference source to

researchers (students) who might want to further studies in the similar topic.
1.7 SCOPE/LIMITATION OF THE STUDY

The study concerns about evaluating inventory management and control in manufacturing firm

with specific focus on Champion Breweries Plc, Uyo. Significantly, the study seeks to

investigate the inventory management procedures in the company and control man in the

manufacturing firm. However, the findings and recommendations will be generalized to cover

other similar company’s.

Besides, the study is limited to Champion Breweries Plc, Uyo and its limitation in scope caused

by the time constraint. The period within which the study is conducted is short for a thorough

research study, hence, gathering adequate information becomes very difficult.

Also, finance is one of the limitations to the scope of this study. The researcher is facing

financial constraint to meet all the needed educational requirements including this research work.

This caused the researcher to restrict this research to one company for possible completion of the

study.

Finally, lack of materials on the topic. This area is totally new in the Nigeria companies, and

schools, hence the researcher resolved to seek friendly approach in order to obtain the needed

materials or information from the establishment or organization under study through the

administration of questionnaire and oral interview.

1.8 Definition of Operational Terms

In the course of the study the researcher defined some terms peculiar to the study. These are:

Inventory: A stock of goods for production and distribution. This includes raw materials,

finished goods, component parts and semi processed goods.

Inventory Management and Control: It is the art and science of ensuring there is no over and

under supply of inventory to enhance smooth production and distribution.

Profitability: This is a measure of the amount by which a company’s revenue exceeds its

relevant expenses.

1.8 ORGANIZATION OF THE STUDY

To achieve the purpose of this research project on “evaluating inventory management and

control in manufacturing firm”, the study is divided into five inter-connected chapters, ranging

from chapter one to five.

In this chapter one the researcher has been able to give an introduction to the work, state

the problem that necessitate this study, outline the questions this work seek to answer as well as

the objectives it hopes to achieve. The scope and significance of this study were detailed as well

as the hypotheses to be tested in the study. Also, key terms were equally defined.

Chapter two deals with literature review, conceptual review, and empirical review.

Chapter three discuss the research methodology and methods of data analysis. Chapter four

describes the presentation, analysis and interpretation of data as well as testing of the stated

hypotheses. while chapter five, the final chapter deals with the summary, conclusion and

recommendations.
 CHAPTER TWO

LITERATURE REVIEW

INTRODUCTION

Our focus in this chapter is to critically examine relevant literatures that would assist in

explaining the research problem and furthermore recognize the efforts of scholars who had

previously contributed immensely to similar research. The chapter intends to deepen the

understanding of the study and close the perceived gaps.

Precisely, the chapter will be considered in three sub-headings:

 Conceptual Framework

 Empirical Review

 Chapter Summary

2.1 CONCEPTUAL FRAMEWORK

INVENTORY

Inventory is the stock of goods for production and distribution. According to Martand (2008),

inventory generally refers to the materials in stock. These materials could be in the process of

manufacturing, raw materials or finished products ready for sale. The definition of inventory has

been defined by many professional bodies and scholars in different ways. The Microsoft Encarta

premium defined it as the quantity of goods and materials on hand. A manufacturer’s inventory

represents those items that are ready and available for sale.

According to Nwaorgu (2005:123), inventory can be defined as a tangible property held to resale

in the ordinary course or business, in the production for sale, to be consumed in the production of

goods and services. According to Jain (1999:472), inventory is the aggregate of these items of

intangible property which are held for sale in the ordinary cause of the business, held in the

process of production for such sales to be currently consumed in the production of goods and
services to be made available for sale. According to Morse (1997:454), inventory is a general

term describing goods which are held in the store house and stock yards, the bulk of which is

usually intended for the connection with production or operation activities and also finished

products awaiting dispatch to customers.

However, according to AMA, (2000:209), inventory is the stock of goods a firm is producing for

sale and the components that make up the goods.

A key decision in manufacturing and retail is how much inventory to keep on hand. Once an

inventory level is established, it becomes an important input to the budgeting system.

Nature of Inventories

Inventories are stock of the product a company is manufacturing for sale and components that

make up the products. Pandey, (2013) highlighted the various forms in which inventories exist in

a manufacturing company. These include: raw materials, work-in-process and finished products.

Raw materials: - they are basic inputs that are to be converted into finished products through the

manufacturing process.

Work-in-process: - they are semi manufactured products that need more wore before they

become finished products for sale.

Finished products: - these are inventories completely manufactured which are ready for sale.

Types of Inventory

Nigel, Chambers & Robert (2007) classified inventories into different types because of an

imbalance between the rates and demand different points in any operation. These are:-
Buffer Inventory – this is an inventory that compensates for unexpected fluctuations in supply

and demand. It can also be called safety inventory. This minimum level of inventory is there to

cover against the possibility that demand will be greater than expected during the time taken to

deliver the goods.

Cycle Inventory- inventory that occurs when one stage in a process cannot supply all the items

it produces simultaneously and so has to build up inventory of one item while it processes the

others. For example, suppose a baker makes three types of bread each of which is equally

popular with its customers. Because of the nature of the mixing and baking process, one kind of

bread can be produced at any time. The baker would have to produce each type of bread in

batches.

De-coupling Inventory- this is the inventory that is used to allow work centres or processes to

operate relatively independent. Each of these areas can be scheduled to work relatively

independent to maximize the local utilization and efficiency of equipment and staff. As a result,

each batch of work-in-progress inventory joins a queue, awaiting its turn in the schedule for the

next processing stage.

Anticipation Inventory- anticipation inventory is most commonly used when demand

fluctuations are large but relatively predictable. This is the type of inventory that is accumulated

to cope with expected future demand or interruptions in supply. A good example is in the

canning or freezing of seasonal foods.

Pipeline Inventory- this inventory exists because material cannot be transported simultaneously

between the point of supply and the point of demand. If a retail store orders a consignment of

items from one of its suppliers, the supplier will allocate the stock to the retail store in its own
warehouse, pack it, load it onto its truck, transport it to its destination and unload it into the

retailer’s inventory.

