CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The contribution of the manufacturing sector to the growth of an economy cannot be overemphasized especially in developing economy like Nigeria. The breweries industries impacts on the manufacturing sector undisputedly. Considering the increase demand for beer, in recent years and effort being made by private and public sectors to satisfy the demand. This has giving rise to the establishment of breweries firms all over the country.
In any manufacturing organization, the cost of raw material form a substantial part of the production cost, the highlight the need for efficient management of raw materials. I am taking Guinness Nigeria Plc as a case study of the breweries industry which itself is a subset of the manufacturing sector of the economy. It is universally accepted fact that business organization have a primary objective of maximizing profit and cost utilization, for here in lies the continue existence of the organization, this has always been made possible through the improvement in overall performance of the organization especially in the area of material management and control. Inventory represent an important portion of most firms, assets, and also require substantial investment. Material management involves planning, organizing and control of handling inventory in such a way to achieve the set goals of the organization. In other words, material management is the management of inventory for profitability and consumer satisfaction while maintaining a minimum inventory investment wit maximum facility and man power utilization. In other words, material control is an insurance against supply failure.
Coming to the Nigerian economy which is filled with uncertainties, the business/manufacturing sector cannot afford wastage especially as regard to material and so there is the need for proper and effective utilization of materials in order to prevent any short fall in the level of production which wills most likely lead to decrease in the priorities of an organization. Material control and management system exists to ensure that proper and adequate utilization of material on other to prevent any short are made and that optimum level of material investment are determined and maintained.
The high premium place on business efficiency prompt the motivation to study material management and control system in the manufacturing sector of the economy. With the uncertainties in the Nigerian economy, raw materials required by company for production purpose are very scarce and limited with the federal government bounding the importation of a large variety of items / materials, foreign exchange has become difficult and expensive to obtain.
These factors have substantially and subsequently led to the liquidation of many companies in Nigeria due to their inability to acquire raw materials. On the other hand, those which are still in production are only able to acquire few materials for production at an exorbitant prices as such, they cannot affords or entertain wastage maximum and efficient utilization of materials acquired are very sought for by management.
In the brewery industry for instance, the federal government of Nigeria has bound the importation of sorghum and with which are the basic raw materials required for beer production.
In reaction of this brand the lending companies in beer production such as Nigeria breweries limited (NBL) etc have resulted to local production of sorghum and wheat. The climate of Nigeria is not sufficient for efficient and maximum production as such the harvest of these grains is very small compared to the quality required. Therefore maximum use of the amount of harvested grains will have to be made in order to ensure greater efficiency and subsequently make food profit.
Material management and control system exist to ensure proper utilization and impart control of material in order to achieve greater efficiency and subsequently better and higher priorities.
The development of modern inventory control started at the early of twenties century. This period marked the application of analytical techniques in studying inventory problems.
A lot researchers, accountant, economist, mathematics and engineers alike have taken interest in material management and control techniques and models. Not withstanding the sophistication of the techniques so far developed, there is still room for further development. Inventory control system can be computerized for efficiency.
1.2 STATEMENT OF THE PROBLEM.
The growth and efficiency of any organization is dependent on how well their material resource are manage and controlled as noted by Harold Koontz etal (1998) management is the establishment of the environment for good effort in such away that individuals will contribute to group objective with least amount of such input as money, time, effort, discomfort and materials.
Although it can be argued that the ban and importation of raw materials such as sorghum, wheat’s, and limited available resources coupled with the uncertainties that abound will affect company growth yet the argument cannot be substantiated, hence this research is to confirm the argument or otherwise. This is the dilemma of this study with respect to organizational growth and development in brewery industries.
The following questions subsequently arose. Is there any major problem involved in implementing material management and control system?
Does inventory control affect the companies’ profit?
Is there any relationship between sales and inventory level and between inventories level and production cost.
