1.1 BACKGROUND OF THE STUDY
The primary objective of most business organization includes and maximization of profits survival, growth and fulfillment of social responsibilities. The margin of profits help companies as well as public entities to take advantage of business opportunities, embark on research and innovations discharge its social responsibilities and in the long run, growth and survival will be achieved by them. To this end, it becomes necessary to make positive attempt towards profit maximization and minimization of operating costs of the business. One area of this cost that needs attention in any manufacturing company such as Champion Breweries Plc is the investment in inventories.
According to Pandey (2008), inventory constitutes the most significant part of current assets a larger majority of Nigerian manufacturing industries. The investment in investment especially manufacturing inventories represent between 10% to 35% of the total assets of the business. Inventories are classified in the balance sheet under current assets as stock because of the fact that it can be turned into cash in a short period of time. It is because of its great impact on the profitability of manufacturing firms that necessitated an in depth study of the topic. This is so because according to Lipsey (1979), inventories are inevitable part of the productive process and require an investment of the company’s money since the company has paid for them but not yet sold.
anufacturing firms need inventories to produce optimal level and also make their products available to the market when needed, and hence they would expect some returns from their capital investment. Invariably, lack of inventories result to non- production or production below capacity. In such a situation, the profitability of the company will be drained especially where there is a situation of shut down. Excessive inventories connote situation where the company has more inventory than needed. This situation results to freeing the company’s capital in form of holding cost, storage cost etc.
The impact of inventory management on the profitability of manufacturing firms is imperative for study. Profit making has been the most motivating force of most companies especially Champion Breweries Plc. For a company to make profit, adequate control of its cost should be high. Inventories must be both physically and financially controlled to ensure the companies ability to operate efficiently and profitably.
1.2 STATEMENT OF THE PROBLEM
The contemporary society is characterized by complex and dynamic environment whereby business enterprises were found springing up randomly. The economy in effect is faced with numerous problems that require urgent attention either by corporate entities and government. Management of inventory in manufacturing companies is a function of observation of prudent inventory accounting techniques which aims at not only helping the sustenance of manufacturing industries of setting it upon the path of growth but also improve industry as a group concern. Thus, the issue of long term profitability is maintained. Indeed, one of the problems that normally faced by manufacturing firms is how to maintain and value their inventories. Characteristically, those companies often lack knowledge of the right valuation method and optimum level of maintaining their stock.
The problem associated with inventory management is that of maintaining an optimum level of inventory. To do this, efforts will be made by the management of eliminating price distortions and high expenditure on frequent re-order, finding the true value of the order quantity, over labour sector inefficiency.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study is to find out the following:
i) To find how a good and proper inventory management and control can be of benefit to the growth of manufacturing firms in Champion Breweries Plc, Uyo.
ii) To determine inventory management has any influence on the volume of profit made by management firms
iii) To determine how proper management could enhance the productivity level of the company
iv) To determine and maintain the optimum level of inventory management in Champion Breweries Plc, Uyo.
1.4 SCOPE OF THE STUDY
This study is limited to Champion Breweries Plc, and upon the research topic, which is centered on the impact of inventory management on the profitability of a manufacturing firms. The researcher is simply interest in fact of inventory intent of method keeping inventory control on the profitability of Champion Breweries Plc, Uyo.
1.5 SIGNIFICANCE OF THE STUDY
The ultimate goal of any company or organization is to maximize profit. The goal can be achieve in the manufacturing firm (company) like Champion Breweries Plc, Uyo through inventory management on the profitability of a company firms.
The study is necessary because it would enable the employer and employee of Champion Breweries Plc, Uyo to improve ethical behaviour 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 researcher (students) who might want to further studies in the similar topic.
1.6 RESEARCH QUESTIONS
The following are the research questions generated for the study:
1. Does proper inventory management bring about increase in the profitability of manufacturing firms?
2. Could productivity levels of management companies be enhance through proper inventory management?
3. What are the problems associated with inventory management on profitability in Champion Breweries Plc, Uyo?
4. Can staff be motivated toward adequate inventory control measures in Champion Breweries Plc, Uyo?
5. How often is stock taking of inventory done in your company?
1.7 STATEMENT OF HYPOTHESES
The following are hypothesis formulated to guide this study:
Ho: There is no significant relationship between inventory management and increase in profitability of a manufacturing firm.
H1: There is a significant relationship between inventory management and increase in profitability of a manufacturing firm.
Ho: There is no significant relationship between proper inventory management and productivity levels of manufacturing companies.
H2: There is a significant relationship between proper inventory management and productivity levels of manufacturing companies.
Ho: There is no significant relationship between staff motivation through training and seminars in adequate inventory management.
H3: There is a significant relationship between staff motivation through training and seminars in adequate inventory management.
1.8 LIMITATION OF THE STUDY
The limitation of this study was inability of management divulge certain information which they consider sensitive and fear of publication which might be detrimental to their operation.
Also, the outright inability of some respondents to complete and return the questionnaire to the researcher is one of the limitations of the study.
Another limitation to the study was traffic congestion for the researcher to meet them in their offices and for possible return of the questionnaire.
Finally, the researcher observed the non-cooperative attitude of some workers of the company to make information available for her.
1.9 DEFINITION OF TERMS
For the purpose of this work, definitions of some variable terms are defined as follows:
1. INVENTORY: This is defined as the stock of the product a company is manufacturing for sale and the components that make up the products (Adibe, 1995 and Aguolu, 1997).
2. PROFITABILITY: This is defined as the tendency to make profits (Koholer, 1995). It means in general terms for the excess of revenue, proceeds or selling price owners, related cost, and pecuniary benefit arising from profession, or from one or more individual’s transactions of any person.
3. MANUFACTURING FIRMS: They are the companies concerned with the production of goods and services made available to consumers with raw materials as their primary inputs.
4. INVENTORY MANAGEMENT: This refers to all the activities involved in development and managing the inventory levels of raw materials, semi-finished materials (work-in-progress) and finished goods so that adequate supplies are available and the cost of over or under stocks are also low (Chiktriki and Revnidannalt, 2010).
5. MANAGEMENT: This is defined as a process (both social and technical that utilizes resources and changes human behaviour in the desired direction in order to produce contributions accomplishing the organization objectives (Igbodi, 1990).