Reasons for Holding Inventory by Organizations

There are many reasons why organizations maintain inventory of goods. The fundamental

reasons for doing so is that, it is either physically impossible or economically unsound to have

goods manufactured whenever they are demanded for. Without inventory, customers would have

to wait until the goods they ordered for are manufactured. According to Martand (2008), the

following are the reasons for keeping inventories. These include;

To stabilize production- the demand for an item fluctuates because of the number of factors.

E.g seasonally, production schedule. The inventories (raw materials and components) should be

made available to the production as per the demand failing which results in stock out and

production stoppage takes place for want of materials.

To take advantage of price discounts- usually the manufacturing offer discount for bulk buying

and to gain this price advantage, the materials are bought in bulk even though it is not required

immediately.

To meet the demand during the replenishment period- The lead time for procurement of

materials depends upon many factors like location of the source, demand, supply condition. So

inventory is maintained to meet the demand during the procurement (replenishment) period.

To prevent loss of orders (sales)- in this competitive scenario, one has to meet the delivery

schedules at 100% service level, means they cannot afford to miss the delivery schedule which

may result in loss of sales. To avoid this, organizations have to maintain inventory.
To keep pace with changing market conditions- the organization have to anticipate the

changing market sentiments and they have to stock materials in anticipation of non availability of

materials or sudden increase in prices.

Sometimes the organization have to stock materials due to other reasons like suppliers minimum

quantity condition, seasonal availability of materials or sudden increase in prices.

In support of Martand (2008), Pandey (2013) summarizes the reasons for keeping inventory into

three general motives. These are transactional motive, precautionary motive and speculative

motive.

Transaction motive emphasizes the need to maintain inventories to facilitate smooth production

and sales operations.

Precautionary motive necessitates holding of inventories to guard against the risk of

unpredictable changes in demand and supply forces and other factors.

Speculative motive influences the decision to increase or reduce inventory levels to take

advantage of price fluctuations.

Costs Associated with Inventory

According to Agburu (2011), maintaining stocks or inventory of items whether intentionally or

not necessarily leads to increased costs on the part of the firm or business concerned. Normally, a

wise or an intelligent manager must ensure that inventory costs are correctly identified, planned

and implemented as the need arises. Normally, many firms have come to know that inventory

costs tend to vary in magnitude from industry to industry and also from time to time. Generally,

however, the following are the main kinds of inventory costs, which are found in companies or

firms:
Inventory Carrying (Holding) Costs

As the name implies, this refers to the cost incurred by the firm or company for keeping stock or

inventory. Specifically, inventory carrying or holding costs include the following;

Storage costs such as the costs of renting the store space, the cost of eating and lighting, of air

conditioning.

Insurance and security costs.

Obsolescence and deterioration costs.

Handling costs

Spoilage, spillage, damage, pilferage and the like.

Inventory carrying costs is normally expressed in percentage i.e as a percentage of the unit cost

of buying the stock. Thus, for example, if the inventory unit purchased price were #20 and the

naira inventory carrying cost were #5 then the percentage inventory cost is given as #5 ¿

#20×100%

Figure 2.2.4 below shows the usual shape of carrying or holding inventory cost. The holding

cost rises as the quantity of inventory carried increases.

Fig.2.2.4 Carrying Cost Curve

Carrying cost

Cost in (#)

O
Quantity of stock carried

Inventory Ordering Costs

This is also known as fixed order costs. Inventory ordering costs are those that are incurred

during the process of ordering for components, raw materials or parts from the suppliers.

Examples of ordering costs include:

Clerical, administrative, and postage costs

Transport or shipping costs

Telephoning or telex costs

Tooling costs

It is important to note that unlike holding costs, ordering costs curve slope downward from left to

right. That is, the unit ordering cost falls as the quantity or order size increases (Agburu, 2011).

Inventory ordering cost is represented thus;

 Fig 2.2.4 Ordering Cost Curve

Cost (#) ordering cost

Quantity of stock

Per Piece Procurement Cost

As the name suggests, the per piece procurement cost refers to the unit purchase price of the

stock. It is the unit cost of acquiring each unit of inventory. Usually, the per piece is constant

except where there are price breaks as a result of quantity discounts. Total procurement costs are

simply per piece procurement cost times total units of inventory bought (Agburu, 2011).

Stock out Costs (Shortage Costs)

Stock out costs arises as a result of running out of stock. These costs can make a firm to lose

some of its very important customers. Examples of stock out costs are:

Loss of possible profits due to shortages.

Loss of sales in future to the customer who has gone to the firm’s competitor due to stock

out.

Loss of customer goodwill.

 Increased costs due to back orders.

Loss of gains to the company due to idle labour. Many of the workers are likely to get

disappointed for being idle for long (Agburu, 2011).

Costs of having to inform the customer to come back to collect the goods that eventually

had arrived.

Reneging i.e cost of losing customer who has left to patronize a competitor.

Total Inventory Cost (TIC)

This refers to the aggregate or sum total of all costs associated with inventory. In effect, total

inventory is composed of total inventory procurement cost, holding or carrying costs, ordering

costs, and stock out. In summary, TIC= procurement cost + carrying cost + ordering cost + stock

out cost.

Inventory Management and Control

Inventory management according to Jessop, (1999) is the art and science of maintaining stock

levels of a given group of items incurring the least cost consistent with other relevant targets and

objectives set by management. It is important that managers of organizations that deal with

inventory to have in mind the objective of satisfying customer needs and keeping inventory costs

at a minimum level. Dury (2004) asserts that inventory costs include holding costs, ordering

costs and shortage cost. Inventory control is an extension of inventory management. It is defined

by Kumar & Suresh (2006) as a planned approach of determining what to order, when to order,

how much to order and how much to stock so that costs associated with buying and storing are

optimal without interrupting production and sales.

Orga, (2006:66) defines inventory control as a process of ensuring that the right quantity of the

relevant stock is available at the right time and in the right place. Whether inventory

management or control, it goes down to mean the same thing.

