Effectiveness of inventory management in a manufacturing company (a case study of ama greenfield breweries plc, enugu, nigeria)

Thesis Overview

<p> INTRODUCTION<br>1.1 BACKGROUND OF THE STUDY<br>Inventory is one of the resources that are managed by business<br>organizations and it was first recorded in 1601. The need for inventory<br>control cannot be overemphasized as it is a means for improving the<br>performance of manufacturing industries. Inventory can be defined as a<br>record of a business current assets including property owned, merchandise<br>on hand and the value of work in progress and work complete but not sold<br>and it is classified as a current asset because it can be turned into liquid cash<br>within a short period of time. Inventory has created a great impact on the<br>profitability of the manufacturing firm which resulted to the deep research of<br>this topic. Effectiveness of inventory management in a manufacturing<br>company.<br>Inventory plays a major role in the operation of many businesses and<br>manufacturing companies. In manufacturing, inventories of raw materials<br>allow companies to operate independently of their sources of supplies. Day<br>to day operation are not dependent on deliveries from supplies since stock of<br>the necessary mateials are maintained and used s needed. Without inventory<br>2<br>control, millions of naira could be lost year because of non accountability of<br>stocks and inaccurate checks and balances.<br>The process of control and management of inventory is a very<br>important factor in the success or failure of any business for example, little<br>stock will result in stock out which will disrupt the production distribution<br>cycle that is crucial to the survival of all manufacturing companies while<br>too much stock will tie down the resources of a company. Poor or<br>inadequate inventory management can present a serious challenge to the<br>productive capacity of a manufacturing organization. In addition to raw<br>materials and finished goods, many companies also maintain items of assets,<br>property, inventories of work in progress, office supplies, business firms and<br>general operation supplies.<br>Inventories often constitutes the most significant part of current assets<br>of large companies. In the public limited companies, inventories are<br>approximately 60% of current assets on the average. The US Burean of the<br>census stated that inventory and accounts receivable ate the two largest<br>accounts of equal magnitude and together they comprise almost 80% of<br>current assets and over 30% of total assets for all manufacturing companies<br>in 1982.<br>3<br>Considering the large sum of money that are committed to the stocks<br>of raw materials, work in progress and finished goods, it is therefore of<br>paramount necessity that these stocks be managed efficiently and effectively<br>in order to avoid the jeopardizing of the profit position of the firm.<br>In inventory, there is an optimum level therefore inadequate inventory<br>causes loss of sale and disrupts the production process while excessive stock<br>level leads to unnecessary carrying cost and obsolescence or spoilage risks.<br>According to Charles T. Horngren (2007), the optimum inventory. Level lies<br>between the inadequate inventories and the excessive inventories. Inventory<br>management aims at maintaining an optimum inventory level that will be<br>carried at the least cost.<br>A BRIEF HISTORY OF AMA GREENFIELD BREWERY IN ENUGU<br>STATE, NIGERIA<br>Ama Greenfield Brewery is the jewell in the crown of Nigeria<br>Breweries Plc and is reputed as one of the most modern Breweries. Precisely<br>on Friday October 24, 2003, the much talked about Nigeria Breweries Plc’s<br>ultra modern Ama Greenfield Brewery located in Enugu state was officially<br>commissioned. It is Nigeria breweries Plc company’s sixth Brewery and the<br>second to be located in Enugu state. The multi-billion naira Ama Brewery<br>4<br>boasts of the best cutting edge technology and world class standard<br>processes. It is located in Umuezeani village in the Amaeke Ngwo<br>community of Udi Local Government Area of Enugu state. Mr. Lassy Agose<br>who was the public relations adviser to the Nigeria Breweries Plc at that<br>time said that Ama Greenfield Brewery has an installed capacity of 3 million<br>hectoliters per annum or 1 million carton units per week adding that it was<br>also equipped with an ultra modern waste water treatment plant in l ine with<br>safe manufacturing practices world-wide. Ama Brewery whose foundation<br>was laid on April 9,2001 by the then Enugu state Governor, Dr Chimaroke<br>Nnamani took 14 months to be completed after the actual construction work<br>commenced on January 23, 2002. the first brew was made on march 22nd<br>,<br>2003 while the first bottle of star larger rolled off the bottling line on April<br>24, 2003.<br>Ama Greenfield Brewery encapsulates the essential ingredients of the<br>world class vision of the Nigeria Breweries plc and represents another<br>milestone in the company’s journey towards the realization of that vision.<br>Beyond these, Ama Brewery holds enormous socio-economic benefits to the<br>community, state and country at large.<br>In addition to opening up the communities to commerce and<br>modernization, the state stands to benefit from increased revenue and the<br>5<br>building of international confidence for investment. This multibillion naira<br>investment is also expected to translate into enhanced employment, as well<br>as open the flood gates of business activities and opportunities in the<br>economy, Mr. Agose stated during a pre-commissioning press briefing in<br>Lagos. Constructed at a cost of N40 billion, it is an essential fulfillment of<br>the pledge made by Heineken NV to invest N70 billion in Nigeria within<br>five years building an ultra-modern civic centre, a borehole and market stalls<br>for the area. <br></p>