THE EFFECT OF INVENTORY MANAGEMENT ON THE PERFORMANCE OF SERVICE
(A SURVEY OF SELECTED SERVICE FIRMS IN PORT HARCOURT)
Complete Material Cost #3,000
ABSTRACT
The study is determined to examine the effect of inventory management on the performance of service. This research design uses descriptive and survey method of data collection. The population of study covers personnel from selected service firms in Port Harcourt comprising of fourty (40) from mile Fabulus Construction company and fourty (40) personnel from Intels Logistics Limited giving a total population of 80 personnel from selected service firms in Port Harcourt, Rivers State.theYaro Yemen’s formula was used to determine the sample size of 64. A self-design questionnaire was used to collectect data from the respondents. The Pearson moment product correlation was used for this research work. Findings revealed that there is a significant relationship between inventory management and the performance of service firms. Based on the findings of the study summary, conclusion and recommendations were made that the method of inventory valuation should be based on the types of items on the stock inflation problems, service firms in port Harcourt should assign staff for the managing and controlling of it inventory as it will help to wipe off obsolete and enhance quality management as well as making the complex to be profitable and perfect quality control system should be carried out by assigned staff.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Companies face a dilemma in today’s competitive marketplace, where on one hand, customer demand customized products and services and require that their orders are filled quickly, but on the other hand they do not want to pay a premium for this customization and availability (Vohra 2008). Therefore, organizations are exploring ways towards postponement strategy in response to constantly changing demands. Vohra 2008 argued that today, the cost of holding, extensive product proliferation and the risk of obsolescence, especially in rapidly changing markets, make the expense of holding large inventories of finished goods excessive and that high demand items naturally have safety stock assigned to them, but in many organization there are so many very-low-demand items that keeping any stock of these items is unreasonably expensive, so they argue that companies must now provide good services while maintaining minimal inventories. Therefore, inventory management approaches are essential aspects of any organization.
In traditional settings, inventories of raw materials, work-in-progress components and finished goods were kept as a buffer against the possibility of running out of needed items. However, large buffer inventories consume valuable resources and generate hidden costs. Consequently, many companies have changed their approach to production and inventory management. Since at least the early 1980s, inventory management leading to inventory reduction has become the primary target, as is often the case in just-in-time(jit) systems, where raw materials and parts are purchased or produced just in time to be used at each stage of the production process. This approach to inventory management brings considerable cost savings from reduced inventory levels. As a result, inventories have been decreasing in many firms (Grauquw,2006),although evidence of improved firm organizational productivity is mixed (Tement, 2010).
The role inventory management is to ensure faster inventory turnover. It increases inventory turnover by ten(10) and reduce costs by 10% to 40%. The so called inventory turnover is not yet right to sell product on the shelves based on the principle of fifo cycle (Kenneth,2003).
Inventory is classified basing on the business undertaking from organization to organization. Common criteria used and are nature of inventory for example manufacturing, sale or retail, purpose for which inventory is being held in stock or function and the related usage in the supply chain. Typical classifications are raw materials (items in unprocessed state awaiting conversion e.g. timber, steel and coffee seeds), components and sub assembles. These are for incorporation into the end product e.g. side mirrors,glasses for car assembling company and monitor or keyboards for a computer assembling company), consumable (all supplies in an undertaking which are classified as indirect and which do not form part of saleable product.(divided into production, maintenance, office and welfare). Proper classification of inventory and its control improve the financial position of a business (David & Johnson,2008).
Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply networks to protect the regular and planned course of production against the random disturbance of running out of material or goods for improved organizational productivity (Essary 2010). The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting (Vohra 2008).
Inventory management involves the planning, ordering and scheduling of the materials used in the manufacturing process. It exercises management over three types of inventories that is raw materials, work in progress and finished goods. Purchasing is primary concerned with management over the raw materials inventory, which includes; raw materials or semi-processed materials, fabricated parts and items (Jonah, 2011).
1.2 STATEMENT OF THE PROBLEM
Inventory management involves the planning, ordering and scheduling of the materials used in the manufacturing process. Service firms uses different systems in inventory management including integrated system (system application and products) responsible for management information system which helps to make serious decision stock, material requirement points, and over stock brands for the fast moving products.
Despite these techniques for inventory management in service firms, it was observed that the performance of the firmreduced. Based on the above information, most service firms in Port Harcourt has observed decline in patronage over time (Arinaitwe, 2009). The study intends to investigate why the decline in performance in this service firmsdespite the many technique of inventory management adopted by the company and also to establish the relationship between inventorymanagement and the performance of service firms.
1.3OBJECTIVES OF THE STUDY
The main objective of the study is to examine the effect of inventory management on the performance of service firms. The specific objectives are as follows:
i. To examine the technique of inventory management in service firms
ii. To identify the relationship between inventory management and the performance of service firms.
iii. To examine the problems associated with inventory management in service firms.
iv. To examine how effective inventory management improved the performance of service firms.
1.4 RESEARCHQUESTION
i. What are the technique of inventory management in service firms?
ii. What is the relationship between between inventory management and the performance of service firms?
iii. Are there problems associated with inventory management in service firms?
iv. How does effective inventory management improvedthe performance of service firms?
1.5 STATEMENT OF HYPOTHESIS
HO: There is no significant relationship between inventory management and the performance of service firms.
HI: There is a significant relationship between inventory management and the performance of service firms.
1.6 SIGNIFICANCE OF THE STUDY
The study findings may be significant in the following ways; it is hoped that study findings will be used for further research and investigations in form of literature.
The findings may provide information to managers in different organizations especially on knowing how to compare actual performance and inventory management.
The findings may also be beneficial to other upcoming researchers to investigate further about the effect of inventory management on and the performance of service firms.
1.7SCOPE OF THE STUDY
The study examines the effect of inventory management the performance of service firms. The study limits scope t some selected service firms in Port Harcourt Metropolis which include Fabulus Construction company and Intels Logistics Limited in Port Harcourt, Rivers State.
1.8 LIMITATION OF THE STUDY
The major challenge in this project is the in ability to get enough information or data. This is because of the nature of the research which has been stated above. Also, there was no enough time for a comprehensive research work but with limit time available, it was not possible to gather so much data and information as required.
Time: The time allocate for the research work was not enough to allow adequate research work and comparisons.
Accessibility: One of the major problem encountered was access to information concerning the area of study.
Finance:Usually, a study of this nature involved some level of expenditure therefore, finance was also a limiting factor.
1.8DEFINITION OF TERMS
Inventory: Is the amount of goods, materials or part carried out in stock or store house for example, work in progress (W.I.P), raw materials, financial goods resale more items.
Organization: An organized body of people with a particular purpose, especially a business, society, association, etc.
Inventory management: Inventory management is a science primarily about specifying the shape and placement of stocked goods. It is required at different locations within a facility or within many locations of a supply networks to precede the regular and planned course of production and stock of raw materials.
Complete Material Cost #3,000