Nweze (2004:423), on his part defines inventory control as the means of ensuring that actual

flow of inventory in an organization conforms to plan.

Ezeani (2008:25) defines inventory control as the techniques used by store managers to ensure

that materials are made available when they are needed in the quantity, quality and price that

they are needed without the risk of stock out and over stocking. However, for inventory control

to be effective there must be a plan which is the development of objectives in an organization

and preparation of various budgets to achieve these objectives. Planning of inventory is very

essential in an organization. A firm should be able to determine its optimum level of investment

in inventories. This situation can only be possible when the company ensures that stocks are

sufficient to meet the requirements of production and sales, and the company must avoid holding

surplus inventories that are unnecessary because it increases the risk of obsolescence. Against

this background, a company cannot afford loss of sales because of insufficient inventories and at

the same time, it is expensive to have more inventories on hand than necessary.

Objectives of Inventory Management and Control

A good inventory management and control according to Kumar & Suresh (2006) aims at

achieving the following objectives;

 To ensure adequate supply of products to customers and avoid shortages as far as

possible.
  To make sure that the financial investment in inventories is minimum (i.e to see that the

working capital is blocked to the minimum possible extent).

 Efficient purchasing, storing, consumption and accounting for materials is an important

objective.

 To maintain timely record of inventories of all the items and to maintain the stock within

the desired limits.

 To ensure timely action for replenishment.

 To provide a reserve stock for variations in lead times of delivery of materials.

 To provide a scientific base for both short term and long term planning of materials.

Benefits of Inventory Control

Inventory management and control is beneficial to an organization. According to Martand

(2008), it is an established fact that through the practice of inventory control, the following are

benefits of inventory control and management.

 Improvement in customer’s relationship because of the timely delivery of goods and

services.

 Smooth and uninterrupted production and hence, no stock out.

 Efficient utilization of working capital.

 Helps in minimizing loss due to deterioration, obsolescence, damage and pilferage.

 Economy in purchasing.

 Eliminates the possibility of duplicate ordering.

Techniques of Inventory Management and Control

According to Kumar & Suresh (2006), in any organization, depending on the type of business,

inventory is maintained. When the number of items in inventory is large and then large amount

of money is needed to create such inventory, it becomes the concern of the management to have

a proper control over its ordering, procurement, maintenance and consumption. The control can

be for order quantity and order frequency.

The different techniques of inventory control are: ABC analysis, HML analysis, VED analysis,

FSN analysis, SDE analysis, GOLF analysis and SOS analysis. The most widely used method of

inventory control is known as ABC analysis. In this technique, the total inventory is categorized

into three sub-heads and then proper exercise is exercised for each sub-heads.

ABC analysis: In this analysis, the classification of existing inventory is based on annual

consumption and the annual value of the items. Hence we obtain the quantity of inventory item

consumed during the year and multiply it by unit cost to obtain annual usage cost. The items are

then arranged in the descending order of such annual usage cost. The analysis is carried out by

drawing a graph based on the cumulative number of items and cumulative usage of consumption

cost. Classification is done as follows:

Table 2.3.3
Category Percentage of items Percentage of annual
consumption value
A 10–20 70–80
B 20–30 10–25
C 60–70 5–15
 The classification of ABC analysis is shown by the graph given as follows (Fig. 2.3.3).

Once ABC classification has been achieved, the policy control can be formulated as follows:

A-Item: Very tight control, the items being of high value. The control need be exercised at

higher level of authority.

B-Item: Moderate control, the items being of moderate value. The control need be exercised at

middle level of authority.

C-Item: The items being of low value, the control can be exercised at grass root level of

authority, i.e., by respective user department managers.

HML analysis: In this analysis, the classification of existing inventory is based on unit price of

the items. They are classified as high price, medium price and low cost items.

VED analysis: In this analysis, the classification of existing inventory is based on criticality of

the items. They are classified as vital, essential and desirable items. It is mainly used in spare

parts inventory.
FSN analysis: In this analysis, the classification of existing inventory is based on consumption

of the items. They are classified as fast moving, slow moving and non-moving items.

SDE analysis: In this analysis, the classification of existing inventory is based on the items.

GOLF analysis: In this analysis, the classification of existing inventory is based on sources of

the items. They are classified as Government supply, ordinarily available, local availability and

foreign source of supply items.

SOS analysis: In this analysis, the classification of existing inventory is based on nature of

supply of items. They are classified as seasonal and off-seasonal items.

For effective inventory control, combination of the techniques of ABC with VED or ABC with

HML or VED with HML analysis is practically used.

Inventory Management and Control Terms

In every field, there are terms peculiar to it. Inventory management and control is not an

exception. To this end Martand (2008) highlighted some terms which are often used in managing

and controlling inventory. These terms include:

Demand- number of items (products) required per unit of time. The demand may be either

deterministic or probabilistic in time.

Order cycle - the time period between two successive orders.

Lead time- the length of time between placing an order and receipt of items.

Safety stock- it is also called buffer stock or minimum stock. It is the stock or inventory needed

to account for delays in materials supply and account for sudden increase in demand due to rush

orders.
Inventory Turnover- if the company maintains inventories equal to 3 months consumption, it

means that inventory turnover is 4 times a year. That is, the entire inventory is used up and

replaced 4 times a year.

Re-order level - it is the level or the point at which the replenishment action is initiated. When

the stock levels reaches re-order level, the order is placed for the item.

Inventory Control Models

According to Agburu (2011), there are two kinds of inventory models. They are deterministic

inventory models and probabilistic or stochastic inventory models.

1. Deterministic Inventory Models: In these forms of inventory models there are known

demand patterns, known lead time, known unit buying price and certain storage costs. The

ordering costs are known with certainty. The most popularly known and perhaps the most

frequently used of the deterministic models is the economic order quantity; (EOQ) models

(Agburu, 2011).

