MATERIALS MANAGEMENT IN A MANUFACTURING COMPANY (A CASE STUDY OF 7UP BOTTLING COMPANY PLC, ILORIN PLANT, KWARA STATE)
Past studies have shown that the poor performance of many firms in Nigeria is due to their inability to manage the relationship between suppliers of input and the operation of the firm. This study is therefore designed to examine how manufacturing firms manage their materials.
Secondary data were collected on the inventory of material in 7up bottling company Ilorin plan. Economic order quantity (EOQ model) was used to analyse data collected.
The result shows the cost saving effect of economic order quantity EOQ model on inventory of raw materials for concentrate, sugar, hydrated lime and acciducant as N521939, N 179421, N1115796 N1014656 respectively and for finished product like Mirinda orange, Pepsi, seven up, Mirinda fruity and mountain dew drink are N359235 N98101, N369835, N293813, N1000557
Findings indicate that the method used by 7up company to maximize their inventory of both materials and finished product is not efficient because the naira saved in the course of purchase have more effect on the profit of company in production/selling. This is why purchasing should be cost effective.
Recommendations include an adoption and application of the EOQ model in order to save cost and make their operation more efficient. This will make 7up product more comprehensive and perhaps enable them gain competitive advantage. The conclusion suggest that EOQ model reveals the cost saving and total inventory of materials use in production and effective management and control leads to efficient operation cost.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
List of Tables vii
1.1 Background of the Study 1
1.2 Statement of Research Problem 3
1.3 Research Objectives 5
1.4 Research Questions 6
1.5 Justification of the Study 6
1.6 Scope of the Study 7
1.7 Organization of the Study 7
CHAPTER TWO: LITERATURE REVIEW
2.1 Concept of Material Management 9
2.2 Types of Materials 11
2.3 Definition of terms and Concept 12
2.4 Materials control and Handling 15
2.5 Material Handling 16
2.7 Forecasting as an essential 22
2.8 Material requirement Planning 23
2.9 Stores Function 24
2.9.1 Stock control 28
2.9.2 Reason why organization hold stock 29
2.9.3 Economic order quantity 35
2.9.6 Purchasing objectives and policies 37
3.1 Introduction 35
3.2 Historical Background 41
3.2.1 Corporate Organization Structure 43
3.2.2 Corporate organization Structure 44
3.2.3 Population Sample 45
3.3 Types of Data 46
3.3.1 Source and method of data collection 47
3.3.2 Sampling Procedure 47
3.3.3 Scope of Data 48
3.4 Methods of Data Analysis 49
4.1 Introduction 50
4.2 Result and Analysis of Data 51
4.3 Calculation of optimal order size for the new material 53
4.4 Calculation of optimal numbers of order for the raw materials 56
4.5 Calculation of optimal time between orders for the raw materials 58
4.6 Calculation of optimal number of units of production run for the company’s product 60
4.7 Calculation of optimal number of runs per year and time between successive runs 64
4.8 Calculation of total inventory cost of raw materials using economic quantity EOQ model 68
4.9Calculation of total inventory cost of finished products using economic order quantity-EOQ model71
4.10 Calculation of cost saving effect of economic order quantity-EOQ model on inventory of raw materials 74
4.11 Calculation of cost saving effect of economic order quantity-EOQ model on inventory of finished production 78
SUMMARY CONCLUSION AND RECOMMENDATIONS
Summary of Findings 82
LIST OF TABLE AND FIGURES
Figure 3.2.1 Corporate organization structure 44
Table 4.2 Material purchase and inventory cost for the year 2009 51
Table 4.6 Production schedule and finished products inventory cost for the year 2009 59
1.1 Background to the Study
As a manager in a manufacturing company. It is more necessary than ever to improve the overall productivity of the operation while such improvement requires an integrated effort involving all functional areas of the facility, specific actions are required within each functional area one of the functional areas in a manufacturing operation that is critical to the overall productivity of the company is material management. The material management involves purchasing supplier management, material handling within the facility and extensive coordination among all functional areas of the facility in conjunction with material management sapiens, Jazayeri (1998).
