THE IMPORTANCE OF STOCK CONTROL IN A MANUFACTURING SECTOR A CASE STUDY OF ETERNIT LIMITED, SAPELE
This study was done
to examine the importance of stock control in a manufacturing company. The
study was carried out in Eternit Ltd Sapele, Delta State. The objective of the
study was to consider some management practices in manufacturing companies to
see how they affect stock control of a company. Chapter one dealt with the
background, the objective, the significance, scope and limitation on the
importance of stock control in manufacturing company. Chapter two dealt with a review of some
related literature written on empirical studies. Chapter three dealt with the method adopted
in collecting the data and the method adopted was through administering of
questionnaire. Chapter four dealt
with the result and findings based on the questionnaire administration to
Eternit Ltd management staffs. Chapter five dealt with summary, findings,
recommendations and conclusion. Some recommendations were made which if
considered will go a long way to remedy the effect of mismanagement of stock of
1.1 Background Of
control is the system used in a firm’s investment in stock, which involves
recording and monitoring of stock level, forecasting future demand and deciding
when and how many to order, in other to minimize overall cost associated with
stock. This is a managerial responsibility which focuses on material control,
procurement, quality control and stock holding. Stock control is essentially an
activity that is concerned with the efficient purchase and use of material for
the attainment of predetermined corporate objectives.
The need for
efficient stock control in the face of increasing cost of material due to high
demand of such materials, economic inefficiencies cannot be over emphasized.
constitutes an essential cost element of production, in manufacturing
industries, whether process or job order firms. The objectives of an industry
especially a private industry is to make production can be obtained when cost
elements like stock and its cost controlled which will lead to less expenses
and higher profit.
In order to
prevent manufacturing industries from running out of stock, the right material
has to purchased from the best source at a good price on a positive note, stock
control has an important role with regard to profit maximization.
1.2 Statement of
economic problems of monetary instability and inflation, there has been high
cost of material. Huge sum of money is lost through various forms of purchase
fraud, low quality of materials and store materials and in addition the method
of stock valuation. Beside the increased materials cost, misadministration
which may cause or lead to stock out cost, this present a major problem of
disruption use in operation as a result of inaccurate balancing of material
acquisition with wage also account for high cost of materials acquisition.
Problem of disruption can lead to supplies disaster of various magnitude one of
such supply disaster may be stock-out-cost. The consequences of this include loss
of current sales, premium payment for such delivery, loss of future sales and
also good will.
1.3 Objective of
out this study of stock control in Eternit Plc, Sapele, the following
objectives will be achieved.
To study the material and stock control
policies and by evaluating, analyzing the purchasing procedures, materials
holding methods and various accounting method of costing inventory.
investigate, so as to identify the controllable and incontrollable variables
associated with materials cost control with a view of determining ways of
keeping them within controllable limits.
the need and importance of sound scientific approach to stock control in the
face of our exteriority economy, and ever increasing cost of stock and
the efficiency of their stock holding using economic order quality (EOQ).
questions enables one to view the essence of literature review to provide the
required foundation for under taking on empirical study on stock control,
answer required to the following research questions;
i. How familiar
are you with the activities of the store and materials holding department and
purchase and supplies department?
ii. In your own
opinion, what are the functions of the store and materials holding department
and the purchasing supplies department?
iii. How has the
store or material holding department and the purchasing and supplies department
in proved the stock control system of the company?
iv. How reliable
is your stock control techniques?
v. What do you
think is the major cause of inefficient and ineffective stock control in the
vi. What are the
major considerations that are criteria for the selection of a supplier for an
vii. How efficient
is the local purchase order (LPO) committee?
vii. How does
stock control play an important role in the profit maximization of the company?
ix. How reliable
is your internal control system?
1.5 Significance of
humans are very important to the process production, stocks are also very
important because they are needed to be converted to finished goods. Stock
control is vital for Nigeria firms especially in period of inflation which
consequently leads to folding up of a lot of firms due to their inability to control
stock constitutes a major part of the company’s investment, there is need
therefore to control stock because more than half of the firms incomes are used
to purchase stock for production. Hence, there is need to have effective stock
control so as to avoid storage of stock for production and at the same time,
too much which will rest in wastage and high holding stock cost.
research work is intended therefore to fill the gaps that have existed and
create a ground for the future research with attempt to offer practicable
suggestion on stock control in Eternit Ltd Sapele and hope that the suggestion
will be of benefit to the company and other manufacturing firms. It will go a
long way to enhance interest in new approaches, concepts and philosophies aimed
at better cost control over materials.
1.6 Scope of Study
research work is committed to cover the following:
analytically the procurement stock controls policies and practice of Eternit
Ltd, Sapele. The purchasing procedure of the organization was examined.
A method of
study of stores department was particularly carried out on its organization, it
various stock control methods as well as its stock level analysis.
accounting section involvement in stock control and material accounting system
was examined with regard to methods of costing materials issued, stores control
ledgers and stock taking and checks.
1.7 Limitation of
limited by the following factors:
The procedures involved in obtaining data was cumbersome,
series for approval had to be granted before certain form of data were released
even after obtaining approval to carry out the research study, the difficulty
of eliciting the necessary co-operation of those in place of relevant information has
experienced. Some of those in place of relevant information declined for fear
of giving at secret information of the organization others assumed this study
to be fact finding exercise into their fraudulent practices and mismanagement,
as such declined responds.
Unwillingness to respond to questionnaire. Also to an appreciable
extent, the study was limited by the value aspect which could be determined by
1.8 Definition of
1. ABC Analysis:
A basic technique of stock control, which classified stock control, which
classified stock according to monetary values stock items are these categories
i. A- item; high value of items are this
ii. B- items; moderate value items.
iii. C- low value items.
2. Bin card: A
store record showing maximum quality to be held in stock and re-orders level.
3. Carry cost:
Cost incurred in maintaining inventories including storage, insurance and cost
of funds invested in.
Cost: These costs which are subject to changes by action or decision of an
individual responsible for the control of costs.
Assets: These assets which can be converted into cash within an accounting year
or within the operating cycle.
6. Expire Cost: A
cost that has no future revenue producing potential.
7. EOQ (Economic
Order Quality): The optimum quality of stock that minimized the carrying costs
and ordering cost.
8. FIFO (First
In, First Out): A material that is issued which assumes that materials are
issued from orders stock and according price. They are issued based on the time
they were bought are issued out first as the name implies.
The accomplishment of a desire objective, goal or action.
10. Efficiency: The
accomplishment of a objective goal or action minimum resources.