Economic Order Quantity (EOQ)

The optimum order may be determined by the costs that are affected by either the quantity of

inventories held or the number of orders placed. There is a problem of minimizing the cost of

holding inventories and the cost of ordering inventories at the same time because if more units

are ordered at one time, then few orders will be required within the same period of time and this

will mean a reduction in the ordering costs. However, when few orders are placed, large average

inventories must be maintained and this will mean an increase in the holding cost.
The aim of inventory planning is to ascertain the most efficient way to minimize the total cost of

ordering and the holding cost and the model that minimizes the combined cost is the economic

order quantity which was originally formulated in 1915 by F.W.Harris.

Economic order quantity can be described as the ideal order size that is the size of an order for

goods that minimizes the sum of shipping, handling and carrying costs.

Ezeani (2008) defined economic order quantity as the amount of materials to be ordered at one

time. It is defined as the quantity of inventory item to order so that inventory costs are minimized

over the firm’s planning period. Olowe (2008), defined economic order quantity as the optimal

ordering quantity for an item that will minimize cost. However, Horngren (2007), wrote that

economic order quantity model is a decision model that calculates the optimal quantity of

inventory of items ordered under a given set of assumptions. This is also known as economic lot

size (ELS). The economic order quantity can be balance between inventory holding cost and the

re-order costs. Badi & Badi (2009) on their part asserted that economic order quantity is a

popular method where purchase orders are released when existing stock reaches re-order level.

The important thing to decide is optimum quantity to be ordered for each item. This calculation

by EOQ formula takes into account inventory carrying cost, ordering cost on the materials for 12

months schedule. If a larger quantity of stock is bought in smaller quantities, the shortage

problem and resultant cost will be very high. Hence arriving at optimum ordering quantity which

is also called economic order quantity is the solution to the problem.

The EOQ is based on the following assumptions

 A known and constant demand.

 A known and constant ordering cost.

 A known and constant per piece (or unit) price.

  A known and constant carrying cost.

 The product is never obsolete.

 There are no stock out.

 No back order.

 The minimum inventory is zero level unit.

According to Agburu (2011), these assumptions are rather sweeping and empirically unrealistic.

A simple inventory model is represented base on the assumptions below;

Fig. 2.3.5 Graphical Representation of EOQ

TIC= Total inventory costs

Inventory costs (#) H=holding costs

S=ordering costs

O Q* quantity

The above figure shows that the ordering cost declines as the units of stock increases. Also, the

inventory holding cost rises with increase in the quantity of stock. The topmost curve is the total

inventory cost. It is the aggregate of the ordering cost and inventory carrying cost. The EOQ is

determined at the point of intersection of inventory ordering cost and inventory holding cost
curves. The point of intersection of these two lower curves is directly below the lowest point on

the total inventory cost curve. Point E, shows the point of intersection of the two lower curves

and it is directly below point M, the minimum point of TIC. Inventory holding cost and ordering

cost are equal at E.

Probability Inventory Model

Analysis has been on inventory models with certain demand i.e where the demand has been

assumed to be known, to be constant from one period to another and inventory is replenished in

an instantaneous way. Often, however, these assumptions cannot hold in practical life. And

where the assumptions are relaxed with the introduction or risk (or uncertainty) in inventory

demand pattern we have what is known as probability or stochastic inventory model (Agburu,

2011). In other words, where wide fluctuations above and below average level of demand take

place it is termed probability inventory situation. Where both demand and lead time vary from

period to period, companies maintain extra inventory or safety stocks to meet their customer’s

need.

Inventory Control Systems

Inventory systems are developed to cope with the situations where the demand or lead time or

both will fluctuate (Martand, 2008 ). The basic approach to all stock control methods is to

establish a re-order level which, when reached would indicate the signal for the replenishment

action. According to Martand (2008) and Agburu (2011), there are two basic types of

replenishment systems. These are: fixed quantity system (Q-system) and fixed period system (P-

system).
 1. Fixed Quantity System – This is also called perpetual inventory systems or Q system.

Here, the order quantity is fixed and ordering time varies according to fluctuation in

demand. Fixed order quantity is represented in the diagram below :

Fig. 2.3.6 Fixed Order Quantity Maximum level

Stock level Q Q1 Q2

Q1,Q2 Order points

ROL lead time consumption

lead time safety stock

Time

The characteristics of the system include;

Re-order quantity is fixed and normally it equals economic order quantity (EOQ).

Depending upon the demand, the time interval of order varies.

Replenishment action is initiated when stock falls to re-order level (ROL).

Safety stock is maintained to account for increase in demand during lead time.

2. Fixed Period System (P system)

This system is also known as constant cycle system. Here, the stock item is reviewed at a fixed

cyclical interval of time and on each review occasion the quantity to be ordered is decided a
fresh. The constant or fixed cyclical time interval could be every week, every two weeks, every

month and so on. The quantity to be ordered varies from one review date to another (Agburu,

2011). Some review dates may not warrant that new quantities be ordered. This is particularly

true where stock usage or consumption rate is low.

Inventory Control Levels

Re – Order Level: Re-order level is the level where an item in stock reaches and there will be an

order for replenishment. There will be a certain level in which the items in stock will fall and it

will necessitate a new order to be placed. Pandey (2013) defined re-order level as the level at

which an order should be placed in order to replenish the inventory. He enumerated some of the

points that should be taken into consideration before determining the re-order point and they

include: lead time, the economic quantity and the average time. Lead time is the time taken in

receiving the delivery of inventory after the order has been placed.

Maximum Stock: The maximum stock level is set after considering the storage capital available

and its cost, the supply of capital, risk of deterioration and obsolescence and economic

purchasing quantities. According to Agburu (2011), this refers to the largest or highest quantity

of items to be stocked.