Once the production process is under way the attention of the operations manager shifts to the daily activities of material management the daily composes materials purchasing, inventory control and work scheduling.
Material management has a philosophy close to that of a modern marketing. In marketing the organization and its staff has to think in a marketing oriented way for example how will customers react to product change? What will be the effect on sales if we alter the packaging? With material management the same principle apply the organization and its entire staff have to consider their decision in relation to how they will after it the material side of the business topics under material management include purchasing, control, transportation, material production, planning stores, inventory control Bret (2001).
Therefore, the main point of materials management is to satisfy the need to all operating system such as manufacturing production line, promotional activities and physical distributor times. It is the operation as the customer, manager must work around the system till everything his and needs are satisfied. The material manager organization and it entire staff should however consider their decision in relation to how they will affect the materials side of the business. It is in view of the above stated facts that this study is being carried out using 7up Bottling Company PLC Ilorin plant a manufacturing company to study the issue of material management.
1.2 Statement of Research Problem
The major challenge that material manager face is maintain a constituent flow of materials for production. There are factors that inhabit the accuracy of inventory which results in production shortages premium freight and often adjustments.
According to the journal of Business logistics (2009) vol1 22 part 2. The major issues that all material managers face are incorrect bills of materials, in accurate cycle counts, unreported scrap shipping error, receiving errors and production reporting errors material managers have strived to determine how to manage these issues in the business sectors of manufacturing since the beginning of the industrial revolution. Although there are no known methods that eliminate the afore mentioned inventory accuracy, inhibitor there are best method available to eliminate the impact up on maintaining an interrupted flow of materials for production. Reluctance can be reduced and effectiveness when service point are clustered to reduce the amount of reluctance. An effective material management program can also revolve island approaches to shipping, receiving and vehicle movement solutions can include creating a new central loading location as well consolidating service areas and docks from separate building into one. Developing better circulation infrastructure also means reevaluating thick delivery and service vehicle routes. Base on above statement that this research seek to examine the issue of material management and the effect it has on an organization using a manufacturing company as the case study.
1.3 Research Objective
⦁ To examine the level of efficiency and product improvement in material management.
⦁ To investigate whether the material management practice permit high stock turnover validation.
⦁ To proffer useful suggestions and ideas on how to effectively manage materials in an organization (Sander 2002).
This objectives are intended to be addressed in this study.
1.4 Research Questions
⦁ To what extent does material management contribute to an organization performance?
⦁ Does specification on materials have any (positive or negative) on the effective material management.
⦁ To what extent does effective material handing help in the enhancement of un interrupted production?
1.5 Justification of the Study
A research of this native is significant in sense that the area of material management is one that requires constant research. It is belief that the study will throw light on the essence and importance of material management in an organization and the choice of 7ups bottling company as my case study is due to the fact that it is a large scale manufacturing company which the setup provides for the study of this nature.
1.6 Scope of the Study
This research study centred on materials management in a manufacturing company. It covered such areas as storage, transportation procurement, materials handling planning control & value engineering etc. the research is also intended to cover a specified period of time range from 2009-2011 also information are going to be drawn within the domain of 7up Bottling company Plc. Ilorin.
1.7 Organization of the Study
The study is going to be structured into 5 chapters and each comprehensively elaborate on different aspect of the study.
⦁ Chapter 1: The introduction of work it deals with background information statement of the research problem, justification of the study, research objectives and scope of study.
⦁ Chapter 2: This will deal with literature review
⦁ Chapter 3: This will deal with methodology data collection and research methodology.
⦁ Chapter 4: This will deal with data presentation and analysis of the data collected. It examine finding in the following areas. Optimal order size for the raw materials, optimal number of unit per production run for company’s products and optimal number of runs per year and time between successive runs. It went further to examine calculations on total inventory of raw material using EOQ model.
Chapter 5: Finally will discuss about the summary and conclusion and recommendation..