Minimum Stock Level: Due to the fact that each item in stock has a minimum level, the actual

stock held should not fall below this level if operations are not to be disrupted. Agburu (2011)

saw minimum stock level as the buffer stock. He stated that the minimum stock level is a

precaution taken against delays in delivery period and that it depends on the rate of consumption

during an emergency period. The minimum stock level is the lowest quantity to which a

particular product should be allowed to drop if deliveries are to be maintained and in arriving at

this, the factors to be considered are; the length of time required for the delivery on the part of

the suppliers and the possibility of late delivery or abnormal usage. It is often difficult to predict
the usage and the lead time or delivery time accurately. The demand for goods may fluctuate

from day to day or from week to week. Also, the actual delivery time may be different from the

estimated lead time. In a case where the actual usage increases or delivery of inventory is

delayed, the firm can have a problem of stock-out which will be very costly to the firm. The firm

or company needs a safety stock in order to guard it against stock out. Agburu (2011) opined

that, minimum level is a level below which stock should not fall.

Optimal Stock Levels: The optimal stock level is the stock level that is either too large or too

small that is to say it is between the maximum stock level and the minimum stock level. The

stock level of a company depends on the nature and the volume of the operation. Therefore, it is

the level that makes use of the capacity of the storeroom.

Inventory Valuation Methods

The main objective of inventory valuation is to produce accurate and meaningful value for

purchases of product, cost and income determination and this is because the different valuation

methods have different effect on a firm’s order.

First In-First out (FIFO): This method implies that the oldest goods are issued out first that is,

materials are issued out in the order in which they were received. Most times, materials or goods

may not be issued out in this order but it will be a good and effective store keeping practice if

this order is maintained because it checks material obsolescence, deterioration and depreciation

and it ensures that these materials are issued out at the actual cost thereby avoiding unrealized

profits or losses which may result from random issue of the materials. FIFO method poses

problem in times of prices being changed because the cost of goods sold is likely to be

understated or underestimated during inflation as old prices are adopted to value the material

used (IFRS).
Last In First–Out (LIFO): This method is an opposite of the FIFO method because it implies

that the latest materials received are issued out first thereby leaving oldest ones in stock and this

means that the materials which are issued for production are charged on the recent prices while

the stock on hand is valued at the oldest prices. The current production cost are simultaneous

with the current sales revenue in order to obtain a realistic profit for the current period and this is

because the most important advantage of this method is that it has the ability to give the most

current cost of a product since the materials used are charged at the current prices. The

disadvantage of this method is that the oldest materials are left in stock thereby exposing them to

risk of loss through obsolescence, deterioration or depreciation.

Base Stock Methods: This method is not an independent method because it makes use of both

the FIFO and the LIFO method. The base stock method according to Osisioma (1990) implies a

fixed minimum stock carried at the original cost. He said it should be set aside and should be

issued out when an emergency situation arises. Except the minimum of buffer stock, the

subsequent materials received may be issued and charged on the basis of any stock valuation

method.

Standard Price Method: This method uses a predetermined price for pricing all the materials

that are issued out. The standard prices may be set over a given period of time after all factors

which affect prices of materials may have been taken into consideration. The use of standard

prices may result in profit if the actual materials price is low and it may also result in loss if the

reverse is the case. The main objective of the standard price is to ensure the efficiency in the

purchase of materials. Most times it is difficult to establish an acceptable standard price of all

materials.
Average Price Method: This method is the weighted average which determines the unit price by

dividing the total cost by the quantity of materials because all materials issued are charged on the

average price and this price makes the cost of materials uniform rather than the actual cost.

Profitability

Profit is the major objective of a business (Nimalathasan, 2009). In view of the heavy investment

which is necessary for the success of most enterprises. Profit in the accounting sense measures

not only the success of the product, but also of the development of the market for it. It is

determined by matching revenue against cost associated with it. An enterprise should earn profit

to survive and grow over a long period of time.

Profit and Profitability

Sometimes, the terms Profit and Profitability are used interchangeably. But in real sense, there is

a difference between the two. Profit is an absolute term, whereas profitability is a relative

concept. However, they are closely related and mutually interdependent, having distinct roles in

business. Profit refers to the total income earned by the enterprise during the specified period of

time, while profitability refers to the operating efficiency of the enterprise. It is the ability of the

enterprise to make profit on sales. It is the ability of enterprise to get sufficient return on the

capital and employees used in the business operation.

As Weston and Brigham (1965) rightly notes “to the financial management profit is the test of

efficiency and a measure of control, to the owners a measure of the worth of their investment, to

the creditors the margin of safety, to the government a measure of taxable capacity and a basis of

legislative action and to the country profit is an index of economic progress, national income

generated and the rise in the standard of living”, while profitability is an outcome of profit. In
other words, no profit drives towards profitability. Firms having same amount of profit may vary

in terms of profitability.

According to Nimalathasan (2009), profit and profitability are two different terms. Profit means

an absolute measure of earning capacity while profitability is relative measure of earning

capacity. Profit is defined by Iyer (1995) as ‘excess of return over outlay’ while profitability is

defined as ‘the ability of a given investment to earn a return from it use’. The word profitability

is composed of two words ‘profit’ and ‘ability’. Profit has been defined but the meaning of profit

differs according to use and purpose of the enterprise to earn the shareholders, creditors,

prospective investors, bankers and government alike (Nimalathasan, 2009).

Profitability ratios measure the firm’s ability to generate profits and central investments to

security analysis, shareholders and investors. Profitability is the primary measure of the overall

success of an enterprise.

Profitability is reported on the income and expense statement. Basically, the accrued net income

is the profit a firm has generated for the fiscal period being reported. It is very important to use

the accrued income and expense statement to calculate profit and not a cash statement.

Profitability measures the size of the profit relative to the gross and net capital invested in the

business. Profitability ratios are used to compare the performance or efficiency of a business to a

set of established standards (or benchmarks) for the industry or sector, or by comparing one

business against others. The gross capital of a business is the total assets, and the net capital in a

business is the total equity the firm owner has in his business

Profitability Indicators and Measurement

In order to pin-point the causes which are responsible for low/high profitability, a financial

manager should continuously evaluate the efficiency of a firm in terms of profit. The study of
increase or decrease in retained earnings, various reserve and surplus will enable the financial

manger to see whether the profitability has improved or not. An increase in the balance of these

items is an indication of improvement in profitability, where as a decrease indicates a decline in

profitability. The following ratios are used to calculate and analyze the profitability of firms.

Gross Profit Ratio

Gross profit ratio is important for management because it highlights the efficiency of operation

and also indicates the average spread between the operating cost and revenue. Any different

position in this ratio is the result of a change in the operating cost or revenue or both. The main

objective of computing this ratio is to determine the efficiency with which operations are carried

on. The Gross Profit Ratio expresses the relationship between gross profit and net sales.

Gross Profit
Gross Profit Ratio = ×100
Net Revenue
Gross Profit = Total Revenue – Operating Expenses

A high ratio of gross profit to revenue is a sign of good management as it implies that (i) the

operating cost is relatively low; (ii) increase revenue income, operating cost remains constant;

(iii) operating cost decline, revenue income remains the same. On the contrary, a low gross profit

to revenue is definitely a danger signal. It implies that (i) the profit is relatively low; (ii) the

operating cost is relatively high (due to purchase of inputs on unfavorable terms, inefficient

utilization of current as well as fixed assets and so on); (iii) low revenue income (due to severe

competition, inferior quality of services, lack of demand and so on).

There is no standard showing reasonableness of gross profit ratio. However, it must be enough to

cover its operating expenses.

Net Operating Profit Ratio

The Net Operating Profit Ratio expresses the relationship between net operating profit and net

sales. Moreover, in the present study, Net Operating profit is taken as the excess of gross profit

over non operating expenses and depreciation. In other words we can say profit before interest

and taxes (EBIT). This ratio helps to find out the profit arising out of the main business. In other

words this ratio helps to determine the efficiency with which affairs of business are being

managed. A high ratio indicates the improvement in the operational efficiency of the business

and vice versa. It is expressed as shown below:

Net Operating Profit

Net Operating Profit Ratio = ×100
Net Revenue

Net Operating Profit =Gross Profit - (Non Operating Expenses + Depreciation).

Return on Net Capital Employed Ratio

This is the most important ratio for testing profitability of a business. It measures satisfactorily

the overall performance of a business in terms of profitability. This Ratio expresses the

relationship between profit earned and capital employed to earn it. The term ‘capital employed’

refers to long-term funds supplied by the creditors and owners of the firm. The term ‘return’

signifies operating profit before interest and taxes (EBIT).

This ratio is more appropriate for evaluating the efficiency of internal management. It indicates

how well the management has utilized the funds supplied by the owners and creditors. In other

words, this ratio intends to measure the earning power of the net assets of the business. It is

expressed below:
 EBIT
Return on Capital Employed = ×100
Net Capital Employed

Net Capital Employed=Share Capital + Reserves + Long Term Loan – Losses. A high ratio is a

test of better performance and a low ratio is an indication of poor performance. The higher the

ratio, the more efficient the management is considered to have been using the funds available.

According to Nshanthini & Nimalathasan (2013), indicators of profitability such as

Gross profit ratio(GPR); Operating profit ratio (OPR); Net profit ratio (NPR); Return on

investment (ROI); Return on equity (ROE); Return on capital employed (ROCE) are taken into

account when assessing profitability of firms.

2.2 EMPIRICAL REVIEW

This section presents the review of related literature in order to establish a basis for the

investigation of the impact of inventory management and control on the profitability. The

review covered previous empirical studies conducted in various countries on this subject matter.

Victoire (2015) investigated the impact of inventory management on profitability in Rwanda

using a manufacturing company as case study. The findings indicate that inventory management

had significant impact on the company’s financial performance. The study is inadequate as it

was restricted to Rwanda and that circumstances in Nigeria could be different from that of

Rwanda. More so the study was not carried out on Top choice bakery hence the reason for this

study.

Prempeh (2015) studied the impact of efficient inventory management on the profitability of

manufacturing firms in Ghana, using raw material inventory management and profit as

variables. Cross sectional data from the annual reports of four manufacturing firms listed on the
Ghana Stock Exchange were analyzed using Ordinary Least Squares (OLS) and multiple

regression techniques. The study found a significantly strong and positive relationship between

raw material inventory management and profitability. In a related study, Sitienei and Memba,

(2015) using similar analysis techniques examined the effect of inventory management on the

profitability of cement manufacturing companies in Kenya. Their study findings revealed that

inventory turnover, inventory conversion period, and inventory storage costs were negatively

related to profitability. Their study is however inadequate because it focused only on firms in

Kenya and the case with Nigeria may be different and the study did not emphasize inventory

management and control.

Sekeroglu & Altan (2014) investigated the effect of inventory management on the profitability

of firms in the weaving, food, wholesale and retail industries in Turkey from 2003 to 2012. The

study employed regression and correlation techniques using the computer software SPSS 20

version to analyze data collected from the income statements of the selected firms. The results

showed positive relationship between inventory management and profitability in the food

industry, but no relationship in the weaving, wholesale and retail industries. The study does not

apply to all firms since few firms were selected for the study and the findings may not be

applicable to every firm.

Lwiki, Ojera, Mugenda & Wachira (2013) examined the impact of inventory management on

the financial performance of sugar manufacturing firms in Kenya. Both primary and secondary

data collected were analyzed using descriptive statistics and correlation analysis, and they found

inventory management had positive correlation with financial performance. There is gap

between the study and the current study because the earlier study focused on sugar

manufacturing firms in Kenya only. In a related study, Panigrahi (2013) examined the
relationship between inventory conversion period and the profitability of cement companies in

India for the period 2001 to 2010. The study adopted gross operating profit as the dependent

variable and proxy for profitability and inventory conversion period as the independent variable.

In addition, current ratio, size of the firm and financial debt ratio were used as control variables.

The study found significant positive linear relationship between inventory management and

profitability. This study did not take cognizance of other countries hence the inadequacy of the

study.

Augustine & Agu (2013) studied the effect of inventory management on organizational

effectiveness and profitability of manufacturing companies in Nigeria. Using Pearson product

moment correlation coefficient and linear regression techniques, the study found positive

correlation between inventory management and profitability. This study was carried out in

Nigeria but such has not been carried in Top Choice Bakery Makurdi.

Okwo & Ugwunta (2012) studied the impact of input costs on firm profitability of the breweries

industry in Nigeria. The study adopted the ratios of selling and general administrative expenses,

cost of goods sold (inventory), receivables, payables and depreciation as independent variables;

and profitability as dependent variable. Using Ordinary Least Squares and multiple regression

techniques, they among others found that cost of goods sold (inventory) had positive significant

relationship with profitability. Their studies were on breweries in Nigeria and their findings may

not be consistent with Top choice Bakery Makurdi.

CHAPTER SUMMARY

In this review the researcher has sampled the opinions and views of several authors and scholars

on the availability and utilization of school library resources. The works of scholars who
conducted empirical studies have been reviewed also. The chapter has made clear the relevant

literatures.
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Area of Study

Champion Breweries Plc is an established brewery in Nigeria manufacturing Champion Lager

Beer and Champ Malta as well as a selection on non-alcoholic beverages. The company also

brews and packages products under contract to Nigerian Breweries Plc. Thus Champion

Breweries Plc in Uyo is the area of the study.

3.2 Research Design

Research designs are perceived to be an overall strategy adopted by the researcher whereby

different components of the study are integrated in a logical manner to effectively address a

research problem. In this study, the researcher employed the descriptive survey research design.

This is due to the nature of the study whereby the opinion and views of people are sampled.

3.3 Population of the study

According to Udoyen (2019), a study population is a group of elements or individuals as the case

may be, who share similar characteristics. These similar features can include location, gender,

age, sex or specific interest. The emphasis on study population is that it constitutes of individuals

or elements that are homogeneous in description.

This research was carried out on the evaluation of inventory management and control in

manufacturing firms using Champion Breweries Plc, Uyo as case study.

Hence all staffs of Champion Breweries Plc Uyo form the population of the study.
3.4 Sample size determination

A study sample is simply a systematic selected part of a population that infers its result on the

population. In essence, it is that part of a whole that represents the whole and its members share

characteristics in like similitude (Udoyen, 2019). In this study, the researcher adopted the simple

random sampling (srs.) method to determine the sample size.

3.5 Sample size selection technique and procedure

In this study the researcher adopted the purposive sampling method to determine the sample size.

Therefore due to the large number of employees of the organization, the researcher purposively

selected fifty (50) personnel of the organization as the sample size.

3.6 Research Instrument and Administration

The research instrument used in this study is the questionnaire. A 15 minutes’ survey containing

10 questions were administered to the enrolled participants. The questionnaire was divided into

two sections, the first section inquired about the responses, demographic or personal data; while

the second section were in line with the study objectives, aimed at providing answers to the

research questions. The research instrument (RICMC) was administered to the enrolled staffs of

the selected organization.

3.7 Method of data collection

Primary and secondary sources of data collection were used. The primary sources include oral

interviews and questionnaires while the secondary sources include textbooks, journals, internet,

published and unpublished articles.

3.8 Method of data analysis

The responses were analyzed using the frequency tables, which provided answers to the research

questions. The hypothesis were tested using Pearson correlation statistic tool SPSS v23.

3.9 Validity and Reliability of the study

The reliability and validity of the research instrument was determined. The Pearson Correlation

Coefficient was used to determine the reliability of the instrument. A co-efficient value of 0.68

indicated that the research instrument was relatively reliable. According to (Taber, 2017) the

range of a reasonable reliability is between 0.67 and 0.87.

 CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

This chapter presents the analysis of data derived through the questionnaire and key informant

interview administered on the respondents in the study area. The analysis and interpretation were

derived from the findings of the study. The data analysis depicts the simple frequency and

percentage of the respondents as well as interpretation of the information gathered. A total of

Fifty (50) questionnaires were administered to respondents of which all were returned. The

analysis of this study is based on the number returned.

Table 4.1: Demographic data of respondents

Demographic information Frequency percent

Gender

Male 23 46%

Female 27 54%

Religion

Christian 32 64%

Muslim 18 36%

Age

21-30 17 34%

31-40 23 46%

41-50 10 20%

51 + 00 00%

Education
 HND/BSC 21 42%

MASTERS 18 36%

PHD 11 22%

Position

Junior staff 28 56%

Senior staff 22 44%

Source: Field Survey, 2021

ANSWERING RESEARCH QUESTIONS

Question 1: Does inventory management increase profitability in Champion Breweries Plc,

Uyo?

Table 4.2: Respondent on question 1

Options Frequency Percentage

Yes 31 62

No 09 18

Undecided 10 20

Total 50 100

Source: Field Survey, 2021

From the responses obtained as expressed in the table above, 31 respondents constituting 62%

said yes. 09 respondents constituting 18% said no. While the remain 10 respondents constituting

20% were undecided.

Question 2: Does inventories help Champion Breweries Plc to make effective and efficient

production?

Table 4.3: Respondent on question 2

Options Frequency Percentage

Yes 28 56

No 13 26

Undecided 09 18

Total 50 100

Source: Field Survey, 2021

From the responses obtained as expressed in the table above, 28 respondents constituting 56%

said yes. 13 respondents constituting 26% said no. While the remain 09 respondents constituting

18% were undecided.

Question 3: What is the benefit of inventory management to Champion Breweries Plc?

Table 4.4: Respondent on question 3

Options Yes No Total %

Inventory planning and management reduces storage cost 50 00 50

(100% (100%)

High inventory turnover brings revenues 50 00 50

(100% (100%)

You can utilise warehouse space better 50 00 50

(100% (100%)

)
Inventory control makes cost accounting activities easier 50 00 50

(100% (100%)

Inventory holding results in effective utilisation of human and 50 00 50

equipment (100% (100%)

Effective inventory control enhances market share 50 00 50

(100% (100%)

Inventory control avoids costly interruptions in operation 50 00 50

(100% (100%)

Regular supply at reasonable prices builds customer confidence 50 00 50

(100% (100%)

Inventory control strategy facilitates purchase economies 50 00 50

(100% (100%)

Source: Field Survey, 2021

From the responses obtained as expressed in the table above, all the respondents constituting

100% said yes to all the options provided.

Question 4: What are the problems associated with inventory management and control?

Table 4.5: Respondent on question 4

Options Yes No Total

Supply chain complexity 50 00 50

(100%) (100%)

Inadequately and improperly trained employees 50 00 50

(100%) (100%)

Not Counting Inventory Often 50 00 50

(100%) (100%)

Not Using Automation 50 00 50

(100%) (100%)

Not having performance measurement parameters in place 50 00 50

(100%) (100%)

Source: Field Survey, 2021

From the responses obtained as expressed in the table above, all the respondents constituting

100% said yes to all the options provided.

TESTING OF HYPTHESIS

HYPOTHESIS 1

H0: There is no significant relationship between inventory management and profitability in

Champion Breweries Plc.

H1: There is no significant relationship between inventory management and profitability in

Champion Breweries Plc.

Hypothesis One

Table 4.3.1: Correlation between inventory management and profitability

inventory profitability

management

inventory management Pearson Correlation 1 .922**

Sig. (2-tailed) .000

N 50 50

Profitability Pearson Correlation .922** 1

Sig. (2-tailed) .000

N 50 50

**. Correlation is significant at the 0.05 level (2 tailed).

In respect to table above, since the p-value (0.000) is less than the level of significance, we reject

the null hypothesis and conclude that there is a significant relationship between the inventory

management and profitability.

 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS:

5.1 Introduction

This chapter summarizes the findings into the evaluation of inventory management and control

in manufacturing firms using Champion Breweries Plc, Uyo as case study. The chapter consists

of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was to examine inventory management and control in manufacturing

firms using Champion Breweries Plc, Uyo as case study. The study specifically was aimed at

finding out the benefits of inventory management in Champion Breweries Plc, Uyo; To

examine the inventory and control management in Champion Breweries Plc, Uyo; To identify

the problems associated with evaluating inventory management and control in manufacturing

company.

The study adopted the survey research design and randomly enrolled participants in the study. A

total of 50 responses were validated from the enrolled participants where all respondent are

active staffs if the selected orgnization.

5.3 Conclusions

Based on the finding of this study, the following conclusions were made:

1. Inventory management and control is essential as it will enable a firm to meet up with current

and future demand for it products.

2. Inventory management increase profitability in Champion Breweries Plc, Uyo

3. Inventories help Champion Breweries Plc to make effective and efficient production.

4. There is a significant relationship between the inventory management and profitability.

5.3 Recommendations

The following recommendations are made base on the findings and conclusion.

i. The management of Champion Breweries Plc should be cost effective. The relative costs

to the firm has a long way of impacting the firm’s profitability. Therefore, empoyees

should be expose to cost minimization through inventory management and control at all

times.

ii. Efficiency in the organization should always be emphasized as it can affect the firm’s

profitability. The management and control of inventories should not be neglected because

it will help the organization to be efficient thereby increasing it long term profitability.

iii. Management of Champion Breweries Plc and other organizations should Recognized the

fact that they are operating with other firms in an industry and so should manage and

control it inventories well enough to be ahead of their competitors. Having an edge over

competitors will enable the firm to increase it profitability through increased market

share.

iv. Organizations with optimum inventories are more likely to fix price that encourage

customer patronage. The management of Champion Breweries Plc as well as other

organizations should emphasize management and control of inventories. Setting high

prices will scare away customers and this will lead to loss of sales. If the price is

favourable to customers, there will be increased sales revenue that go along way

increasing the firm’s overall profitability and vice versa.

v. It is highly recommended that Champion Breweries Plc should maintain optimum

inventories to guide against under stocking which will lead to stock out in the

organization as well as over stocking to minimize costs. Adequate inventories will

 minimize stock out and help the firm to increase the overall profitability of the firm. Loss

of sales will be minimized when the firm satisfy it customers. Sales people should be

proactive as they are in the field as well as engage in face to face contact with customers

and therefore in better position to know what customers needs are. They should give

feedback to the organization to enable useful decision.

vi. Inventory management and control should be seen as a driver of a firm’s profitability and

therefore be treated as such.

5.4 Suggested Areas for Further Studies

Further research should be conducted in the following areas;

i. The role of inventory accounting systems in manufacturing firms.

ii. Effects of inventory management practices on performance of small scale enterprises.

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APPENDIX

APPENDIXE

QUESTIONNAIRE

PLEASE TICK [√] YOUR MOST PREFERRED CHOICE(S)

SECTION A

PERSONAL INFORMATION

Gender

Male [ ] Female [ ]

Age

20-30 [ ]

31-40 [ ]

41-50 [ ]

51 and above [ ]

Religion

Christian [ ]

Muslim [ ]

Educational level

WAEC [ ]
BSC/HND [ ]

MSC/PGDE [ ]

PHD [ ]

Others……………………………………………….. (please indicate)

Marital Status

Single [ ]

Married [ ]

Separated [ ]

SECTION B

Question 1: Does inventory management increase profitability in Champion Breweries Plc,

Uyo?

Options Please Tick

Yes

No

Undecided

Question 2: Does inventories help Champion Breweries Plc to make effective and efficient

production?

Options Please Tick

Yes
No

Undecided

Question 3: What is the benefit of inventory management to Champion Breweries Plc?

Options Yes No

Inventory planning and management reduces storage cost

High inventory turnover brings revenues

You can utilise warehouse space better

Inventory control makes cost accounting activities easier

Inventory holding results in effective utilisation of human and equipment

Effective inventory control enhances market share

Inventory control avoids costly interruptions in operation

Regular supply at reasonable prices builds customer confidence

Inventory control strategy facilitates purchase economies

Question 4: What are the problems associated with inventory management and control?

Options Yes No

Supply chain complexity

Inadequately and improperly trained employees

Not Counting Inventory Often

Not Using Automation

Not having performance measurement parameters in place